IASbhai Daily Editorial Hunt | 14th May 2020
Everything is either an opportunity to grow or an obstacle to keep you from growing. You get to choose.– Wayne Dyer
EDITORIAL HUNT 80:“A plan to revive a broken economy : Steps to Revive a Broken Economy“
SOURCES: THE HINDU EDITORIAL | Steps to Revive a Broken Economy
A plan to revive a broken economy
There are clear, implementable steps the Centre can take in fiscal terms to revive the economy and support livelihoods
SYLLABUS COVERED: GS 3:Economy
What ate steps a state should do immediately in fiscal terms for reviving the economy and supporting livelihoods. Elucidate -(GS 3)
- How to improvise the existing schemes to boost economy ?
- What economic stimuli do rural and urban societies demand ?
- Are you new to CARE ECONOMY ? Lets dive in !
STEPS TO REVIVE A BROKEN ECONOMY
- The Prime Minister has just announced Lockdown 4.0. Despite some resulting increase in economic activity, vast numbers of working people will remain without their regular incomes.
- He also announced a package of ₹20-lakh crore, but this includes already allocated money of ₹6-lakh crore and monetary policy directives to banks and non-banking financial companies.
The announcements by the Finance Minister thus far involve no additional public spending, even though this is urgently required to revive the economy and prevent further contraction.
FOOD AND CASH TRANSFERS FIRST
- The immediate need is to provide free food and cash transfers to those rendered incomeless.
- Providing every household with ₹7,000 per month for a period of three months and every individual with 10 kg of free foodgrains per month for a period of six months is likely to cost around 3% of our GDP (assuming 20% voluntary dropout).
- This could be financed immediately through larger borrowing by the Centre from the Reserve Bank of India.
- The required cash and food have to be handed over to State governments to make the actual transfers, along with outstanding Goods and Services Tax compensation.
- Hence, an immediate programme of food and cash transfers must command the highest priority.
REVAMP MGNREGA WORK
- EXPANDING THE AMBIT : Employment has to be provided to them where they are, for which the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) must be expanded greatly and revamped with wage arrears paid immediately.
- LIMITLESS WORK : The 100-day limit per household has to go; work has to be provided on demand without any limit to all adults.
- RURAL GROWTH : Permissible work must include not just agricultural and construction work, but work in rural enterprises and in care activities too.
- EMPOWERING PANCHAYATS : The revamped MGNREGS could cover wage bills of rural enterprises started by panchayats, along with those of existing rural enterprises, until they can stand on their own feet.
- CREDIT FLOW : Public banks could provide credit to such panchayat-owned enterprises and also assume a nurturing role vis-à-vis them.
- SUSTAINABLE LOCAL MARKET’s :The second change is the palpable unsustainability of the earlier globalisation, which means that growth in India in the coming days will have to be sustained by the home market.
- ECONOMIC BOOST : Since the most important determinant of growth of the home market is agricultural growth, this must be urgently boosted.
THE MGNREGS CAN BE USED FOR :
- Paying wages for land development and farm work for small and medium farmers;
- Apart from government support through remunerative procurement prices,
- Subsidised institutional credit,
- Input subsidies, and redistribution of unused land with plantations.
THE URBAN FOCUS
- URBAN REVIVAL FOCUS : In urban areas, it is absolutely essential to revive the Micro, Small and Medium Enterprises (MSMEs).
- CASH LIQUIDITY : Simultaneously, the vast numbers of workers who have stayed on in towns have to be provided with employment and income after our proposed cash transfers run out.
- URBAN EMPLOYMENT PROGRAMME : The best way to overcome both problems would be to introduce an Urban Employment Guarantee Programme, to serve diverse groups of the urban unemployed, including the educated unemployed.
- URBAN LOCAL BODIES : Urban local bodies must take charge of this programme, and would need to be revamped for this purpose.
- PRIME FOCUS : It should imaginatively also include care work, including of old, disabled and ailing persons, educational activities, and ensuring public services in slums.
- EASING NORMS : These measures are in direct contrast to those that seek to entice private investors by easing labour laws.
Such measures, far from reviving investment or employment, would also further reduce domestic demand.
THE ‘CARE’ ECONOMY :
- The pandemic has underscored the extreme importance of a public health-care system, and the folly of privatisation of essential services.
- The post-pandemic period must see significant increases in public expenditure on education and health, especially primary and secondary health including for the urban and rural poor.
OPPORTUNITY AHEAD :
- Anganwadi and Accredited Social Health Activists/workers who provide essential services to the population, including during this pandemic, are paid a pittance and treated with extreme unfairness.
- We must improve their status, treat them as regular government employees and give them proper remuneration and associated benefits.
- But in the medium term, public revenues must be increased.
- This is not because there is a shortage of real resources which, therefore, has to taken from other existing uses through taxation.
- Since much underutilized capacity exists in the economy, the shortage is not of real resources; the government has to just get command over them.
- A combination of wealth and inheritance taxation and getting multinational companies to pay the same effective rate as local companies through a system of unitary taxation will garner substantial public revenue.
- They will also reduce wealth and income inequalities which have become horrendous.
- A 2% wealth tax on the top 1% of the population, together with a 33% inheritance tax on the wealth they bequeath every year to their progeny, could finance an increase in government expenditure to the tune of 10% of GDP.
- Aspects suffice to finance the institution of five universal, justiciable, fundamental economic rights: the right to food, the right to employment, the right to free public health care, the right to free public education and the right to a living old-age pension and disability benefits.
- The broken economy must be rebuilt in ways to ensure a life of dignity to the most disadvantaged citizen.