Mitigating India’s Economic Woes
Extreme times call for extreme measures, while India is reeling under a chronic economic crisis, this measure if the government takes can go a long way in mitigating the economic fallout of the COVID-19 pandemic
Financial Emergency- the need of the hour
The word ‘emergency’ is like a pandora’s box to say to the least. But the emergency clauses may emerge as a messiah at this critical juncture. India is reeling under extreme economic pressure, revenues are faltering, layoffs in the informal sector are very high, on top of that the 21-day national lockdown has forced economic activity to come to a grinding halt.
The central government must resort to extreme measures to contain this pandemic at all costs even if democracy takes a backseat for the time being. The need of the hour for the Union government is to activate Article 360 of the constitution to impose a financial emergency in the country. It will enforce fiscal discipline, will reduce all non-essential expenditures, the reduction in salary and perks of key officials such as bureaucrats, judges will allow the augmentation of fiscal resources for the government which can be used for bolstering the monetary reserves in the consolidated fund of the country. The imposition of the financial emergency using the economic crisis as a solid pretext will play a pivotal role in mobilizing all monetary resources to contain the fall out of the economic costs of the crisis.
Shiny yellow metal- a game-changer
Since the coronavirus pandemic began spreading its tentacles in India and the economic crisis became more pronounced, none of India’s top’s economists, policymakers suggested this new measure, a few years ago the World Gold Council (WGC) estimated that total gold holdings in India is around 24,000 tonnes, out of which the temples in India hold close to 3,000-4,000 tonnes. What the central government needs to do is after declaring a financial emergency use the ordinance route to bring in a law that will declare the huge caches of gold reserves present in the top ten temples in terms of gold possession as “government property”. The responsibility of the protection and making the right financial use of the gold reserves should be given to the Reserve Bank of India (RBI). This gold needs to be utilized under the Gold Monetization Scheme (GMS) and other available routes to convert gold into monetary form.
Steps the government can take
Using the gold reserve the government can then make full use of the JAM (Jan, Aadhar, Mobile) trinity to alleviate the economic woes of the masses, some steps could be:
Firstly, directly transferring Rs 4 lakh crore of money into the bank accounts through the Jan Dhan route of India’s poorest 500 million people, this re-monetization will help bring much-needed purchasing power in the hands of the people.
Secondly, make use of surplus reserves of the non-core assets of the Central Public Sector Enterprises (CPSE) which will pay rich dividends in the fight against the pandemic. Further, devising an economic stimulus package worth over slightly higher at 5% of the GDP would help further.
Thirdly, since private investment is projected to remain subdued in the aftermath of the pandemic, the gold assets can be used to bolster public investment. The central government’s total expenditure (both revenue and capital) has been declining sharply since 2010-11. From a high of 15.4% of the GDP in 2010-11, the total expenditure has hit a low of 12.2% of the GDP in 2018-19. The capital expenditure component has dropped from 2% of the GDP in 2010-11 to 1.6% in 2018-19 and that of the revenue expenditure from 13.4% in 2010-11 to 10.6% in 2018-19. The public investment is the only lifeline that can save the country from sliding into a path of prolonged economic slowdown, it is imperative that the government ramps up public investment to over 45% of the budgeted estimates(BE) until the private sector is able to make its own meaningful contribution to driving the engines of the economy.
The idea of utilization of the temple’s gold reserves even against their wishes can become a game-changer for the Indian economy in the coming decade, the efforts can certainly bolster India’s prospect as an economic superpower if the steps are duly adhered to.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of The Kootneeti Team