There is a tide in the affairs of men, which, taken at the flood, leads on to fortune. For India’s economic growth, the tide could soon begin to ebb and, if the government fails to act, much of the economy will find itself all at sea, ‘bound in shallows and in miseries’. The government has done some very good things in response to the downturn induced by Covid-19, but these are what would be classified as necessary, but not sufficient. Now is the time to take to take that sufficient step, a big bang investment programme in infrastructure that would create demand for industry and services, put purchasing power in the hands of workers and employees, and pump life into the limp economy.
Capacity utilisation in industry was below 70% even before Covid, so it is futile to expect private investment to fire up the economy in the short run. The needed investment has to be made directly by the State or policy-induced by it. Shovel-ready projects exist in infrastructure, not in setting up new ventures. Take over flailing, stagnant real estate projects and, accepting the promoters as minority partners, complete them.
Complete the dozen townships under the Delhi-Mumbai Infrastructure Corridor. Where does the government have the money to invest on a large scale? It should borrow: from the public trying to take shelter from falling fixed deposit rates and flaky mutual fund performance in, of all places, direct entry into the stock market; and from the central bank. Monetise the deficit, ignoring rating agencies and their wagging fingers: growth will justify the means.
The point has been made that borrowing big to invest big and boost growth will set off a virtuous cycle of steadily lower debt-to-GDP ratios over the years, whereas timid borrowing now to finance some half-hearted investment would result in feeble growth and a rising trajectory of debt/GDP. If demand fails to pick up, companies will be forced into liquidation, never mind bank moratoria and all the other help the government has arranged and guaranteed. The time to act is now and the clock is ticking away.
(Source: Times of India)
