After the first wave of the COVID pandemic, Central govt brought a lot of schemes to stimulate the economy, in the form of moratorium to bank loans, new working capital enhancement loans, re defining of the MSME and many other welfare schemes for industry and individuals. It made a larger impact in the market for revamping economy from the shock of unprecedented and unexpected lockdowns. Enormous fund has been released to infra to boom the economy by the ministry of roads and Highways through NHAI & NHIDCL where the estimated expenditure on the Ministry of Road Transport and Highways for 2020-21 is Rs 91,823 crore. NHAI awarded highest value of projects compared to last three years. It helped the GDP in infra at 4th quarter to 14.5% and helped overall GDP FY20-21 to close at minus 7.5% from a deep slash.
Vocal for Local & anti-Chinese sentiment due to tensions at Galvan Valley helped to create the initial demand for Indian products. Economic stimulation packages increased the liquidity, reduced Bank Guarantee burden on projects and provided great relaxation to infra companies. It gave a feeling to the market that Indian economy may not get affected much in its growth. But greedy steel & cement companies used this opportunity to the optimum level. Revive packages went to their hands and cleared all their accumulated losses in this gesture. Central Government created a demand, but we cannot close our eyes on failure of Governance to controlling the price of raw material by the government or respective ministry. Even the Union minister Nitin Gadkari’s involvement also doesn’t help to rope the raw material price hike disaster. 60-80% increase of basic material for Infra project, pushed infra companies to deep liquidity issues, even though the Infra contributed 14.5 % of GDP in last quarter of FY.
Welfare schemes helped a lot to maintain the lively hood, especially on below poverty line segments, who are a large population in our country. The scheme to guarantee the rural employment under Mahatma Gandhi Rural Employment Guarantee Scheme (MGREGS) has been used 80 % of the allocated fund used. That means an amount of Rs. 89,287/- Crore during last financial year on allocated amount of 1, 11,500/- Crore has been utilised. It is almost equal to Road Transport Ministries expenditure on last financial year. Unfortunately the saddest part is, this huge amount spending as the labour charges, is not contributing anything to GDP. If such labour is used for asset creation such as infra works, it will give a greater boost to industry. It also encourages the local labour usage. Many states depends on migrant labours for the asset creation but uses there MGREGS fund for non-productive work. Moreover, Policy shift helps respective States to increase their own GDP to higher levels. It is necessary to bring those labours under PF & ESI schemes which provides beneficiaries to be the part of health and saving schemes.
Re booting the economy after the second wave is a different challenge than the first, hence it needs a diverse strategy. Proactive steps of government after the first wave provides a confidence in the market. Unfortunately now the market has lost that. It could be brought back by driving and creating the demand. For creating the market demand the economic activity needs to be on full fledge. This is achievable only with vaccination of at least 75% of total population. It would reduce the worry on the expected third wave, and plan for long term goals. In a normal situation every government would pump the money in to Infrastructure and create assets for improvement of the market demand. But this is not a normal situation for the government to do so for the market to flourish. In this tough time they should cut down on expenses & overheads, review the non-productive & unimportant projects, and we need a better governance on the price control & market regulations. The import policy on the cheaper Chinese products demands revisiting in order to support the “Atmanirbar Bharat”. Back during the border dispute days, the government’s actions used to threaten the Chinese turned out to be good for the SME segment, but the cause lost momentum half way. This needs to be rekindled more sincerely on a long term basis. More conscious steps like MGREGS fund utilisation for asset creation which helps long term solutions in unorganised labour issues. GST slabs for R&D firms need to be reviewed with a flexible payment mode. Procreative interference in the market for Steel price, the biggest raw material to all industry, surely will bring the economy back to spindle.
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