GEHLOT SENSITIVE TO HUMAN SUFFERING, LEADING GOVT FROM FRONT: MAYARAM
Firstindia | April 8, 2020
Stress on new formats to restart economic activities as post-Corona businesses’ bankruptcies feared
A government reveals a lot of itself by the decisions it makes. Decisions are instruments of change and therefore indicators of direction. They provide not only an insight into how a government manages its activities, but, more importantly, where it is going and how it intends to get there. In Rajasthan, the Gehlot-led government’s focus has always been long-term. The government’s decisions and activities reflect this, and so does its performance.
Looking at the current achievement of Rajasthan, and considering government’s consequent fight back strategies against the Coronavirus one can say Rajasthan’s policy makers and the bureaucrats is a capable group of people and they understand too well the meaning of the slogan “success through work”.
Chief Minister Ashok Gehlot has now roped in his Economic Advisor and ViceChairman of CM’s Rajasthan Economic Transformation Council Arvind Mayaram, an IAS officer of Rajasthan cadre, to head the second Task Force to draft a plan for reviving and boosting economic activities in Rajasthan. Arvind Mayaram was Secretary in the Ministry of Finance, Government of India.
In Rajasthan Government, he held key posts. He was also the alternate Governor of India on the Boards of World Banks, Asian Development Bank, Africa Development Bank, India’s Finance Deputy in G20 and BRICS. In an exclusive interview to First India, Arvind Mayaram explained a range of issues concerning Rajasthan and Coronovirus. z Rajasthan was the first State in the country to actively implement lockdown.
Police admit it has been hard work to keep residents in their homes, while some cops say some degree of coercion was needed to enforce government orders. Considering the economic cost of the lockdown people are asking whether such a “sudden blunt instrument” was required. This is a crisis with no precedence in the remembered history. The speed with the contagion has spread and its reach, have been unprecedented.
There is no doubt that without such a blunt and all pervasive weapon, the State could not have contained the contagion. In such a complete lockdown, there must have been some excesses and a lot of hardship for the people. But by and large, the lockdown has been managed with as humanly as possible. Chief Minister Ashok Gehlot has been leading the government effort from the front and has been very sensitive to human suffering.
z Times are trying and there is no way of knowing how long the siege would last. Do you think it is still not the time to announce the recovery plan as there is nothing to indicate things will change dramatically, and we cannot have solutions to unknown emerging hurdles? Do you think we must first figure out how long will this uncertainty continue? You may recall just recently the Chief Minister has announced formation of a Task Force to recommend measures for economic recovery. The Indian economy has been witnessing a serious slowdown for the last two years, even before the pandemic hit the country into a lockdown.
The lockdown has further damaged the prospects of a turnaround. By most estimates, 2% may be shaved off from GDP growth due to Covid-19. As already diminished demand in the economy gets further eroded, industries, specially MSMEs, and services, will be staring at bankruptcies. Already there is a serious loss of livelihoods, especially in the informal sector which employs close to 80% of the work force.
It is estimated that Covid-19 and lockdown have further diminished demand and therefore consumption. This is also eroding the tax base, especially the indirect taxes majorly for all the state governments, further reducing their capacity to take economic measures to counter Covid effect. It is quite clear that the lockdown will continue in some form post-April 15, 2020.
There would be some restrictions on movement of people and social distancing will remain a norm for a few more months. Under the circumstances, we need to develop new formats of restarting economic activities while maintaining some restrictions on crowding and social mixing. With restart of economic activities, we would see some money passing into the hands of the people, which could generate some demand, and create an incentive for production and trade.
z Do you think the current difficult times to have to live with Coronavirus crisis with uncertainty around, can be compared with the devastating economic decline of the 1930s Great Depression era that went on to shape countless adverse economic scenario worldwide? The general consensus amongst economists is that unless appropriate and unconventional fiscal and monetary tools are not used in time, the world could be staring at the spectre of a bigger recession than in the 1930s. z Many question, have we not tested enough? Are we under-reporting positive cases and deaths? Experts say the count is “just not right.”
Do you think there could be uptick in cases over the next two to three weeks as testing capabilities improve in Rajasthan? There can be no two opinions about enlarging the number of tests being undertaken exponentially. However, it is difficult to definitely state whether the under reporting is of the magnitude as feared in some quarters. However, we now have sufficient data to predict the trends and hotspots are beginning to emerge.
I have seen a recent report narrowing down major uptick of new cases to 62 districts out of 640 districts in the country. While it was important to give primacy to health driven policy making, we need to quickly calibrate to give increasing space to economic policy making. z Industry in Rajasthan is now getting concerned over possible blanket orders on them by the government. Do you think Rajasthan should only play the role of facilitator for industries and allow them to be controlled by the market forces? I have always felt that government role should be to regulate the markets (not individual players) to ensure competition and fair trade and allow the industries and trade to be driven by market forces.
However, in crisis situation governments have to play more a role of a partner to ensure economy remains afloat. Governments have an “equity” interest in industries and businesses, because the financial handholding during crisis results in higher tax realization in the future, which is “return on equity” if I may use that term. Q6: Talking about financial liquidity, Rajasthan like other State governments is to some extend dependent on the Central governments for certain tax revenues. There has been a call from some industry quarters for a temporary GST holiday or temporary reductions for certain sectors.
Do you think it is feasible idea? If yes, will you be advising CM to demand a bigger share of the revenues? Ans: These are difficult choices. The complexity arises because any tax holiday results in loss of revenue, needed to carry on governance functions including welfare. But without financial assistance, if the businesses die, there would be no taxes in any case. Therefore, finding a fine balance between the two is the difficult part. The States’ finances are stretched.
They do not have much a headroom for borrowing because of ceiling on fiscal deficit they can run and also because debt to SGDP ratio is already very adverse. Central government and its agencies like the RBI hold all fiscal and monetary instruments. In times of crisis, Central government would have to use these to empower states.
(The writer is a senior journalist).
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