The government deserves to be complimented for efficiently managing so far the fallout of the dreaded Covid-19 outbreak, that is devastating many countries in the world. The clamping of the lockdown was timely, as were the announcements of steps by the Reserve Bank of India to facilitate increased lending by the financial institutions. It is difficult to predict the likely impact of this virus on the economy as a whole, though there are estimates being made by a number of experts. There is absolutely no doubt that world over, GDPs will be adversely impacted, and India too will suffer. The issue now is of limiting the damage and making use of the few opportunities that may come our way.
The world will certainly undergo a change, but it is difficult to predict what will finally emerge. As of now the end to this scourge does not appear to be in sight, but one day it will. The key question is, are we preparing ourselves when the world does come out of the crisis?
Yes, there is bound to be greater focus on healthcare. It has been long overdue in India. It is a wake-up call. The biggest sufferers of the lockdown have been the poor unorganised workers, most of whom are daily-wage earners. There were horrid stories about those who attempted to migrate back to their villages to be with their families. The country will have to think seriously in terms of social security for such workers, another long over-due intervention.
There are, however, a few opportunities that appears to be emerging. I had tweeted a few days ago: “The world is mighty upset with China on account of COVID 19. This presents a huge opportunity for India as many Companies plan to shift out of China. Let us prepare the ground forthwith to welcome such investment into India. Let us try and make life easy for investors. It can be done”.
The world will keep debating about the “role” of China in the emergence and spread of this virus, but it is clear that a large number of countries have already started thinking in terms of shifting their investments out of China. Can India seize this opportunity? Indeed, it can, but the key question is, how?
The steps recently announced by the Reserve Bank of India have the potential to impact investors within the country, even though they are limited to creating additional liquidity that need not necessarily lead to investments. There is an argument that liquidity was not the major factor even before the arrival of Covid. It was more on account of the “fear” factor and the lack of demand.
Covid-19 will only aggravate the problem of lack of demand. However, the “fear” factor can and should be tackled.
Revive clearance mechanism
The government will have to consider the following steps forthwith to attract international investment. These steps will also help revive the sentiments for domestic investors:
First, revive the Project Monitoring Group (PMG) in letter and spirit. The PMG came into existence during UPA-II and managed to do what was unthinkable during that time, when scams were breaking out every other day. Enforcement agencies were hounding civil servants and decision-making had come to a grinding halt. Clearances of various projects were stuck. By putting in place a transparent web-based mechanism for clearances and by engaging intensively with the State governments to expedite clearances, projects worth more than ₹5 lakh crore were cleared in a period of 15 months.
Both the premier chambers of commerce and industry (CII and FICCI) had written to the Prime Minister: “the PMG has been playing an exemplary role in getting the necessary approvals and clearances for projects that have been stalled”. There was also a request from these chambers to expand the mandate of PMG.
Second, make all clearances time-bound and process transparent. This is already being attempted by the Samagra Foundation in Haryana in close co-ordination with the State government.
Third, streamline all the processes of clearances. With the data getting generated at the PMG, the bottlenecks can be clearly identified.
All the three steps mentioned above are inter-linked. These steps will provide comfort to the investors. They do not require any legislation or any amendment to an existing legislation. This can be done forthwith. The investor will have at his disposal an institutional mechanism which he can approach in case he runs into a problem. Over a period of time, as the processes become streamlined and digitalised, the role of PMG will also undergo a change.
Apart from the above, other fiscal and monetary measures can be put in place to put more money in the hands of the consumer. The FRBM Act may have to be amended to enable larger deficit financing. Steps will have to be taken to revive construction activities. The precipitous fall in petroleum prices and the consequent reduction in the bitumen price can be leveraged. The government will be well advised to make all the payments due expeditiously.
It can also consider measures such as imposing a moratorium on subscription to the provident fund and asking the employers to give in cash to the employee his contribution to the PF, as well as that of the employer.
The government would already be working on a package to revive the economy, but the key really is the sentiment that will help private investor (both domestic and international) feel “comfortable”.
Roadshows did not help in that past. They will not help now. What will help is action on the ground. It can and should be done in the interest of the country and its people.
The writer is a former Union Coal and Education Secretary