The COVID-19 pandemic caused a lot of distress in the Indian Economy. The Government of India earlier took various steps to combat the economic crises of the country. In this article, we analyze some of the recent updates, statements, and measures taken by the Union Finance Minister Smt. Nirmala Sitharaman on account of reviving the Indian Economy.
1. Increase in the GST Collection and purchases of goods
The Union Finance Minister Smt. Nirmala Sitharaman spoke about near-zero growth due to the COVID-19 pandemic last week. However, over the course of the last five days, we have witnessed a steady increase in the GST Collection, purchase of two-wheeler and four-wheelers, exports, FDI inflows, forex reserves, PMI numbers, and the rural economy. In fact, the Gross GST Revenue Collection for the month of October 2020 stood at a whopping Rs. 1,05,155 crores, marking an increase of 10% in the GST Revenue Collection as compared to the previous month.
This graph shows the trends in monthly gross GST Revenue Collection during the year:
Analysis: While the GST Revenue Collection clearly shows a boost in the economy, there have been various arguments that the rise in the GST Collection may also be due to the rise in the demand for goods amidst the festive season. A clear picture of the economy will only come into the light once these factors are rationalized.
2. Role of Domestic Demand to sustain Growth
Union Finance Minister Smt. Nirmala Sitharaman has assured businesses that exports are on a rise at a steady pace. With a large level reset in the economy, most businesspersons are looking at a decrease in capital, manpower, effort, and inputs. Moreover, with a cut-throat competition in the market, skilled and partly-skilled manpower is shifting towards newer and better-paying jobs. This shifting has put the Centre in a challenging position as far as jobs are concerned.
Analysis: While the domestic demand cannot be ascertained until the festive season is over, it has been made clear by the Finance Minister that exports of the country are on a rise. However, these exports have led to cut-throat competition and manpower transfer at a huge level. In times like these, a rise in domestic demand is highly essential for small, and medium enterprises to survive in the market.
3. MGNREGA Scheme in Rural Areas
The Mahatma Gandhi National Rural Employment Guarantee Act, 2005 is Indian labor law and social security measure that aims to guarantee the 'right to work' and to enhance livelihood security in rural areas by providing at least 100 days of wage employment in a financial year to every household whose adult members volunteer to do unskilled manual work. As made clear by the definition, the MGNREGA Scheme is currently applicable to the unskilled laborers of Rural areas. However, the government has been suggested to expand the benefits of the scheme to urban areas as well. Currently, no decision has been made regarding this.
Analysis: The MGNREGA Scheme is one of the most beneficial schemes in India for the empowerment of unskilled laborers in Rural India. Its expansion to the urban areas of India will prove to be extremely beneficial for unskilled workers and generate huge levels of employment in the country.
4. Progress on getting investors to relocate to India
The Production Linked Incentive Scheme (PLI) has benefited the nation to a large level, attracting a lot of electronics and mobile phone manufacturers in India. According to the Finance Minister, there has also been a similar interest in pharma and medical devices. Thus, we can look forward to good progress in getting investors to relocate to India.
Analysis: The PLI scheme, although offering great advantages to the nation has also gathered criticism on account of lack of adequate infrastructure, domestic supply chain, logistics, high cost of finance, inadequate availability of quality power, limited design capabilities, and inadequacies in skill development. These issues must be resolved by the government on a priority basis as the PLI Scheme can offer greater benefits to the nation in the long term.
5. Assessment of distress in the Corporate Sector and Bank Balance Sheets
Banks faced huge losses amidst the COVID-19 crises. This has resulted in acute distress in the Corporate Sector as loans are not as easily available to the common person now, together with the availability of a limited working capital for most banks. In this regard, the government has ensured that the situation of banks has improved to a large extent and this is reflecting in the GST and PMI Numbers. It has also been assured that firms will now see good help and assistance from banks and NBFCs.
Analysis: Although it has been assured that the situation of banks has improved considerably, it still is a long way to go for them to get back to the pre-COVID stage as huge losses have already been incurred. This situation of banks has been especially difficult for the common person, as the availability of loans has decreased to a significant level, shifting a lot of small and medium enterprises to bankruptcy. However, an improvement in the banking system shows a ray of hope to the darkness that is the Indian economy right now.
What do you think of these recent initiatives taken by the Government of India to combat economic downfall? Let us know in the comments section below.