04/09/2020 - Economy

KEY POINTS

·         India’s GDP has fallen by 23.9 per cent in the first quarter. Tax revenues have fallen even more and the fiscal deficit has risen sharply.

·         One major demand generator with a huge multiplier effect and considerable employment potential is the housing sector. It generates demand for a range of products, ranging from cement to steel to paint to electrical fittings.

Housing reforms

·         A radical out-of-the-box measure would be for the government to take over all stalled housing projects of developers across the country, guarantee fresh debt for completion of these projects, appoint an empowered CEO with the mandate to renegotiate existing contracts or award fresh ones, and have construction restarted in this calendar year itself.

Initiatives for the working class

·         To create rental housing and manage them, the pre-1991 role of State-level development authorities and housing boards have to be revived. They need to assemble land, build and rent at affordable rates.

·         The accommodation so created should also be suitable for dormitory use, as many migrant workers are single. The Central government could ensure 100 per cent financing of such affordable housing projects to State-level agencies, with the State government providing a guarantee.

·         The State governments would need a change in mindset to price land at nominal rates to ensure that a feasible rental income covers maintenance and debt repayment. The Central government could set an example by getting the Delhi Development Authority, the Railways and its public sector undertakings to offer land for such projects.

·         The poor are now getting relief through the MGNREGA and the food security regime, to which an additional free supply of foodgrains has been added. But, now, large numbers from the middle classes are losing jobs.

·         One way of giving them relief and also sustaining demand is for the government to guarantee bank loans to them up to half their income of the previous year as declared in their tax returns.

Auto reforms

·         An easy way to accelerate the phasing out of old polluting vehicles is to introduce a variant of the ‘cash for clunkers’ scheme that Germany introduced to help their auto industry during the 2008 financial crisis.

·         Under this scheme, those who traded in an old vehicle and bought a new one got a cash rebate. A grant of 50 per cent rebate in the GST for an old vehicle that is traded in for a new one should be a sufficiently attractive incentive. The old vehicle should be physically scrapped in a licensed state-of-the-art facility.

·         In addition to this carrot, there should be the stick of withdrawal of registration in a phased manner starting April 2022. The objective should be complete replacement of all pre-BS-VI commercial vehicles by 2025.

·         To increase the demand for electric vehicles, power distribution companies may be directed to invest in the charging infrastructure in cities, starting with the larger ones first.

Pls review