If there’s any benefit that came out of the Covid-19 pandemic, it is that it exposed the serious fault lines and inequities in our society.
Millions of jobs were lost, small and medium scale industries shattered and workers left with no welfare measures unlike their western counterparts. This was further aggravated by the subsequent rural distress as the unemployed had to return to their villages with virtually no jobs or productive economic activity in sight.
Growth is a magical tool that alone can prevent further collapse in employment and allay the general distress the pandemic has brought in.
Taking a Keynesian approach, the overall goal of the upcoming Budget must be to put most hands back to work while creating a suitable mechanism for the economy to jumpstart.
Investing more on infrastructure is an ideal way to not only create a much-needed avenue for further investment, especially FDI inflows, but also to create a pathway for mass employment, especially from the unskilled sector.
Taking account of the “multiplier” effect, this would mean a sustainable demand would be there for consumer goods, which had taken a hit due to the pandemic, while the necessary precondition of good infrastructure means an increased opportunity for skilled labour.
Further, the major bottleneck that prevents many multinational firms from setting up base in India is the shoddy infrastructure.
Again, the gendered nature of our labour market means women gets a raw deal at the end. Hence, an active way of putting more women back to work can be through increased spending on MGNREGA, which has historically been a major source of income for rural women.
Reforms & govt intervention must benefit all stakeholders
While the issue of NPAs are burdening the banks, one needs to see that micro, small and medium scale enterprises (MSMEs) are the ones that employ the largest number of people in India and these are badly in need of cheap loans to survive as well as restart the production cycle.
Not to mention that this is also the field where a large number of women entrepreneurs exist and government guaranteed loans can give them a fresh impetus to restart.
Expenditure on education also needs to be increased in a way that more women are encouraged to get quality education through new scholarship schemes, subsidised loans and skill-development programmes.
Given the fact that export markets remain sluggish, the most optimal way to achieve growth would be through increased domestic demand, which needs to pick up rapidly.
Further, increased money supply can also ensure that banks would be able to buffer up their reserves and get short-term relief from the pending NPAs.
Another sector that was badly affected was agriculture. Adequate crop insurance schemes need to be envisaged to protect farmers from uncertainty. Rather than giving them increased input subsidies, the funds need to be diverted to modernise agriculture methods and its allied supply chains.
It will not be easy to bring consensus here given the already strained relation between the Centre and the farmers, but extra push is needed if one really wants to get to the root of the problem that has been plaguing the Indian agriculture.
The NDA government had promised to double the farmers’ income by 2022 and any sort of realistic way to achieve the same even at a later date needs serious structural reforms.
The pandemic had only widened the gap in income disparity and had pushed millions into poverty, while erasing almost three years of growth. A steady and sustainable growth rate can only be achieved if reforms and government intervention benefit all the stakeholders in the economy, starting from the lowest rung.
Navaneeth M S is a student of IIT Madras.