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CENTRE MUST SPEND MORE, FOREGO TAX REVENUES

The Current Scenario

  • As India nears the end of the lockdown period, the serious damage to the economy and livelihoods is beginning to make itself apparent.
  • There is tremendous pressure from industry bodies to opt for a nuanced policy that will help economic activity to restart as they fear a collapse if activity is stopped for another fortnight.
  • One way to sidestep this existential dilemma is by bringing on a second round of an economic relief package that goes well beyond the first both in terms of the financial commitment and the spread.
  • Out-of-the-box ideas for delivering support and also for raising the required funds might be required.
  • Economists are unanimous that there is little option now but to print money and spend. That is exactly what the developed countries are doing.

What can be done?

  • The ₹1.7-lakh crore package announced by Finance Minister Nirmala Sitharaman on March 26 was a good start but barely accounted for 1% of GDP; India should spend at least 5% of GDP for now.
  • he cash transfers to the poor should be hiked to at least ₹3,000 a month for the next three months.
  • This should be in addition to free rations and cooking gas, as was announced earlier.
  • In the harvest season, farmers need logistical support for moving their produce to markets.
  • Lenders, including NBFCs, should be granted freedom to reschedule their loan accounts so that borrowers are not under pressure to repay for fear of turning delinquent.
  • A credit guarantee fund that will support non-delinquent borrowers for the next six months will be a good option.
  • Such a fund can be financed through a domestic bond offering.
  • The bankruptcy code should be suspended for the next six months, at least for MSMEs.
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October 2022
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