Context: The current lockdown calls for some proactive steps in order to improve the economic potential of India.

Challenges faced today:

  • Like the 1965 scenario of a border challenge by Pakistan and economic constraint by monsoon failure. The situation of the day looks similar in context of China and COVID -19.
  • The situation is graver than the 1991 crisis Balance of Payment Crisis which was solved majorly at the central level without a comprehensive integration of state governments.
    • But today a high degree of mutual interdependence between union and states calls for state cooperation however the difficulty of attaining the same is well known.
    • This was testified in the setback faced by the UDAY scheme when states did not pursue the tariff restructuring needed. 
  • Further there is concern between policy intent and implementation, a major reason being inter-ministerial conflicts. 
    • These can arise at the political level, even if the ministers in question belong to the same political party, or between senior bureaucrats, if there are turf issues at play.
  • An ambitious 20 lakh crore Atma Nirbhar package has been launched but the real challenge lies in devolving such a huge amount of funds and maintaining the fiscal indicators.
  • The stress on the government is further going to rise with enhanced job losses owing to rise in business shutdowns.

Way Ahead:

  • Improved Centre state coordination is required as now we have another power sector reform plank in the Atma Nirbhar Programme, which will make good unpaid dues to independent power producers ( Rs. 90,000 crore) and thereby provide the banking sector relief as well. 
    • Since it will involve fresh borrowing with the default obligation falling on states, there remains a question mark over state cooperation in the new scheme.
  • The ministers and Bureaucracy must keep aside their personal and professional grudges which will help in delivering better results.
  • Front Loading of Budgetary allocation must take place so as to support intended schemes and concerned departments in effective implementation. 
    • While at the same time rational options of Bond issuance, Deficit financing and External Assistance must be taken into consideration for managing the promised outlay.
  • Cautious optimism is shown by the new Garib Kalyan Rozgar Abhiyaan that covers 116 districts in six states; and specifically targets reverse-migrant labour.
    • The scheme will operate till october and has been given an outlay of 50000 crore.
  • A crucial focus on MGNREGA is required as the scheme will also help in attaining other developmental objectives like improving irrigation, natural resource management, infrastructure creation etc..
    • Devolution of additional 40000 crore under Atma Nirbhar Abhiyan towards it is a welcome step.
  • Performance-linked incentive mechanism for manufacturing has extended to three sectors so far: 
    • domestic production of electronics hardware; 
    • medical devices including protection equipment and testing kits;
    • active pharmaceutical ingredients presently imported from China.
    • The need is to gradually expand it to other sectors for preventing business shutdowns.