By Nitin Pai, Anupam Manur, Sarthak Pradhan, Anirudh Kanisetti
The economic response to the pandemic should consist of immediate disaster relief, a stimulus for economic revival, and a multi-year economic reconstruction programme. It must address the simultaneous shocks to aggregate supply and aggregate demand in a period of global recession. This would require the usage of all three levers: fiscal policy, monetary policy & deregulation.
As part of the immediate disaster relief, a Multi-Contributor Social Security account (MCSS) can be created which will enable citizen-to-citizen direct cash transfers. The Union and state governments should also focus on providing economic relief to the most vulnerable sections of the population. The poorest 550 million need to be provided basic income support of Rs 2500 per month for 3 months. Foodgrains and rations, cooked food (wherever needed) should be supplied. Frontline workers should be provided with different monetary and non-monetary incentives. Liquidity support should be extended to businesses & entrepreneurs so that they can carry out their contractual obligations, continue providing wages, etc.
For ensuring growth and employment, 100 new cities should be built. Highways and railway connectivity should be ramped up. India must also capture the manufacturing opportunity which has been reopened because of the US-China trade war and the pandemic. For this India needs to create a favorable business environment and ensure policy certainty.
For reviving economic growth, capital expenditure must include investments in physical infrastructure, public health, technology, human capital, and green energy. Regulatory bottlenecks must be reduced to promote investment flows. Labour and land acquisition laws must be liberalised. An Indian version of the Troubled Asset Relief Programme must be rolled out to ensure the recovery of Indian banks. This will strengthen the financial sector and ensure financial stability. Nighttime commerce needs to be enabled to increase economic activity, create employment, and ensure social distancing.
Finally, some sector-specific policies for revival and reconstruction are also explored in this paper.TDS-A-Pathway-for-Post-Pandemic-Economic-Reconstruction-AM-SP-AK-V1.2