Atma Nirbhar Bharat Abhiyan: Critical Analysis – Economics

Table of Contents

CONTEXT

Government announced an economic stimulus package of Rs 20 lakh crore.
Objective- First, interim measures such as liquidity infusion and direct cash transfers for the poor will work as shock absorbers.
Second, long-term reforms in growth-critical sectors to make them globally competitive and attractive.
These steps may revive the economic activity, impacted by Covid-19 pandemic and create new opportunities for growth in sectors.
However, there are several challenges that are needed to be addressed in order to fulfill the vision of this plan.

Primary Sector:
Reforms to amend ECA, APMC, Contract framing, etc are particularly transformative.
Steps towards the One Nation One Market objective.
Help India become the food factory of the world.
Achieve the goal of a self-sustainable rural economy.
MGNREGA infusion of Rs 40,000 crore – alleviate the distress of migrants when they return to their villages.
Secondary Sector:
Rs 3 lakh crore collateral-free loan facility for MSMEs- provide a kickstart to the dismal state of the economy, help to sustain the labour intensive industries and thereby help in leveraging India’s comparative advantage.
Limiting imports of weapons and increasing the limit of foreign direct investment in defence from 49% to 74%- much-needed boost to the production in the Ordnance Factory Board, while reducing India’s huge defence import bill.
Tertiary Sector:
A balanced approach
PM e-Vidya programme for multi-mode access to digital online education provides a uniform learning platform for the whole nation
Enable schools and universities to stream courses online without further loss of teaching hours.
Public expenditure on health will be increased- investing in grass root health institutions and ramping up health and wellness centres in rural and urban areas.

The package of Rs 20 lakh crore comprises both fiscal and monetary measures.
Majority of the package is liquidity measures.
The lockdown has lowered aggregate demand, and a fiscal stimulus is needed. However, the package, rely overwhelmingly on credit infusion.
Lack of Backward and Forward Linkages: Unless the rest of the domestic economy is revived, the MSME sector may face a shortage of demand.
Fiscal Deficit: Government claims that the stimulus package is around 10% of India’s GDP.
The government seeks a disinvestment to mobilise the finances for the plan.
It is difficult to borrow the foriegn markets, as rupee with respect to dollar is all time low.

Enhancing Demand
Creating infrastructure
For financing of the stimulus package, India’s foreign reserves stand at an all-time high which could be strategically used to finance its needs.
The rest may have to come from privatisation, taxation, loans and more international aid.
Holistic Reforms