Atmanirbhar Bharat Abhiyan - Approach

What is the issue?

With the announcement of the final tranche of Atmanirbhar Bharat Abhiyan, a pattern to the government’s approach is visible. Here is an assessment of it.

What is the approach adopted?

• The measures taken up are largely in line of -
  1. giving a strong supply-side push by boosting availability of capital on easy terms
  2. keeping income and wage support schemes to the minimum
  3. empowering constituencies ranging from farmers and workers to businesses
• Above all, the government seems to be keen on keeping the damage to the fisc as low as possible.
• The fiscal impact of the Rs. 20-lakh crore package is estimated by economists at between 2-3% of GDP.
• This includes withdrawals from provisions already made in the Budget for this fiscal.

What is the idea behind?

• The pillar on which the package rests is liquidity support so that businesses can be revived.
• This, in turn, is expected to set the economic cycle back in motion.
• The option of a demand-side stimulus through a resort to deficit financing seems to be reserved for a future date.
• This could be in case if the infection does not subside or a second wave begins prompting another lockdown.

What is the concern with this?

• The problem with this approach is that there is now a desperate need for demand stimulus; the government has focussed on supply-side push.
• A strategy to drive consumption may have worked better under prevailing conditions.
• The options could have been suspending GST for a couple of months or at least cutting rates temporarily, combined with a liquidity boost.
• The Centre’s problem is that its revenues are a fraction of what it would have been in a normal situation.
• But despite this shortfall, a fiscal stimulus could have been fitted into the overall package.

What are the welcome moves though?

• The government has done well in increasing the budget for MGNREGA by two-thirds, adding another Rs. 40,000 crore.
• With migrants now returning to their villages, MGNREGA can be leveraged to keep them occupied with meaningful work.
• The demand of States for higher borrowings limit has also been granted but with clear reform milestones that they have to meet.
• The government has also used the opportunity to unleash some much-needed reforms in agriculture marketing.
• The measures also include -
  1. opening up more sectors for private participation
  2. enhancing foreign direct investment in defence
  3. corporatizing the monolith Ordnance Factory Board, and so on

What lied ahead?

• In sum, the package has several notable features not all of which are COVID-19 relief.
• But, the government has clearly refused to borrow and spend more on boosting demand.
• If the strategy of boosting supply works, it is fine.
• However, if it does not work on expected lines, the government will be faced with a bigger problem down the line.
• The strategy of promoting supply without helping boost demand may force a relook later.

Source: The Hindu