03/07/2020 - Government Policies

KEY POINTS

·         Good rains last year, bountiful rabi harvest, significantly high storage levels in all reservoirs, record sowing of kharif crop, prediction of yet another normal monsoon and very little disruption due to coronavirus compared to urban areas have ensured that rural India is primed for a strong growth.

Signs of revival

·         Demand for two-wheelers and tractors has risen sharply and so have sales of FMCG products. CRISIL expects agri GDP to grow at 2.5 per cent while non-agri GDP is expected to shrink by as much as 6 per cent.

·         What one can say with certainty is that Bharat has the potential to ease India’s economic pain. The extent to which it will depends on a lot of factors. Both government and the private sector have a role to play in maximising this effect.

Supply-side issues

·         While conditions are ripe for agriculture, what could come in the way are the supply-side factors — availability of quality inputs. The government must ensure availability of quality seeds, fertilisers, pesticides and, most importantly, credit. Banks should drop their reticence to lend and aggressively fund the farm sector.

·         Also, in India, a bumper crop does not necessarily translate into good income for farmers. Glut in the market causes prices to crash, forcing farmers to resort to a fire sale or even worse, simply destroy their produce.

·         The stock that is procured by the government enters the market and further depresses their price. Cotton Corporation of India has procured a record one crore bales of cotton. This will eventually enter the market and depress the prices for 70 per cent of the cotton farmers who are not part of the public procurement.

·         The recent reforms that facilitates one country-one market and contract farming will help, but not immediately. If growers are not assured reasonable price for their produce this season, rural consumption will suffer.

Government schemes

·         Then there is the issue of implementing schemes such as MGNREGA and Pradhan Mantri Awas Yojana. The former has the potential to gainfully employ thousands of migrants who have returned home while the latter can give a fillip to rural housing and consequently boost demand for cement, steel apart from consumer durables such as fans, television sets, etc.

·         The rural housing scheme has slowed down (just 2.6 lakh in the first quarter due to the lockdown) and should be speeded up.

·         That apart, efforts should be made to enhance rural consumption by ensuring credit availability (credit penetration in two-wheeler sales is just 35 per cent) and offering attractive schemes for consumers. 

Please review

The world, as we know it, is fairly uncertain right now; we had an economy which was slowing before any of this coronavirus crisis started, but Covid-19 is creating a challenging test for humanity.

In a country as densely populated as us, the magnitude of this pandemic cannot be taken lightly. We need to protect the lower strata of our ecosystems, people with no medical insurance, the daily wage workers, domestic helpers, our farmers, etc.

>>> Various ways to effectively tackle COVID-19 crisis :

- Broaden the coverage of health insurance scheme : The scope of Ayushman Bharat- India’s flagship insurance/assurance scheme launched with the vision of universal healthcare, should be expanded to include the 40 per cent ‘missing middle’ who are neither covered by private insurance nor by the govt.

- Alteration and Innovation : There is no denying fact that the world might change once we overcome the situation caused by the pandemic, which implies, our govt need to work upon "alteration in policies" and "innovation"  to  overcome the challenge posed by the pandemic. For this, we need to invest on digital capability and trainings.

- Alignment between India’s monetary and fiscal policy : Targeted fiscal, monetary, and financial market measures - cash transfers, wage subsidies and tax relief , will be key to mitigate the economic impact of the virus.

- Beside this, attracting "new capital" through FPI and FDI, and nurturing a thriving economy might go a long way in aiding our fight against the crisis.

- Maintain the channel of communication : To effectively and efficiently maintain, the crisis like this, the govt must ensure constant, consistent and credible communication to provide necessary public health guidance and to allay any fears and panic among the populace. A good example of such a communication is in the state of Kerala.

- Private sector participation : Giving nod to the private sector to support in testing efforts and the utilisation of corporate social responsibility (CSR) funds to fuel these efforts will help scale a very significant stage in the containment of the pandemic.

- Solidarity in social distancing   : It is eventually up to each individual to continue following social distancing  to reduce the spread of the virus. 

>>> Conclusion :

By keeping ourselves enthusiastic to respond decisively, innovatively through this phase and remodelling our ways of operation to suppress the spread of the virus and address the socio-economic devastation that COVID-19 is causing in all regions, we can emerge out victorious for sure.