Govt will stimulate demand once lockdown ends: Principal Economic Advisor
New Delhi: Government of India is not following others in re-inflating the economy with massive spending because post-covid world would be very different from the pre-covid world and there will be structural changes. “Why waste all ammo on a world that is dying,” asks Mr Sanjeev Sanyal, Principal Economic Advisor to Government of India. He says that the government has used some resources to cushion the blow in the form of food and cash support for the poor and liquidity support to the MSMEs and NBFCs.
Mr Sanyal was speaking at an online dialogue organized by All India Management Association (AIMA) as part of its LeaderSpeak series.
Mr Sanjay Kirloskar, President, AIMA and Chairman and Managing Director, Kirloskar Brothers moderated the dialogue that included many top CEOs such as Mr Harsh Pati Singhania, Senior Vice President, AIMA and Vice Chairman and Managing Director, JK Paper Ltd; Mr Sunil Kant Munjal, Chairman The Hero Enterprise; Mr Sanjiv Mehta, Chairman and Managing Director, Hindustan Unilever Ltd and Mr Sudhir Jalan, Chairman, Neo Foods Ltd.
Replying to queries about measures for stimulating demand, Mr Sanyal said that it was useless to push demand during a lockdown. “We are cognizant of the demand situation and we will use fiscal and monetary measures for demand where required,” he said.
Mr Sanyal said that the demand support money will go only to the poor who need it to spend. “If we transfer resources to people, one segment would go and spend but that is a small segment going by Jan Dhan accounts. If we spray generally, most of the money will go to the people who will save it,” he argued, adding that the government will use up its ammo but the industry will not get demand.
The government’s demand creation approach is to provide food and cash to the poor, create jobs in MNREGA, protect jobs in the MSMEs and launch a pipeline of massive infrastructure projects, Mr Sanyal said. “Demand is not about consumption alone. Investment is an important part of our toolkit,” he said.
Talking about Atmanirbhar Bharat as a growth strategy, Mr Sanyal said that the general reaction to the term was misplaced as the government was not fully understood. “May be we’re not as crazy as you think we are,” he said. He explained that the PM’s slogan of self-reliance was not about going back to centralization but about localism. “It is about the states doing their own thing, the districts doing their own thing and the companies doing their own thing,” he said.
Mr Sanyal said that the removal of the Essential Commodities Act and the linked APMC Act illustrated the government’s world view the best. He said that the reform would make farmers atmanirbhar. The same logic applies to the public sector enterprises, he argued, referring to Air India as not being Atmanirbhar.
“We’re ready to relook into the holiest of the holy laws,” he declared.
However, Mr Sanyal said that the government was not for laissez fair either. “It is a special way of protection,” he said and gave example of protection to the pharma API sector and simultaneous opening of FDI in the defence sector. “We’re ok with foreigners coming to India to produce. We want to indigenize technology. That is not isolationism,” he said.
Mr Kirloskar thanked Mr Sanyal for explaining Atmanirbhar Bharat and expressed hope that it would lead to skill upgradation and higher value addition in the country. He pointed out that in many countries, government tenders require a high level of local value addition and not just screwdriver assembly.
Talking about labour reforms, Mr Sanyal said that the government is thinking of labour laws from the labour’s perspective. National minimum wage, workplace safety and working condition reforms, and formalization of jobs through mandatory appointment letter were the government’s way of changing the labour laws in a peculiar way, he said.
Mr Munjal explained that the industry did not want a hire and fire law. “Industry wants a balanced regulation,” he said. He also suggested that India needed to industrialize rural areas and involve the panchayats in that since the majority of the migrant workers were unlikely to return to work in urban areas anytime soon. Mr Mehta pointed out that demand growth in rural areas had disappeared even before covid. “Cost of not doing or doing less could exceed the cost of doing,” he remarked.
Mr Jalan suggested prompt action on the release of funds and payments as promised by the government. He wondered if the government was keeping its powder dry for too long.
Mr Singhania suggested that the government could focus on some high-employment sectors for special stimulus.
Mr Sanyal assured that the government would speed up payments and resumption of projects stuck because of lockdowns. Those would help protect a large number of jobs and also stimulate demand, he said.
Ms Rekha Sethi, Director General, AIMA thanked Mr Sanyal for agreeing to explain the government’s position on the recent reforms and explain its thought process.
The dialogue was broadcast across all the major social media channels and more than 500 people participated in it.