As the focus shifts from celebrations to expectations let us look at the economic challenges that the next government will face in coming years. The key election issues, related to the economy, that were discussed during the bitterly fought election campaigns were:
- Rising Unemployment.
- Stagnant Industry Output.
- Farmers’ woes.
- Slowing down rural consumption.
- Overall indication of slowing the Economy.
Marred by contradictory claims employment generation has been a key issue which was vociferously discussed during the polling campaign. Government report suggested that generation of employment had declined in the last few years and it was used as a major tool by opposition. Government’s claim of employment generation through distribution of MUDRA loan, increase in the number of employees registered with Provident Fund Commission went to deaf ears.. It is difficult to believe that with so much government spending on Housing, Toilets, Electrification and new gas connection, no employment was generated. Was it done by invisible hands? The statistical system that government has is facing scepticism today. The government needs to consolidate its agencies which publish official data.
Be that it may need of hour is to create employment and it has to be seen to be believed. In that context the employment generating business units would be required to be encouraged. The new government needs to win the confidence of the local industrialists to enhance the private investments. New industrial policy will be required to be in place and incentives need to be provided to promote manufacturing in key employment generating sectors along with aligning the mega-infrastructure projects across sectors. Another factor which baffles is the spending pattern.
There was lot of hue and cry when the implementation of 7th PAY Commission additional money available for consumption gone? Partial answer to this question was available when sudden jump was noticed in demand for gold during Akshay Tritiya one of the sacred muhurtas. With dwindling bank rates Government needs to attract investments to productive purpose rather than gold.
MODI 2.0 will have to prioritise BJP’s promise of 100 lakh crore investment in infrastructure in the next five years. The government needs to kick-start the proposals for highways within the first few months of government formation. This will ensure higher demand for commodities, steel and cement which can set the ball rolling.
Another big challenge for this government is tackling farmers. By their on commitment this government has set an ambitious plan of doubling farmers’ income by the year 2022. Even a country like China had set longer term to achieve this. Huge spending in irrigation, warehousing and electronic marketing will have to be provided. With a laudable intent, this government introduced PM Kisan Samman Nidhi Scheme in the interim budget presented in February 2019. With massive mandate behind its leadership, the government will have to think of increasing the NIDHI in its kitty by crediting at least triple the amount (Rs 1500 per month) to provide real relief to the people who are at the bottom of pyramid. With over 65% of the population depending on agriculture, problems like farmers’ suicide and debt traps will have to be resolved.
Government with clean image and big dreams will have to concentrate on rural development. Spending on Pradhan Mantri Gram Sadak Yojna (PMGSY) will be required to be prioritised for linking routs over one lakh kilometre. For all these activities government will have to improve tax collection on consistent basis. This will ensure proper target for MGNREGA.
With clear picture on NPAs and Insolvency and Bankruptcy Code in place, further refining in the banking sector is required. It will be futile capitalising the public sector banks so long as these are under the control of the government. Reserve Bank of India’s powers will have to be enhanced for better supervision.
With the monthly economic report of the ministry of finance indicating slowing down the economy, government will have to fire all the cylinders. Corrective action on widening trade deficits and liquidity in NBFC sector will have to tackled. Besides nagging worry of rising cost for crude import and perennial issue of non-dependable monsoon needs immediate attention. So having won the hearts of billions of people it’s time to act fast and lay the foundation of programmes with surgical implementation which provide eternal solution.
In the financial sector, we may still not have a full picture of the NPA problems. scary situation is emerging in the NBFC sector.We also need to urgently reform the GST. The immediate need is of a simple tax with one moderate rate while keeping essential goods out of the ambit of GST so that poor and low-income families are protected. GST should levy a different rate of duty for demerit goods and bring real estate, petroleum products, tobacco, and liquor within its ambit too.
- UDAY TARDALKAR
CORPORATE CONSULTANT AND TRAINER