Providing safety net to boosting demand: Sanjeev Sanyal unravels India's stimulus approach

Speaking exclusively with Republic TV's Executive Editor Niranjan Narayanaswamy, the Union government's Principal Economic Advisor Sanjeev Sanyal explained the significance of the Atmanirbhar Bharat Package 3.0. On the eve of Diwali, Union Finance Minister Nirmala Sitharaman had announced 12 new measures to boost the economy. According to Sanyal, this stimulus package focused on reviving industry, employment and investment. 

For instance, he pointed out that the Centre had rolled out a subsidy to companies for encouraging job creation in the private sector. Moreover, the Principal Economic Advisor stressed the need for the country to recover from the demand shock experienced in the last few months owing to the COVID-19-induced lockdown. He mentioned that the Centre was also trying to encourage investment in various sectors.

Principal Economic Advisor Sanjeev Sanyal remarked, "Now is the time when we are ramping up the demand stimulus part of it. So, it is now that we are pressing the accelerator because we have got the foot off the brake. Yesterday's stimulus is a part of this. It is about reviving industry, employment and investment."

"So it has to be seen in the context of the fact that we have had some revival in growth. So, what we are trying to do now is to accelerate the process that is naturally happening as we are unwinding the lockdown. Yesterday, the big focus was on job creation in the private sector. What we have done is that we have provided a subsidy using the EPFO framework to companies in order that if they employ new people, if they employ people who have lost their jobs during the COVID-19 period for no fault of theirs, in that case, if you rehire them, the government pays its EPFO contribution. It is a subsidy for employment," he added. 

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Sanyal elaborated, "The second thing we are doing is to encourage the private sector to invest again. During a demand shock that we had in the last few months, demand activity obviously stalled. Not surprisingly, it happened everywhere. In particular sectors, we want to get back into the game and be a part of the global supply chain. And we did this thing called the Production-Linked Incentives in a handful of sectors earlier. We got great results in the manufacturing of cellphones, electronics and so on. We are now widening into chemicals, textiles and other sectors. And the idea is that we begin to ramp these sectors up on a targeted basis, encourage investment and basically, insert ourselves into the global supply chain."

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'India's approach has been very different'

During the interview, Sanyal also talked about India's approach as far as formulating a stimulus package is concerned. He stated that the focus during the lockdown was to ensure a safety net for the most vulnerable sections of society. Mentioning that the demand has picked up with the gradual opening up of the economy, he cited the recent economic indicators to buttress his point. 

Principal Economic Advisor Sanjeev Sanyal said, "You have got to understand the broader context in which we are doing this. Our approach in India has been very different from what other countries have been doing or even what many international experts have been advising us. Throughout the process, we have been saying that we will not do this one big-bang stimulus package. Instead, we were going to do this step-by-step."

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"When we were in full lockdown between April and July, there was simply no point in unveiling a big stimulus to revive demand. Because there is simply no point in pressing the accelerator when you got a foot on the brake. So the purpose of the measures at that time was essentially to provide a safety net for the most vulnerable sections of the society. We were providing food, some Jan Dhan transfers, providing some support to the MSME sector. Since then, we have begun to open the economy step-by-step again. And wherever we are opening it up, you are getting some revival in demand. Again, the September-October numbers are very clear on this," he opined. 

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