Finance Minister Nirmala Sitharaman accomplished a complicated task with considerable elan. Accommodating the competing constituents in a package meant to resuscitate the economy is no mean task, considering our social, regional and political complexity. Even before the Covid-19 pandemic made its presence felt, our economy was listless. Industrial production was sliding, economic growth had hit an all-time low and demand had slackened. Markets had been showing ominous signs of stagnation. With or without the pandemic, India needed a stimulus package.
Of course, two months of lockdown has hastened an inexorable slide and poignantly magnified the consequences within a short duration. Therefore, the hefty economic package announced should be seen not as an exclusive response to the Covid-induced slowdown, but as an inevitable one to an already sick economy.Opposition parties have criticised the Centre for making major policy changes, especially concerning foreign investment in sensitive sectors, without taking Parliament into confidence.
Several commentators have observed that in the name of the stimulus package, the Centre has made far-reaching policy changes. Left parties have been critical about the changes in labour laws favouring the managements and depriving the privileges enjoyed by the workers. The most significant aspect of the package, however, is that out of the astounding figure of Rs 20 lakh crore, nearly 85% comprises bank credit and other notional amounts.
Of course, the Centre has given guarantees, interest subsidy and other policy support for making credit more hassle free. The direct cash outflow of the Centre seems to be less than Rs 4 lakh crore. That was to be expected when government receipts have been playing truant for several months, particularly after the introduction of GST. (The states are in deeper trouble.) Within these constraints, the Centre has managed to design a package, impressive in magnitude, ambitious in scope and ingenious in leveraging funds.
With heavy emphasis on the supply side and implicit faith in private investment, the package could well augment production of goods and services, and attempt to strive towards ‘Atmanirbhar Bharat’, arguably the aspiration of the package. Despite all its limitations, the package has an impact on national consciousness. It has clearly conveyed the government’s extraordinary resolve to steer the economy out of the current impasse.
The package has a well-defined economic philosophy behind it. It believes that development is possible only by augmenting wealth creation. The government’s job is to facilitate this by overhauling policies and pragmatically changing archaic laws and procedures to suit the changing times. The argument is familiar: ‘When countries are vying with each other to attract investment, how can we get stuck in the old-world notions of welfare economics and socialist pretences?’ That explains the disproportionately small allocation in the package for the well-being of migrant workers, small traders in the informal sector and agriculture workers.
The package follows the textbook dictums on liberalisation and privatisation, while striking an unusual note on self-reliance, normally anathema to the apostles of globalisation. Neoliberal economics has some favourite aphorisms like ‘wealth will trickle down to the poorest sections’, ‘any kind of subsidy in the name of social justice is bad for the economy’, ‘government should recede from as many sectors as possible and allow private players to bring in competition and merit’, etc. It believes in survival of the fittest. The weak, by implication, may perish. Another inviolable credo of neoliberal economics is that the private sector alone holds the key to economic growth and public sector is incompetent.
While not embarking on any ideological critique of neoliberal economics or the stimulus package, three practical concerns need to be amplified. The first is that the package does not seem to appreciate that there is no universal prescription of privatisation and liberalisation. In a country like India with a vibrant private sector having impressive technological, logistic and financial advantages, it is perfectly justified to support it for enhancing GDP. But applying all the commandments of privatisation with insufficient appreciation of human suffering can only be self-defeating. Our society has the destitute, the poor, the middle class, the rich and super rich. Sound economics takes care of all these sections with their differential needs. People have to be fed regardless of neoliberal dictums. Governance is all about flexible responses to dynamic problems.
The second point of concern when the country seems to have reposed so much faith in the private sector is the lack of a corresponding strict regulatory regimen. Unregulated privatisation has only created ecological, social and moral profligacy. Effective and independent regulatory mechanisms are a prerequisite, not only for providing a level playing field but also to ensure that short-sighted craving for profit does not devour our ecological and social capital. The package with its pro-industry tone is pertinently silent about regulators.
The third aspect is the inherent lack of faith in government institutions. Though it has not been articulated as such, several pronouncements vouch for the faith in the private sector vis-a-vis the inefficiency of the public sector. While the nation is still coping with the pandemic, it is the government health infrastructure, government personnel, local bodies, railways, Air India and other public utilities that have stood by society. It would be a grave error of judgment if the public services are not appreciated and duly strengthened. The privatisation mantra has only limited resonance in a country where poverty, unemployment, illiteracy, agricultural crisis, social backwardness, superstitions and caste barriers are still prevalent. For the poor, free ration is more real than free Wi-Fi!
K Jayakumar
Ex-Kerala Chief Secretary, ex-VC,Thunchath Ezhuthachan Malayalam Varsity
(k.jayakumar123@gmail.com)