Do you think it is time to move ahead with National Renewal fund to bring back the economic stability of the country? Analyse (200 Words)
Refer - Business Standard
Enrich the answer from other sources, if the question demands.
IAS Parliament 4 years
KEY POINTS
· The Indian economy is staring into an abyss. The scenes of thousands of people walking on foot for days back to their villages, the staggering loss of livelihoods and the potential bankruptcies of businesses, large and small, are just the most visible manifestations of a post-Covid economic crisis that is well underway.
· To enable the government to discharge the humongous obligations being placed on it, a stimulus package that would be of the order of 15 per cent of GDP (around Rs 30 trillion) suggests itself.
· This is similar to the size of the stimulus which helped pull China out of the 2008 financial crisis. Such a package could sit in a separate fund — call it a National Renewal Fund (NRF) and financed by long-term government borrowing (with a tenure of 50 years or more), from both the domestic and overseas markets.
· The NRF should have a moratorium on servicing interest for the first 10 years; and can follow a ballooning structure thereafter, for the next 40 years. Expenditures must be heavily front-loaded over the next few years to have maximum impact.
· The Fund could possibly be redeemed through a cess on direct and indirect taxes for the next 40 years.
· Such a fund would deliberately not be under the purview of the fiscal responsibility and budget management or FRBM rules — the government and Parliament must understand, as many other countries already do, that this is not a time for fiscal discipline.
· States will play a critical role in the way any such NRF is used and allocated — they are the ones at the frontlines of the battle against the coronavirus pandemic and it is they who, when the immediate impact of the crisis has ebbed, will be best placed to decide which sectors and projects need a big funding push.
· The NRF can also provide a guarantee mechanism for state borrowing — this is urgently needed since interest rates on state government bonds have been creeping up since the crisis began.
