Selective treatment

THE MODI GOVERNMENT IS PUSHING ITS ECONOMIC AGENDA IN THE COVID-19-INDUCED FINANCIAL CRISIS. IT REMAINS TO BE SEEN HOW THE GOVERNMENT WILL HANDLE THE POLITICAL COST OF THE PANDEMIC

- PRATUL SHARMA

Economic crises are often opportunities in disguise. In 1991, the balance of payment crisis which forced India to pledge its gold reserve to raise money, set the stage for P.V. Narasimha Rao and Manmohan Singh to initiate reforms to liberalise the economy. Now the Narendra Modi government is using the Covid-19 pandemic-induced financial crisis to push through many held-up reforms to make India “self-reliant”, with less government control and more privatisation.

The package announced by Finance Minister Nirmala Sitharaman revealed that the government had a different prescription for the ailing economy. In almost similar circumstances in 2008-09, prime minister Manmohan Singh focused on creating demand by giving cash transfers, a method which the Congress and a host of noted economists like Raghuram Rajan and Abhijit Banerjee still vouch for.

The Modi government is betting on infusing liquidity into the system, extending easy loans to enterprises and preventing them from going bankrupt. The emphasis has been on securing the supply side. The message is clear—there are no free lunches for the industry. If there are hindrances in running a business, the government will remove it. Even the migrant labourers and the poor who were hit hard by the lockdown were provided support through the institutional methods of the Public Distribution System, the Ujjwala scheme for cooking gas and women Jan Dhan accounts.

Ironically, the Atma Nirbhar push has been used to dismantle the Nehruvian structures of self reliance—the public sector units—and amend the Essential Commodities Act 1955, which will help deregulate the agriculture sector. The government has opened up mining, aviation, defence, space and atomic energy sectors for greater private participation.