Rooted in participation: Greater stakeholder participation can open the doors for more growth

November 7, 2020 6:15 AM

France and Canada, under the leadership of Emmanuel Macron and Justin Trudeau, respectively, are pushing forward with this approach to create frameworks based on equity.

An open economy cannot afford to have crisis on the trading front.As per the terms of reference (ToR), the Commission was mandated to give its recommendations for five years from 2021-22 to 2025-26.

By Munish Alagh

India’s per capita monthly income in 2019-20 was Rs 11,254, this had increased 6.8% since last year. While the pandemic may halt India’s rising per capita income, it also presents a case to review India’s growth from the perspective of global trade and India’s position in the global economy. In the short run, for a slow-moving country like India, too many quick turns in the domestic economy may be difficult to negotiate. So, if it needs to overcome the effects of this pandemic, it has to leverage trade relations to smoothen business cycles and bring the economy back on track.

An open economy cannot afford to have crisis on the trading front. India, however, has continued to irk its trading partners. What the policy makers need to realise is that a forward-looking model of policy, which attempts to smoothen out a trade deficit by leveraging on India’s strengths can work in this regard. In order to achieve this the government will have to switch from its old world thinking and look at policy options that go beyond standard macroeconomic (fiscal or monetary responses). So, for instance, a money supply approach by tinkering with interest rates to reinvigorate demand may not work as much as tweaking policy in areas that can stimulate investment in the medium-term. The new farm laws are an example in this regard. If implemented in all earnest they can yield a growth of 8-9% in agriculture and an unprecedented increase in farmer incomes.

However, the government cannot follow a top down approach. In India, the relation between positive and normative approaches to economic policy has always an uneasy one. Besides, the country has always resorted to public policy interventions to correct market failure. The current pandemic is no different. The tourism industry, auto sector and others are all looking to the government to stimulate demand. Instead, what the government needs to focus on is a participative approach, wherein it can include all stakeholders to structure policy responses. In the case of farm laws, and subsequent decision-making priority needs to be accorded to farmer producer organisations, which can represent the views of farmers alongside representation from start-ups and the government.

France and Canada, under the leadership of Emmanuel Macron and Justin Trudeau, respectively, are pushing forward with this approach to create frameworks based on equity. This is also helping to develop correct macroeconomic adaptive response in line with the New Growth Theories. In the case of international trade, increases in government expenditure towards a particular open economy action can lead to an unforeseen multiplier effect. While it is true that such measures will be slow to trickle down to all sections of the economy, and will benefit some sections more than others. But the government here has a role to play to temper down expectations.

The aviation industry, with the government’s help, could see a re-emergence of Jet Airways in India by forging an alliance with Emirates. Such forward looking adjustments will not only help the ailing sector, but will also help break the monopoly of China.

The author is Associate professor in Sardar Patel Institute of Economic and Social Research. Views are personal

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