As part of India Today’s e-Conclave session Jumpstart India, India Today TV spoke with Principal Economic Adviser in the Ministry of Finance Sanjeev Sanyal to get a sense of what needs to be done to revive the economic activity and bounce back from corona coma. With every sector in decline, where does the government aims to deploy its limited financial resources? Sanjeev Sanyal explains:
Speaking of the government’s plans, Sanjeev Sanyal said the government is clearly aware of the disruption in the economy and it has taken a different approach to what some other countries have done.
“First, we prioritized the health emergency over the economic emergency. If we hadn’t kept the health sector on priority, given the size of our population and the density of the cities in India, it would have gone out of control and then nothing would have mattered.”
On the number of job losses that the country is staring at in view of the halted economic activities due to the coronavirus pandemic, Sanjeev Sanyal said, “We focused on providing some sort of a cushion to the system whether it’s the reserve bank repeatedly coming out with liquidity or the government physically out there to distribute ration, putting money into people’s accounts through direct transfers and so on. It’s just a cushion. Over time, several packages would be announced and will be slowly ramped up. Through the opening and then rebuilding which is the next phase.”
“We will ramp things up step by step,” Sanjeev Sanyal said.
Asserting that the government understands these are hard times and the initial steps may not solve the problems the country is facing, Sanjeev Sanyal said that the government is willing to do a lot more but in a calibrated fashion. “At every step we have to not simply announce a great package, we have to make it work on the ground. A lot will be done in stages and it will happen a lot sooner than later,” the principal economic adviser said.
On the companies’ suggestions of doing away with the Goods and Services Tax (GST) for a while, Sanjeev Sanyal said while it may help one group, it is not obvious it will help the other ones like the hospitality industry.
On the stimulation of demand, the principal economic adviser said, “India has a significant monetary space. We also have more fiscal space and we will use it. Unlike many developed countries with high GDP ratios, our GDP ratio is much more reasonable. We have to take into account the constraints.”
“The job losses will not only happen in large scale in the MSMEs and the unorganized sector, it would also be difficult to track where those losses are. We take the issue of stimulating demand and made sure there is adequate functioning of the monetary transmission. Both for payments as well as to stop something quite dangerous which is a cascade of defrauds. When that begins to happen the financial sector jams up and it can be very difficult to revive these things,” Sanjeev Sanyal said.
Elaborating on the MSMEs, Sanjeev Sanyal said we live in an ecosystem where everyone depends on everybody else and one of the issues of monetary transmissions has been the difficulty of getting credit through to the MSME sector.
“Typically, there is a rush by these financial systems to safety in which case, even viable MSMEs find it very difficult to get credit. You have to provide some extra care to the MSME sector. They employ a large number of people. Cash flow has to be maintained,” he said.
“The wider problem is that we have a slowdown and one of the problems you will see with this migration is that in the urban areas, if and when the growth comes back, they are going to face skilled and unskilled labour. We will have to pay attention to this. But once we are past the initial phase of opening up, we’ll have to revive growths. Rebuild our economy into a new world we are emerging into,” Sanjeev Sanyal said.