PM Modi lays out roadmap for reopening business post lockdown2 min read . Updated: 03 May 2020, 11:22 PM IST
- PM Modi, FM Sitharaman discuss interventions needed in finance sector, structural reforms to spur growth
- PM Modi’s plan to support businesses comes when they are struggling to even pay wages
With the coronavirus crisis dealing a heavy blow to jobs and economic growth, Prime Minister Narendra Modi has laid down the measures his cabinet colleagues must take urgently as the country emerges from a crippling national lockdown.
The priorities that Modi has set include aiding quick recovery of businesses, clearing the bottlenecks to investments, reforming corporate governance and credit markets, ensuring financial stability and liquidity, speeding up infrastructure projects and reforming agriculture.
Modi’s emphasis on support to businesses and urgent reforms come at a time when businesses, struggling to pay wages and remain solvent, are keenly awaiting a big stimulus package.
“The reform initiatives undertaken by the various ministries should continue unabated and action should be taken in a timebound manner to remove any obstacles to investment flows and capital formation," Modi said after a meeting with finance minister Nirmala Sitharaman, according to an official statement late on Saturday.
Both discussed interventions needed in the financial sector and structural reforms to spur growth as the restrictions on movement and commerce placed since 25 March are gradually eased.
Modi discussed strategies to support micro, small and medium enterprises (MSMEs) and farmers as well as ways to boost liquidity and credit flows. Financial stability and steps needed to help businesses recover quickly from the coronavirus impact were the main subjects of discussion.
Modi’s administration had worked to lift India’s ranking in the World Bank’s ease of doing business rankings from 142 in 2014 to 63 in 2019. Last month it tackled a thorny issue often flagged by the multilateral agency that affected businesses—red tape in cross-border trade. For reforming some sectors such as power and agriculture, Modi will need the support of state governments which wield the law-making powers in those sectors.
Experts said it makes sense for India to take up pending reforms and explore long-term opportunities, while simultaneously addressing the issues that affect businesses at the ground level on account of the lockdown. “It is good to think strategically of a long term, more efficient and reformed economy to go back to. We should also be focusing on the short-term issues including credit flow to the industry. There are some ground-level issues to be handled as well. For instance, how are supply chains going to operate if there is any conflict with the containment strategy, which might affect productivity," said Abheek Barua, chief economist at HDFC Bank.
Many economists including former Reserve Bank of India (RBI) deputy governor Rakesh Mohan, former chief economic adviser Arvind Subramanian and former RBI governor Raghuram Rajan have sought a stimulus package of the order of 5% of India’s gross domestic product which works out to ₹10 trillion. They have also argued for compensating the poor and informal sector workers affected by the lockdown, who have very little social security.
The government, which last month announced a ₹1.7 trillion package for the poor and the needy, is working on a set of measures for the worst affected, including micro, small, and medium enterprises .