Boost infra projects to kickstart the economy

Published: April 10, 2020 5:00:02 AM

Not doing so, or delaying it, will result in further job losses, no new job creation, low spending, and dip in manufacturing, leading to low GDP growth and increased dependence on social protection measures

The impact of Covid-19, one fears, will bring down GDP growth to near 2-3% levels. The impact of Covid-19, one fears, will bring down GDP growth to near 2-3% levels.

By Aruna Sharma

The Indian economy is going through one of the most difficult phases in the post-liberalisation era. Economic growth in the third quarter for the previous financial year (FY20) slipped to a low of 4.7%. The impact of Covid-19, one fears, will bring down GDP growth to near 2-3% levels. The manufacturing sector in the third quarter contracted 0.2%, while agriculture grew 3.5%, and construction 0.3%. Growth has taken a hit from the lockdown due to Covid-19. There is no denying that the lockdown was the need of the hour. However, it is equally important that the economy receives an immediate boost in the right direction with timely decisions to generate not just urgent, but widespread employment, and that too on a priority basis.

Covid-19 forced the country to resort to complete lockdown for 21 days, causing economic activities to nosedive. India, a developing economy, needs financial packages that are being considered, but the impact of these will be short term. Any financial package will be truly useful only if parallel steps are also taken to re-trigger the economy. The need is to create a demand in the market. The best option would be the one that brings income to many sectors, and without any loss of time.

The top priority must be infrastructure-rail construction, roads, shift to pre-cast technology for buildings. In rural India, the target must be for every village to have concrete cemented roads, drains, sewage, piped drinking water, good public buildings, and housing. The health infrastructure must also be added to by way of repair and updation of equipment. Pre-cast shift is the need of the day in the construction sector. Neither will this shift levy an environmental cost, nor will it cause air pollution. Further, it will give a boost to a chain of industries across the country. Not only national highways but also the Pradhan Mantri Sadak Yojana (PMGSY), and the Centre and State finance commission funds for local bodies, both urban and rural, converged with MGNREGA, will trigger economic growth. Incidentally, earmarked funds are available. The need is to release these on top priority.

For any nation to grow on a sound footing, and to continue to be a developing economy, what is crucial is strong GDP growth-ideally, for India, a double-digit growth-to trigger manufacturing, research, and quality services. Today, the continuous decline in the rate of GDP growth is a matter of grave concern. The priority of the government must be to focus on sectors that will contribute to an immediate and sustainable uptick in GDP growth. Allowing the infrastructure sector to restart will immediately put money in the hands of labour, will revive the material market and the machinery use. Steel, stainless steel, cement, sand, and transport and logistics industries will get a boost. Money in hand will trigger demand for fast-moving consumer goods (FMCG) and thus have a ripple effect. Social protection is a supplement, but it cannot be the only intervention to boost the economy and to bring it back on track.

This is the time to ensure that the fiscal deficit is not the guiding factor; expenditure needs to be incurred that will boost the economy in both the short-term and the long run. The need is to think quickly and big, and not to be guided by hackneyed economic policies. This is the time to shift to the principle that the more the government spends, the more it earns. Infrastructure success will bring in more taxes by use of fuel, and mining royalty and, therefore, boost GDP.

If course correction is not done, or if it is delayed, it will have a negative impact and result in no new job creations, further job losses, low spending, dip in manufacturing, low borrowings, and thus, low GDP growth and increased dependence on social protection measures.

Yes, India can give an immediate impetus by setting its priorities right and allowing infrastructure work to reopen, with necessary protection measures for labour. On-site availability of healthcare facilities and masks and strict observation of hygiene and sanitation practices should be the norm. This is time not just to give doles, but to enable more and more earning capacity in a sustainable manner. The infrastructure boost is needed for a better quality of life. It ensures better health and better business.

The author is Development economist & former secretary, Government of India. Views are personal

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