oppn parties Providing Credit Not Enough, Investments Need To Be Made By The Government

News Snippets

  • In a first, the Supreme Court recognizes marital rape, although for the limited purpose of allowing married women the right of abortion up to 24 weeks if they conceived as a result of forced sex by their husbands
  • Air India cuts discounts on base fare to students and senior citizens from 50% to 25%
  • Mallikarjun Kharge and Digvijay Singh are being touted as frontrunners to take on Shashi Tharoor in the elections for the post of Congress president
  • Sonia Gandhi will decide who will be Rajasthan CM if she feels there is a need to change guard after the near-rebellion by MLAs in the state
  • Ashok Gehlot bowed out of the race for being Congress president after meeting Sonia Gandhi
  • India has moved to the 40th spot in the innovation index, up 6 spots from last year
  • DGGI has alleged that top insurance companies, banks and NBFCs has committed a fraud of Rs 800cr by claiming input tax credit without underlying supplies
  • The Centre will borrow Rs 10000cr less than planned earlier due to good revenue collections
  • At $23.9bn, India's current account deficit widened to 2.8% in Q1, the worst in four years
  • Stocks continue to flounder on Thursday: Sensex sheds 188 points to 56409 and Nifty 40 points to 16818
  • The 36th National Games were declared open on Thusrday by PM Modi in front of a record crowd in Motera near Ahmedabad
  • Jasprit Bumrah most likely to miss T20 World Cup due to recurrence of back injury
  • PFI's political wing, the SDPI is on EC radar and action will follow soon if discrepancies are detected
  • Ashok Gehlot to meet Sonia Gandhi today, says all issues will be sorted out soon
  • Referring to the PFI ban, most Muslim organizations ask the government to take similar action against right wings organizations like the RSS, Bajrang Dal, VHP and the like
In a landmark order, Supreme Court rules that all women, married or unmarried, are entitled to safe and legal abortion up to 24 weeks of pregnancy as per the MTP Act
oppn parties
Providing Credit Not Enough, Investments Need To Be Made By The Government

By A Special Correspondent
First publised on 2020-11-16 15:09:57

The third Covid package announced by the finance minister suffers from the same shortcomings as the earlier packages - it is credit-based instead of being investment oriented, most of its provisions target the medium and long term when the need is for immediate relief and the benefits are restrictive and not broad-based. In that sense, even though the package is touted to be of Rs 2.65 lakh crore, the actual immediate outgo from the government side will not be even 50000 crore. Although the five-year plans have long been abolished, the government seems to be seized of the mentality that was prevalent when drawing up these plans. It is not providing immediate relief to businesses devastated by the twin impacts of the pandemic and the lockdown.

For instance, it could follow the US example of providing equity support to selected businesses instead of credit support as the latter needs servicing of the interest component and increases costs. The government can ask banks to buy equity in selected companies and sell them at a profit later. It also needs to infuse actual funds in the system by investing in infrastructure projects, either on its own or in joint venture with private companies. The orders generated by these projects will benefit the core sectors of steel, cement, logistics and generate jobs. In addition, the downstream orders will benefit a huge number of sectors and the chain effect will improve sentiments and the economy will recover faster.

But for some strange reason, the government is shying away from making the huge investments needed to revive the economy. Granted that the funds are not there, but in these troubled times the increase of fiscal deficit by one or two percentage points should not come in the way of such a decision. If we worry about ratings at this juncture, the economy might slump further and the ratings will go down anyway. Although green shoots are appearing, but we have to wait till the January figures to come to the conclusion whether this is due to festive buying in October and November or whether the demand will  remain buoyant. Hence, it is necessary that the government take all measures to generate funds and make investments. Only then will businesses flourish, jobs will be created and tax collections will improve.