Viewpoint: Reforms-driven growth

21 FEB,2021 | MEDC


 

Budget 2021 has sincerely attempted to reboot the economy and revive growth. It focuses basically on high-expenditure growth to boost demand, and aims at wide-ranging structural reforms to position the economy for high growth in the medium to long term. Due to the pandemic, many experts expected the fiscal deficit to be in the double digits. The good news is that it has not materialized. India’s fiscal deficit is projected to decline from its current level of 9.5% of GDP to 6.8% in 2021-22. This massive fiscal compression is going to restrict the spending capacity of the government, and thus, necessitate greater private sector participation in the process of economic revival.

This reforms driven growth rests on a calculated gamble … that public and private money can prove to be mutually beneficial in the digital age. Today’s world is characterized by a dual monetary system. This involves privately issued money – by banks of all types, telecom companies, or specialized payments providers – built upon a foundation of publicly issued money – by Central Banks. This system is not perfect but it offers distinct advantages, including innovation and efficiency (provided mostly by the private sector) and stability and a sovereign guarantee (ensured by the public sector). These objectives are related to each other (usually via trade-offs) and the Budget is betting on their positive interactions to help fund infrastructure development.

The pandemic has clearly illuminated India’s socioeconomic stratifications. More needs to be done to close the growing digital divide, especially in the education sphere, as the future of an entire generation is at stake. In many savvy urban areas, schools have transitioned effortlessly to digital platforms, and knowledge compounding is working beautifully. However, most rural areas are telling a different story. Thus, our education models need to be reimagined to minimize these disturbing learning gaps. Despite all the ravages of the pandemic, it may be a blessing in disguise for the system. It is forcing us to rethink our approach to primary socioeconomic growth drivers like education and healthcare, and bring about fundamental changes aimed at inclusivity which may have been otherwise delayed.

There is positive news on the agricultural front. India is likely to achieve an all-time high food grains production of over 297 million tons in 2020-21. This is the fifth consecutive year of record production, as per the government’s second advance estimate, to be released soon. This bumper harvest shows that there has been little impact of Covid and the farmers’ agitation so far in India.

Leadership is the ability to uplift the hearts and minds of people, and not just control them through micromanagement. Policymakers have got it right in their quest for reforms-driven growth. India has the ability to reinvent itself. 

 

*Photo Credit: Google

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