A day after Prime Minister Narendra Modi announced a Rs 20 lakh crore package to help an already struggling economy get back on its feet after the setback of the pandemic, Finance Minister Nirmala Sitharaman unveiled the first tranche(a part of total amount) of relief measures.
The measures, which are designed for the government to take on the credit risk in the economy, and boost liquidity to various segments, follow a three-pronged approach:
First, ensuring flow of credit to the micro, small and medium enterprises.
Second, easing liquidity constraints of financial intermediaries, and;
third, addressing cash flow woes(concerns) of other parts of the economy.
So far, the announcements have comprised largely of contingent(subject to chance) liabilities like loan guarantees, with some direct fiscal support.
The government has announced collateral(security)-free loans for MSMEs to the tune of Rs 3 lakh crore, where both principal and interest risk will be borne by it. This measure, while limiting the immediate outgo for the government, should encourage risk averse banks to lend to MSMEs.
Though it does raise the spectre(threat) of moral hazard, as only a fraction of loans extended are likely to turn bad, actual credit flow to MSMEs could be much higher.
This will help cash-starved MSMEs access funds to meet their obligations such as paying salaries. Further, relaxing the definition of MSMEs addresses the perverse(bad) incentives of wanting to remain small.
This will incentivise(push) MSMEs to scale up as and when the economy picks up, without worrying about not being able to take advantage of existing incentives. Clearing all pending due of MSMEs, though not a reform, will help ease their liquidity woes(problem) further.
To encourage flow of funds to parts of the financial system, the government has announced special liquidity schemes — Rs 30,000 crore to buy investment grade debt of NBFCs, HFCs, and MFIs, and Rs 45,000 crore for investment in lower rated papers.
But the question is: Will risk averse(avoid) banks lend to lower rated NBFCs?
Other administrative and regulatory measures which include lowering the rate of tax deducted at source, extending relief to contractors, and relaxations for provident fund contributions will help ease liquidity constraints in the broader economy.
TELECOM- However, injecting Rs 90,000 crore to financially stressed state electricity distribution companies, through PFC/REC(Rural Electrification Corporation (REC) n Power Finance Corporation (PFC)), while restricting the government’s outgo, is at best a stop-gap arrangement as it does not address the core of the problem.
Rather, the government should be pushing through contentious(concerning) reforms in the power distribution segment, as the draft amendments to the electricity law seek to do.
The finance minister has sidestepped(ignored) questions over the quantum of additional spending being undertaken, how it will be financed. While the government has announced a revised borrowing calendar, it is likely to be only enough to plug(fill in) its revenue shortfall.
This lack of clarity will keep bond markets on tenterhooks(state of suspense or agitation because of uncertainty about a future event). Not much was also shared on the anticipated land and labour reforms.
Hopefully, the next set of measures will focus on how the government plans to stimulate(uplift) the economy, and the structural reforms it intends to implement.
The Supreme Court order on Monday declining pleas(requests) for restoration of 4G internet services in Jammu and Kashmir is disturbing for several reasons.
The continued denial of such services in the lockdown constitutes a special injustice to a people deprived(suffer) of fundamental freedoms since the Centre’s August 5 2019 decision to abrogate(remove) Article 370 — the present 2G service is not enough for children to access online classes, or for patients to consult doctors, or for businesses dependent on online transactions.
DELAY AND EVASION:
But the SC order is also troubling because it appears to be part of a broader pattern of delay and evasion(avoidance), and passing the buck(responsibility), in cases that touch upon fundamental rights and crucial policy issues — in ways that amount, effectively, to giving the political executive the benefit of the doubt.
Monday’s order, for instance, does not just contain no-questions-asked references to “national security” and “compelling circumstances of cross-border terrorism”, it also cedes(surrender) the court’s own powers of judicial review to a special committee headed by the Union Home Secretary, which will examine the contentions(concerns) of the petitioners(one who makes complaint) as well as the “appropriateness of the alternatives” suggested by them.
other words, the apex court has held that another body, consisting of secretaries of the very departments whose orders are in question, should adjudicate(decide) on the validity of the restrictions on people’s freedoms imposed by them.
DELICATE BALANCE IS MUST:
There is no doubt that in J&K, imperatives(need) of national security need to be factored in, a delicate balance must be struck. But the process of doing so must be both judicious(sensible) and judicial.
More generally, while executive assessments are a crucial input, they cannot be the only, or unquestioningly, the last word, in cases that involve constitutional principle and law.
By throwing the ball(responsibility) on internet access back to a government-led committee, and by its delay in taking up cases of habeas corpus(a writ requiring a person under arrest to be brought before a judge or into court, especially to secure the person's release unless lawful grounds are shown for their detention) in Kashmir, the court has given the executive a free pass, instead of acting as a check and balance on executive power.
The apex court is the custodian(protector) of fundamental liberties and the fiercely independent upholder of the letter and spirit of the Constitution.
That it should be seen to display a lack of urgency on important cases where the executive needs to do the explaining is disappointing and dispiriting.
The COVID-19 pandemic will soon be brought under control and the lockdown relaxed. We should also expect vaccines and therapeutic(relating to the healing of disease) drugs to appear on the scene, which will decisively overcome the virus.
It is perhaps time now to think of whether returning swiftly to business as usual of the before corona era should be the only objective or should we also think about a shift to a new normal. The latter would address the root causes that led to the vulnerabilities(weakness) that have come to the fore(front) during the pandemic.
ENSURING LIVELIHOOD SECURITY:
People often talk about jobs and their changing nature, protectionism and the challenges to globalisation, the impact of emerging technologies and so on when discussing the new normal.
It seems to me that a fundamental facet(aspect) of the new normal will be to ensure livelihood security and living in harmony with nature. Population growth and human greed have driven the earth close to the tipping(end) point, even as a large part of humanity suffers serious deprivation(suffering).
I believe, in this context, that the have-nots becoming empowered enough to find their own solutions would be a far more effective approach to addressing human deprivation than relying on the vendor-buyer transactions between haves and have nots.
SOLUTIONS THROUGH SCIENCE AND TECHNOLOGY (S&T):
The balance between meeting the development needs of all humans and the sustainability of mother earth will depend on solutions determined through science and technology (S&T). The challenge is to empower the have-nots with S&T knowledge and innovation ecosystems so that they can find their own solutions.
This approach of local empowerment also presents India a unique opportunity to fast-forward its development, provided we act decisively to leverage(take advantage) our demographic dividend in the ongoing knowledge era.
(Demographic dividend refers to the growth in an economy that is the result of a change in the age structure of a country’s population. The change in age structure is typically brought on by a decline in fertility and mortality rates)
CREDIBLE PANDEMIC MANAGEMENT:
What can we learn from the pandemic to minimise the loss of lives and livelihoods should a similar episode occur again? Just as we have made progress in minimising loss of life and property from potentially disastrous events like cyclones and earthquakes, we need to develop a credible(trustworthy) pandemic management plan.
This will need to be a global action plan with pre-defined roles and actions at various levels going down to a locality or a hospital with mutually agreed SOPs for all stakeholders. Panic(fear)-driven irrational(not logical or reasonable) responses at any level should be avoided by ensuring transparency.
CREATING ATTRACTIVE JOBS IN RURAL AREAS:
One of the biggest concerns is the extremely dense population in cities. We must leverage our demographic dividend and knowledge technologies to quickly create attractive jobs in rural areas that make villages not only self-sufficient but net exporters.
A new and aggressive approach to the education and skilling of the youth in rural areas, which would build their capacity to earn livelihood in fields that go beyond the traditional concept of rural jobs, is necessary.
Broadening our approach to schemes like MGNREGA to support rural youth wanting to transition to new-age jobs in addition to government schemes that encourage rural entrepreneurship(business) could make a big difference. This approach would not only relieve(free) high habitation density in urban areas but also bridge rural-urban gap and lead to faster economic growth.
Some of the economic models currently in operation seem to widen disparities(differences). We do not pay adequate(enough) attention to the compensation of people at the grass roots in key areas like agriculture, public health and rural education that are crucial to the elimination of vulnerabilities.
Our investments in these domains are also significantly below the accepted bench-marks. Our health sector, for example, while it boasts(talk with excessive pride and self-satisfaction) of global competence to the extent of making India a health tourism destination, remains near the bottom of the table.
We need policies which can neutralise to a large extent the disparities created by market forces.
More generally, it seems to me that time has come to think about pricing principles based on the true cost of value addition and accepted norms for compensating those who do it.
Also, the transactions along the value chain should be restricted only to those who add value. Others who are also necessary for this process should come in as service providers. Leveraging modern technologies and creative business formats, we should be able to develop a healthy and non-exploitative configuration, particularly to the grass roots producers and the consumers.
A balanced approach to land use patterns needs careful attention. We need to arrive at an optimum(best) distribution of land for habitat and food for humans as well as animals, industry and other economic activities including infrastructure, energy, forest cover and water management.
Agriculture, water, energy and environment are heavily intertwined(interlinked) and need to be dealt with in a holistic manner.
Water harvesting, recharge and management systems also need attention, particularly in the context of groundwater levels, irrigated agriculture, flood control and ensuring that rivers and water bodies remain clean.
Finally, holistic education is perhaps the strongest tool to sustainably eradicate(eliminate) vulnerabilities(weakness). Education merits maximum attention as it is the key enabler of our demographic dividend, and necessary to leverage(take advantage) the opportunities of the knowledge era, particularly in rural areas. Many say that education as it exists today may become irrelevant. Technology is of crucial importance to address the issue of quality as well as access to education.
Our education environment should be linked with industry and society both in terms of work-based learning as well as real-life problem-solving. The education system should enable outreach for technology, capacity building and livelihood enhancement for rural areas.
Such a “cillage”( Cillage is concept of bridging the knowledge gap between City and Village) ecosystem that connects modern knowledge and research, currently restricted to cities, with the needs of new-age villages, should enable villages to benefit from the opportunities of the knowledge era.
Then villages, rather than being a drag, will become the engines of national development.