Experts call for a spending boost4 min read . Updated: 30 Dec 2020, 07:38 AM IST
- Centre urged to focus its budget on structural reforms and higher expenditure on health, education and social security to spur economic growth
The Union budget must focus on structural reforms, and higher expenditure on health, education and social security to spur economic growth, experts said at the Mint Budget 2021 panel discussion on Atmanirbhar Bharat.
In the hour-long session titled, ‘Pandemic, unemployment, inequality: The way forward’, experts said the outbreak of covid-19 has exposed the pre-existing inequality gaps and socioeconomic challenges in India and advised professionals to pivot their careers by acquiring new skills.
Rosa Abraham, a senior research fellow at Azim Premji University, said though the employment scenario has improved in recent months, income levels have fallen.
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“Between December and August, there is almost a recovery—90% of men have come back to work, but 60% of women who were working in December could not come back to work by August. There is a gender differential in recovery," Abraham said.
“There is also a huge transition in the kind of work people are in. Most people have moved to self-employment, and they have taken income cuts in the range of 10-50%. People have come back to employment but in more precarious ways," she said.
In this context, an urban jobs guarantee scheme could provide the kind of social safety net that less privileged sections of the society require, Abraham added.
People who have found employment again are earning less, and its impact will be severe in the short and long run, said Jyotsna Jha, director, Centre for Budget and Policy Studies, Bengaluru.
An urban job guarantee scheme could not only spur spending but in turn will benefit the economy at large, as secure employment and income will create demand for private goods, increase consumption and have a multiplier effect on helping small businesses, she added.
Manish Sabharwal, chairman of Teamlease Services, however, said a job guarantee scheme was not a solution for creating employment, but a programme for poverty alleviation. “Spending money won’t create jobs. Schemes like MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) are not an employment but a poverty solution. ‘Find the money’ is not a solution; there is a shortage of it in a year like this, when the pandemic has exhausted resources," he said.
“We need structural reforms, financialization and formalization of human capital. Structural reforms will create jobs," he said.
“We don’t have fiscal and monetary policy flexibility… Non-fiscal measures that can be done—make EPF voluntary, we can fix governance, we can move to a labour code. This budget is not going to be able to do much fiscally," Sabharwal said.
Sabharwal said that in a budget like this, funds will be allocated towards healthcare and mass vaccination.
India has been witnessing a huge jobs crisis due to several factors, including a slowdown in the economy amid the covid crisis, and the consequent nationwide lockdown prompting several businesses to shut shop or face severe financial stress. Economic growth also hit rock bottom, contracting 23.9% in the June quarter. It shrank at a slower 7.5% pace in the three months ended September.
With a gradual improvement in high-frequency indicators, the Union finance ministry expects the recovery in the second half of FY21 to be better than the first half.
The government and the Reserve Bank of India also stepped in to support poor households, farmers and small businesses.
According to the finance ministry, the relief measures announced by the central government and the RBI amounts to ₹29.87 trillion, or 15% of India’s gross domestic product (GDP).
State finances have also been under pressure. The central government reported a fiscal deficit of ₹9.53 trillion, or 119.7% of its budgeted full-year target during April-October, as tax collections continued to remain under pressure due to the pandemic.
Jha said maintaining fiscal prudence by cutting expenditure will not be a wise policy decision. “Public spending on social security does not have to be detrimental to the economy. Governance reforms can be socially responsible and yet push economic growth," she added.
Besides gender, caste, urban-rural and other inequalities, the pandemic has also worsened inter-state inequalities. “One inequality that has worsened is inter-state. States that are in a better position will recover fast… so the role of the Union government and the budget is very important in terms of signalling what is important, so that states can follow," Jha said.
Ashutosh Gupta, India country manager, LinkedIn, said reskilling professionals in the services sector, such as hospitality and tourism, which were badly hit by the pandemic, is a priority.
“The road to recovery lies in reskilling, especially for those in sectors such as education, healthcare and hospitality, which employ a large number of women and have been the hardest hit by the pandemic. You have to pivot to new skills. You have to find new jobs and use your skills to get there," Gupta said.
Moving ahead, there will be demand for digital skills, he added.