The economic package: The layman’s dilemma–economic times

Clipped from: https://timesofindia.indiatimes.com

A great economist of his time, Milton Friedman, famously observed, “One of the great mistakes is to judge policies and programs by their intentions rather than the results”. The economic package as announced by the Finance Ministers over five days in five chapters has evoked intense discussions and debates in economic and political circles as well as in the general public. Given the prevailing pandemic ridden circumstances under which the package is announced, it has created high hopes and great expectations among the people notwithstanding severe criticisms from many experts over its real quantum and prospective effects. In the face of it, the package is too huge, broad and wide affecting each of the segments of economy which seemingly intends to reform and redefine the whole spectrum from coal to power to defense to space and from rural to tiny, small, medium sectors to heavy industries as also from PSU to corporate to private players. The avowed goal is to make the country ‘Atmanirbhar’ being ‘Vocal for Local’ and making in the country ‘for the world’.

Though there is serious debate over the perceived size of the package fact remains that the size of the infusions in various aspects is, so far, biggest, deepest and widest and the govt has put in its entire might for its impact and success. Given the huge trust, respect and love Narendra Modi commands of his people, his govt would have to be doubly determined to ensure that the package yields the desired level of positive effects upon the economy and eventually upon the living of the masses. There are always various ways and means to prosperity – for individuals as well as for nations and there has been and will always be debated as to which path one takes. But then when the nation achieves prosperity it hardly makes any difference as to which path it took. Of course, it has to be ensured that the path is smooth and creates no avoidable difficulties for its people.

While the journey would be keenly watched, observed and commented upon, from people’s perspective there are few dilemmas which are storming layman’s mind. Firstly, whether being ‘Atmanirbhar’ means moving towards a limited closed economy compromising the path of liberalization which the nation admittedly pledge to follow. Secondly, whether the magnitude and intensity of investments through credits as envisaged would take place to the optimum giving perceived results and thirdly, how and in what manner the PSUs would be tweaked, reformed, amalgamated or privatized? Will there be any time frame?

Being Atmanirbhar remains a dilemma. During my Grandfather’s generation one would be atmanirbhar only if he had a govt job – otherwise even if one would earn infinite, would be seen with uncomforting nerve. This was being atmanirbhar with caution and limitation. Many of today’s youth, however, do not prefer a govt chair, whatsoever high, to a moderate corporate job or even to being an entrepreneur. So the situation is quite tricky. What type of atmanirbhar the govt would want the nation to be. Are we going to shun most of the imports and be content with what we make? We make AC, washing machines, garments, fridge, TVs, and cars and so many other things. Will we not import all these and not allow our people to purchase and use them? We do also export so many things even though we need them back home. We exports fruits, spices, garments, engineering equipment, cars etc and do import them too. Are we going to ban exports of the items we need for ourselves and thereby refrain our people concerned earn more? Or we are going to create a situation where we promote our people to make more and make competitive in both cost and quality and keep our people and the also the countries to choose from and select Indian based on the standing in the market? And let us earn enough from exports to import enough the things we do not have or cannot have and make them available at a reasonable price? Richest of the countries do import things which they don’t have – but in many of the countries the price of items like petrol is much cheaper than us though the source and input price remain the same. Therefore, there has to be clarity how much, how far, and which way we aspire to be atmanirbhar. Otherwise, it may very well appear to look like a U-turn policy-wise.

Most of the money proposed to be infused are in the form of credits, of course with guarantees therefor from the govt side – be it for farmers, street vendors, MSMEs or the mightiest of industries. There are no talks about the rates of interests to be charged. How far the unit owners would be encouraged to borrow? Most of the MSMEs manufacture various components of many products of large industries – from auto sector to utilities such as Fridge, AC, TVs etc. With dismal demand for many of these products, there will be diminished demands of the components. And with lesser demands the production too will not be in full capacity of the units concerned, so what for the units go in for additional credits and how they are going to repay? Demands for almost everything other than essentials are reduced too much. Yesterday only, the Union Commerce Minister Piyush Goel has called up on realtors to lower the prices and sell out the remaining inventory as the ‘situation is not going to improve’ any soon. Thus, if the govt feels the situation on demand side is not going to improve in near future, how it expects the entrepreneurs to go on manufacturing putting in more investments in form of credits? Therefore, there appears to be larger questions than that of capital and those have to be addressed on priority.

Dealing with PSUs and their future has been an ever debated issue with lot of ifs and buts of their equity and relevance. Having decided that there will not be more than four PSUs at a given ‘strategic sector’, we must be planning ahead. Now, firstly, it is going to take an eternity to decide what makes a sector ‘strategic’ especially in view of opening even defense and space to private players and secondly, after the decision – if at all it would be eventually taken – it would linger on to privatize and/or consolidate by mergers. After all, let us keep in mind that we are a country where we require police to enforce wearing seatbelts and helmets and a PSU to sell out railway tickets and provide food and water to passengers! Therefore, let us not blind copy others. Every country has its own ethos and culture of functioning – one may not and even must not try overturn it. Certain PSUs have done amazingly excellent making private players jealous of them and some private corporates too have been caught at the top of inefficiencies and irregularities. The bottom-line remains to have a positive outlook to create, nourish, and sustain sound PSUs and private players – the fine mixture will give miraculous results. The delay kills and kills painfully – like what is happening to Air India. Thus, a holistic roadmap of planning and decision with timeframe will be needed and to be adhered to.

It is beyond any doubt that the Prime Minister has shown an exemplary vision coupled with a concrete plan and target. But much will depend on the way his lieutenants take the vision forward with solid strategy coupled with efficient implementations. Having decided the package, the govt must leave behind the debate which may continue going on, as John Kenneth Galbraith, one of the leading champions of American liberalism, said, unlike in politics, “In economics, the majority is always wrong”.

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