Measures to reduce major problems in Indian economy

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The great contraction of Indian economy would effect all products and services which are not essential for a living. Government revenues would decline because of lower consumption and resultant lower profits. It would set the economy back by 28 months - country has never seen such unprecedented happening in its recent history.

There are two fears which caused the fall in demand - fear of coronavirus infection and the fear of future financial security. With no surety for their job or salary, people have stopped spending on non-essential products, affecting the country's industrial activity. This is where the Govt. should step in, not merely by giving sermons but by releasing its dues to the private sector and by increasing spending on big infrastructure projects. 

While the Govt. has been hesitant about deficit financing option, there appears to be no option other than this. The dipping into cash reserves of PSUs by the State Governments to bail them out, may not be available this year because of poor financial conditions of PSUs. 

Government should focus on increasing purchasing power of the people besides increase in production and exports of goods and services. Indian economy has seen large swings in growth and inflation over the past decade. GDP growth weakened sharply during the global financial crisis due to decline in export demand from advanced  economies and slump in investments. 

What is needed is relief that has an effect on next two quarters. This brings us to the demand side of the economy- considering the glut in market, this is not a supply issue. 

To boost demand, particularly in coming quarter, people need money through bonuses, cash schemes based on means, more than 100 days job a year under the MGNREGA  and other measures. Presently, the average number of days guaranteed employment under the scheme is 45 days, far less than the legal mandate. There is also a need for tax rebates to small and medium enterprises, Dearness allowance, revision of pension of Rs. 1,000/- from PF sources (far less than even to meet monthly needs of husband and wife) under the present market rates inflation, making filing of GST returns at lower levels easier, loan waivers for poor farmers, price protection and higher Govt. off-take of farm produce. This will give extremely poor and the middle class more cash and boost demand. 

Following five reforms, when implemented, will push economy to new heights:

1. Right to uniform education.

2. Increased Agricultural growth.

3. Creation of National Water Grid.

4. Empower communities.

5. Increase economic stability.

To conclude, Government should focus on raising purchasing power and demand to keep the economy growing is the need of hour. Besides, Govt. should make efforts to restructure/reopen the closed establishments which were closed due to Covid 19 effects. This will generate more jobs and increase more revenue sources not only to the Govt. but to unemployed youth.


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