Announce the stimulus and undertake structural reforms – editorials
During the past week, Prime Minister Narendra Modi held a series of meetings to review the state of various economic sectors, the ways in which the current depression can be reversed, and, most importantly, the fundamental reforms that they can be undertaken in these respective sectors to overcome structural problems. This is important, as once the coronavirus pandemic subsides, there will have to be a singular focus on the economy.
There is no doubt that the pandemic will force the economy to press the reset button. India, in the worst case, will witness a recession this year, or at best, grow by 1-2%, a projection offered by top economic adviser. These figures translate into businesses that close; a sharp drop in the profitability of companies that manage to survive; income reduction for citizens; the collapse of a large number of micro, small and medium-sized companies; an increase in unemployment in all sectors; a success in trade agreements; taxes exhausted for the government at a time when spending commitments will increase; and the inability to pursue much-needed development goals. The ambition to become a $ 5 trillion economy will recede further.
This newspaper has always argued that to overcome distress, the government must present a substantial fiscal stimulus package immediately. There is no alternative to increasing public spending. This has already been inexplicably delayed. But beyond the size and composition of the stimulus, the Prime Minister’s meetings offer the hope that this moment can be used as an opportunity to undertake structural reforms. Two areas, in particular, stand out. The first is manufacturing. As countries turn inward, and many global production centers seek to relocate from China, India must cut red tape, reform its fundamental factors of production, and encourage companies that can provide mass employment. To be sure, new ways of doing business will have to be found, including mass manufacturing, in accordance with the rules of social distancing. The second is agriculture. The prime minister indicated at a meeting on Saturday the need for integrated markets and a new legislative framework for the sector. Fragmented agricultural markets and the Agricultural Commodities Market Committee framework have long been held hostage by farmers, empowered intermediaries, and undermined India’s potential. If, after the stimulus, the government can use the pandemic to announce long-awaited reforms, it will be the best use of this crisis.