The Hindu Business Line : Stimulus follow-up

Introducing the packages was just the beginning. Now, policymakers have to ensure that the planned expenditure creates the much-needed multiplier effect on private investments.

Like track athletes after a gruelling run, policymakers almost seem relieved at the end of the second stimulus package. As the Deputy Chairman of the Planning Commission, Mr Montek Singh Ahluwalia asserted, there would be no more packages this fiscal though the RBI would continue its monetary balancing. As far as New Delhi is concerned, both the New Year’s booster shots and those administered on December 7 have to work themselves out in the economy with producers and consumers adjusting their activities with occasional help from the RBI. At first glance, this process seems to have started if the responses of the stock market this week are any indication. Just how the real economy reacts time will tell; of course, the current quarter output and corporate performance results will reflect the growing pessimism of the last three months. The moot question is: has the government therefore done its bit?

Not by a long shot. Introducing the packages was just the beginning. Now, policymakers in the Ministries of Finance, Commerce and Industry and Rural Development have to get together to ensure that the planned expenditures — budgeted and added on in the two stimulus kits — find their way into productive capacities and create that much-needed multiplier effect on private investments. Given six decades of patchy and costly outcomes in Plan projects, policymakers need to ensure that history does not repeat itself. So, over the next two months, the key economic ministries and the Prime Minister’s Office must monitor and evaluate not just the allocation of public money but the manner of its usage with an eye on results in the shortest possible time. If State transport bodies have to upgrade their fleet of commercial vehicles, the resources should be used expeditiously to stir a sluggish commercial vehicles industry and improve regional public transport. At a national level, the India Infrastructure Finance Company can be an efficient catalyst and Mr Ahluwalia is right in according priority to its refinance capabilities. With its mandate for an additional sum through tax-free bonds, the company can leverage Rs 75,000 crore for the core sector within the next year and a half. So the quicker it gets going, the faster will its actions, as the lender of the first resort, ignite confidence in credit distribution once again.

Equal stress is required on delivery mechanisms for public investments. Along with the States and North Block, the Planning Commission must help create an ombudsman-type body to regulate and monitor fund utilisation and project progress across the country. Formalising accountability would overturn Indian public policy’s dubious record in project completion. It would also be the UPA government’s permanent legacy to the nation.

Related Stories:
Stimulus package a drop in the ocean
UPA’s final booster dose for economy
Exporters get second stimulus package

More Stories on : Editorial | Financial Policy | Economy

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Stimulus follow-up

Time to speed-dial 3G

Illusion of independence

Once more to the hustings

Has economics lost its way?

Treasury windfall for banks

Micro-finance growth