A Plan to boost the Indian Economy- Feasible or Just Hypothetical?
Recently I came across an article in the ET that shared an optimistic idea to boost the Indian Economy. In order to achieve that, cash flow must be increased in the domestic market. As India’s asset is its population, massive immediate consumption can help to meet this objective. But a staggering 12.2 crore people are already without jobs, a huge chunk of which forms the informal sector. With such an alarming figure how can we expect them to indulge themselves with such amenities?
An answer to this according to the article could be to give Rs 5000 per person to every Indian (or Rs 20000 per household) that must be spent over the course of the next 12 months. This substantial amount could help the people survive a few months and give a much-needed boost to the economy. The amount can be given as vouchers. A part of the amount needs to be spent on tourism, travel, restaurants, and service-based industries. The rest can be spent on purchasing appliances, clothes, and food items. Once this money comes back to the economy it can help create some job opportunities and bring back liquidity in the market. The GST on the goods and services would be an added benefit.
But arranging such a huge amount is certainly a massive task. Going by the figures, 140 crore population and Rs 5000 one-time payment would cost 7 lakh crore to the government. However, to fund this, the government could issue long-term bonds that would have a decent, tax-free rate of interest. It would certainly attract some big-shots to invest in the safe and good yielding bond.
The underlying assumption is that the Indian economy would grow multifold that it would be able to cover the principal as well as the interest rate on the already huge principal. While it is true that in terms of GDP, India ranks 5th and the recent skirmish with China has made India self-reliant in Pharma, fertilizers, iron, and steel sectors. But unless it is able to maintain its failing export-import deficit, such ambitious plans tend to overload the economic systems. Some critics of the scheme also complain that handing over doles doesn't benefit society. Such an amount should be spent on upskilling the workforce. There is also an argument regarding corrupt distribution channels siphoning off chunks of the funds questioning the efficacy of such systems in place. In conclusion, it seems to be a far-fetched idea that may have been possible in a utopian society.
Please feel free to drop arguments and counter-arguments to the above post and let me know how you feel about the above article.
