Atmanirbhar Bharat Abhiyan
This Blog is written by Priyesh Parthasarthy from Symbiosis Law School, Noida. Edited by Amrith R.
The COVID-19 pandemic is an unprecedented global health crisis of our time and the greatest global humanitarian challenge the world has ever faced since World War II. The virus has spread widely, and the number of cases is rising daily even as governments are working tirelessly to combat the pandemic. India acted quickly, implementing a proactive, nationwide, 68-day lockdown, with the goal of flattening the curve and using the time to plan and resource responses adequately.
Along with an unprecedented human toll, COVID-19 has triggered a deep economic crisis. The global economic impact could be broader than any other recession we have seen since the Great Depression.
India’s efforts to contain COVID-19 have garnered praise across the world, although many grievances are also noted within the country. A complete assessment of the negative impacts of the lockdowns on India’s economy will not be known for some time. Nonetheless, neither an indefinite continuation of lockdowns nor a sudden relaxation is possible. Some economic stimulus was to be expected in the meantime to help the populace survive the lockdowns.
Recently, the Prime Minister has announced the ‘Atmanirbhar Bharat Abhiyan’ (or Self-reliant India Mission)’ with an economic stimulus package — worth Rs 20 lakh crores aimed towards achieving the mission.
• The announced economic package is 10% of India’s Gross Domestic Product (GDP)in 2019-20.
• The amount includes packages already announced at the beginning of the lockdown incorporating measures from the RBIand the pay-outs under the Pradhan Mantri Garib Kalyan Yojana.
• The package is expected to focus onland, labour, liquidity and laws.
The Atmanirbhar Bharat Abhiyan is argued to strengthen India’s cottage and home industries, small and medium enterprises (SMEs) and other industries. A new atmanirbhar (self-reliant) India is envisioned to be built on five pillars: economy, infrastructure, a system driven by technology and forward-looking policies, demography, and economic demand.
DARK SIDE OF ATMANIRBHAR BHARAT ABHIYAAN
COVID-19 has exposed the fallacies of the development model societies have relied on since industrial revolution. Traditional approaches focusing on cost-benefit ratios and return on investment as the bedrock of economic development have treated the environment and ecosystems as externalities. Such a development has also left us unable to deal resiliently with shocks such as COVID-19.
The poor have not only missed the bus of this economic development but they have once again faced the brunt of COVID-19 in terms of the number of infections, morbidities and mortalities. They have also been paying a disproportionately high price for climate impact.
Climate impact assessments have been put through the economic lens in terms of their costs to life, property and infrastructure. Climate adaptation has been the tool to deal with climate impacts that are unavoidable. Climate adaptation has largely been considered independently of economic development. This has already cost us dearly in terms of adaptation being ineffective or only marginally effective in reducing inequities of climate vulnerabilities.
Adaptive development relies on closing climate adaptation gaps to reduce risks of abrupt shocks or disruptions that are slow moving. Adaptive development aims to enhance society’s ability to respond to and mange such risks by treating adaptation as an integral aspect of economic development. Adaptation has always focused on mitigating climate change risks but treating it as separate from development has often resulted in development working against adaptation goals.
For example, urbanisation and other kinds of land use changes are an essential component of economic growth but they exacerbate environmental damage and climate change risks. Adaptive development can ensure low-regret and no-regret options for reducing risks without negatively impacting economic development. Traditional economic development can be argued to have caused the current predicament of climate change. Such arguments are now being used to advocate reductions in consumption as a new way of life for the post-COVID world.
IMPACT OF ATMANIRBHAR ABHIYAAN
The economic disruption caused by the pandemic is of gigantic proportions. It’s impact on Indian economy can be discussed as under:
The measures (reforms to amend ECA, APMC, Contract framing, etc) announced for the agricultural and allied sectors are particularly transformative. These reforms are steps towards the One Nation One Market objective and help India become the food factory of the world. These would finally help in achieving the goal of a self-sustainable rural economy. Also, the MGNREGA infusion of Rs 40,000 crore may help in alleviating the distress of migrants when they return to their villages.
Given the importance of MSMEs for Indian economy, the Rs 3 lakh crore collateral-free loan facility for MSMEs under the package will help this finance-starved sector and thereby provide a kickstart to the dismal state of the economy.
Also, as the MSME sector is the second largest employment generating sector in India, this step will help to sustain the labour-intensive industries and thereby help in leveraging India’s comparative advantage.
Additionally, limiting imports of weapons and increasing the limit of foreign direct investment in defence from 49% to 74% will give a much-needed boost to the production in the Ordnance Factory Board, while reducing India’s huge defence import bill.
The government has adopted a balanced approach in addressing concerns across sectors. For example, the newly launched PM e-Vidya programme for multi-mode access to digital online education provides a uniform learning platform for the whole nation, which shall enable schools and universities to stream courses online without further loss of teaching hours.
Public expenditure on health will be increased by investing in grass root health institutions and ramping up health and wellness centres in rural and urban areas.
CHALLENGES WITH ATMA NIRBHAR ABHIYAAN
Issues related to liquidity
The package of Rs 20 lakh crore comprises both fiscal and monetary measures, the latter being in the nature of credit guarantees and liquidity infusions into banks and other financial sector institutions rather than the economy per se.
Majority of the package is liquidity measures that are supposed to be transmitted by RBI to Banks and Banks to Citizens. This transmission wouldn’t be as smooth owing to inefficient transmission of monetary policy.
Lack of demand
The lockdown has lowered aggregate demand, and a fiscal stimulus is needed. However, the package, by relying overwhelmingly on credit infusion to boost the economy, has failed to recognise that investment will pick up only when people across income segments have money to spend.
Lack of backward and forward linkages
Unless the rest of the domestic economy is revived, the MSME sector may face a shortage of demand, and its production may soon sputter to a close.
Growing fiscal deficit
Government claims that the stimulus package is around 10% of India’s GDP. However, financing it would be difficult as the government is worried about containing the fiscal deficit.
Difficulty in mobilising finances
The government seeks a disinvestment to mobilise the finances for the plan. However, the majority of Indian industries are already a bit debt-laden to take up the stake in PSUs.
Further, it is difficult to borrow the foreign markets, as rupee with respect to dollar is all time low.
STEPS TO BE TAKEN
The economic package for the country emerging out of the lockdown requires a stimulus enhancing demand across the economy.
The best way for this is to spend on greenfield infrastructure.
Infrastructure spending uniquely creates structures that raise productivity and extends spending power to the section of the population most affected by the lockdown, namely daily wage labourers
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 trade
Any stimulus package will fail to reflect the trickle-down effect, until and unless it is backed by reforms in various sectors.
Thus, Atmanirbhar plan also encompasses the unfinished agenda of holistic reforms which may include reforms in Civil services, Education, Skill and Labour, etc.
The economic crisis triggered by COVID-19 pandemic is much like the 1991 economic crisis, which was a harbinger of a paradigm shift via liberalisation, privatisation and globalisation. The post-COVID-19 era may usher in unprecedented opportunities provided the implementation deficit is adequately addressed.
The Atmanirbhar Bharat Package is a monumental effort to help Indians and the Indian economy tackle the COVID-19 scourge and lays the groundwork for India to become a $5 Trillion economy by 2025. The package focuses on empowering the poor, laborers, migrants, etc., both from organized and unorganized sectors, which form the backbone of the country’s economy.
Our responsibility to make the 21st century, the century of India, will be fulfilled by the pledge of self-reliant India. This responsibility will only get energy from the life force of 130 crore citizens. This era of self-reliant India will be a new vow for every Indian as well as a new festival.
Self-reliance will prepare the country for tough competition in the global supply chain. It is important that the country wins this competition. Self-reliance and self-efficiency imply optimum utilisation of one’s capabilities, to facilitate the realisation of one’s true potential. Self-reliance should not be misunderstood as self-centred. The current pandemic has brought to the fore the importance of self-reliance and self-efficiency that we may have missed otherwise, so indeed this challenge can be and should be turned into an opportunity.