Over the last several days, Finance Minister Nirmala Sitharaman announced a wide ranging economic package aimed at relieving the stress caused by the Covid-19 pandemic. The Pandemic and the resultant economic fallouts are both huge challenges with a whole host of unknowns and far reaching and deep impacts on every aspect of human life. India’s 20 trillion rupees package aims to address the challenges in several sectors and supporting the economy to get back on its feet.
The uncertainties are on several fronts. For one, many sectors fear a labour vacuum especially in sectors such as construction and manufacturing where large numbers of the migrant workers have returned to their home towns and villages and one is not sure when they will return to their city jobs; or how many of them will return at all. This could put in peril the production system and in due course disrupt supply chains thus affecting larger sections of industry. Then there is the big question – are there buyers for the manufactured produce? In time, factories will start to produce cars, scooters and other goods once again as the manufacturers put their houses in order. But what is the demand scenario like? With salary cuts and job losses happening, when will the purchasing power, especially for discretionary purchases come back? There is an air of caution and hesitancy, and confidence is low.
The march back to economic normalcy could be a long one for most economies of the world. For us in India, there is need to get our small and medium industry (MSME) humming again. In many ways our MSME sector is a key building block of our livelihoods landscape. Along with small manufacturing, the related activities such and transport and supplies account for significant income of the less skilled, informal worker. The economic package has rightly aimed at making life easier for the MSMEs. Alongside there is need to put more spending power back in the hands of people so that confidence returns and wheels of the economy turn smoothly. While some attempt has been made at this, more measures are likely.
There has also been an attempt to bring about some reforms for the longer term. Announcements opening up commercial coal mining to the private sector and enhanced FDI in defence manufacturing will generate employment opportunities in the medium term. On the farm side, a facilitative legal framework is being created to enable farmers to engage with large retailers, exporters, processors and so on in a fair manner so as to secure better prices for their produce.
While these have the potential to improve prospects of the economy across different sectors, more measures and some tweaking could be required as we go along to realise our objectives.
A key development on the international scene is the reported moving out of many global manufacturers from China to set up elsewhere. India too is making a pitch for attracting such investments and we could realise big gains if we attract sizable manufacturing projects. We must leave no stone unturned.