Package for the Economy: The need to announce Economic Stimulus by the Government
The growth rate in the year of the pandemic can be positive only when efforts are made to reduce the negative impact on the economy from the lockdown by increasing consumption, industrial growth and employment. Given the second wave of Covid, the Center should give an economic stimulus package.
In the backdrop of Covid-19, the performance of the Indian economy in the year 2020 was better than expected. As a result, the estimated Gross Domestic Product (GDP) stood at Rs 197.5 lakh crore, which was three per cent lower than the GDP of 203.5 lakh crore in 2019-20.
In terms of real GDP, this decline was 7.3 per cent. Interestingly, in the fourth quarter of the last fiscal, real GDP grew by 1.6 per cent over the previous quarter, indicating that the economy picked up during March.
It is noteworthy that in March itself, the GST collection was the highest ever at 1.41 lakh crores. Unfortunately at this time, a second wave of the pandemic struck.
As a result, various states announced lockdown, which stopped business activities and once again started the return of migrant labourers, which affected the economic growth and the process of bringing the economy back on track.
In such a situation, economic growth in the first quarter of the current financial year will not only be lower than expected, but a partial recovery in the economy can also start from the coming July.
The real growth rate of GDP in this financial year has been estimated at 10 to 12.5 per cent, which may come down to 9.5 to 10.5 per cent.
The growth rate in the pandemic year can only be positive if there is an attempt to reduce the negative impact of the lockdown on the economy by massive growth in consumption, industrial growth and employment.
Private consumption expenditure declined to Rs 116 lakh crore (58.6 per cent) in the financial year 2020-21 from Rs 123 lakh crore (60.5 per cent of GDP) a year ago.
If the government does not provide incentives to increase private consumption, then this figure could be further reduced in the current financial year.
In such a situation, there is a need to announce an economic stimulus package by the government to give a boost to the economy, which is as follows in various sectors – Automobile sector – The contribution of the automobile sector in the manufacturing sector is 42 per cent.
To make up for the loss of the first quarter, the central government should stop for three months the recovery of CC (compensation cess) on the sale of auto products, which is a part of GST.
The total monthly CC figure is around Rs 9,000 crore, of which the auto sector accounts for Rs 5,000 crore. In such a situation, by banning CC for three months, the states will save 15,000 crores.
Public transport- Under this, the central government can provide 50,000 electric buses to the states. This will provide new pollution-free buses to the states, new employment in the manufacturing sector and will also encourage the expansion of new industries in the country.
Under this plan, a roadmap can also be prepared for the operation of electric buses across the country by the year 2025, which will also give impetus to the battery manufacturing sector.
As Tata Power rolls out EV charging stations across the country, this is the right time to change the face of public transport. Real Estate and Housing-Mumbai had reduced the registration fee on the purchase of residential property from six per cent to three per cent for six months. This experiment was very successful.
This led to an increase in sales by over Rs 60,000 crore, fresh capital in the real estate sector, reduced NPAs of banks, increased government income and increased investment.
There are residential properties worth five lakh crores across the country. The central government may ask the states to follow the example of Mumbai and reduce the registration fee of residential property by half for the next six months.
Since this will reduce the revenue of the states, in such a situation, the central government can compensate 50 per cent of their losses in this scheme. This will give momentum to the housing sector.
There are 7,500 census towns in the country. The government can develop 2,000 of these cities through industrial complexes, housing societies and world-class infrastructure.
Under this scheme, the centre can give 10 crore rupees to the states for the development of every city, while the state government can give 10 crores for the development of roads, sewage, electricity etc. in every city.
To increase employment, the government may develop 250 districts as Special Industry Zones connecting 2,000 cities to be developed.
Those districts of Uttar Pradesh, Bihar, Rajasthan and Madhya Pradesh can be developed as Special Industry Zones, from where a large number of people migrate for employment due to lack of development opportunities. Industrialists who employ these districts can be given income tax exemption for 10 years.
The pandemic has shown an acute shortage in the medical infrastructure sector. To overcome this shortage, it is necessary to have modern facilities in every district and a primary health centre in every taluka.
Also, it is necessary to set up training centres in every medical college for the training of 1.5 lakh doctors and 2.5 lakh nurses annually.
The Sunday Guardian, in its report published on May 15, has also called for a detailed action plan to transform India’s health sector. Since the middle-class income taxpayers and industrialists have been affected by the Covid epidemic, capital gains tax should be reduced along with giving relief in income tax.
On the lines of those killed in natural accidents, the government should give compensation to the families of those killed by Covid. If the government takes steps in a planned manner, then the damage done to the economy by the second wave can be minimized.