The Centre is aware of the economic disruptions that happened due to coronavirus and a subsequent lockdown. Rather than one big-bang package, there could be a “series of medium sized packages”, said Sanjeev Sanyal, Principal Economic Advisor to the Union Ministry of Finance.
According to him, the Centre has taken a different approach, as compared to other countries, and responses will be “calibrated” step-by-step.
He was addressing members of the Bharat Chamber of Commerce, via video conferencing, on Tuesday. India, Sanyal maintained, has shown its administrative capabilities by enforcing a lockdown “in a country of over one billion people”. There may be some “fuss here and there”; but “overall” the country pulled it off”. This has also signalled that India’s decision-making may be different than what others expect, if required. The Centre was also willing to stand out for the sake of national interest.
Sanyal referred to India’s unwillingness to sign the RCEP (Regional Comprehensive Economic Partnership) and OBOR (One Belt One Road) as classic examples of how it remains clear on a stand that focuses on protecting its domestic industries. The time, he maintained, was right for “big structural changes”.
Liquidity crises
Acknowledging that there was a liquidity crises in the system, specially with reference to availability of working capital, Sanyal said banks were indeed “not lending” at levels they should and this despite the measures taken by the Reserve Bank of India.
NBFCs are also facing cash crunch and “the credit market has to get moving”. It is very unlikely that a step-by-step approach would come in handy in such a case. “There is a serious problem of liquidity and payments. Tax refunds should speed up,” he said.
India will have to look at the supply chain space while reducing dependence on imported inputs. Admitting that “import substitution models have failed in the past”, he reiterated that import substitution models need not mean return of the “licensing-raaj”.
As India prepares to assert itself in the global supply chain, State governments have to play a critical role in such a mechanism with issues such as land availability, electricity connection and other crucial factors required for drawing industries. He cited the recent example of Uttar Pradesh which is offering incentives to companies looking to shift their bases from China.