Structural Reform: Vaccine against COVID-19
Real Estate

Structural Reform: Vaccine against COVID-19

On this 74th Independence Day, economies world over seem to be in the throes of a crisis. Britain has announced that it has slipped into a deep recession. All global economies are set to contract into negative territories. For its part, India has played its cards extremely cautiously. While it did go ‘hammer and tongs’ during the pandemic with its Rs 20 trillion economic package , most of this was non-fiscal. It has instead chosen to act upon sectors needing structural reforms like agriculture, domestic defence production and mining, among others.

John Maynard Keynes, the British economist whose theories came to the rescue of industry post-World War, mooted government spending to counteract slow economic growth. He reasoned that extra spending by government is needed to ensure aggregate demand remains high enough to maintain full employment. According to an article in The Economist, these theories collapsed during the 1970s where it was seen that high inflation and high unemployment failed to move in the opposite direction as was expected. Policymakers then concluded that it was no longer possible to ‘spend your way out of a recession’. Milton Friedman, a Keynes contrarian, held that ‘if policymakers tried to stimulate without tackling underlying structural deficiencies, they would raise inflation without bringing unemployment down’.

These bailout packages will result in debt shooting through the roof; as per estimates, advanced economies will run an average deficit of 11 per cent of GDP this year, according to the IMF, even if the second half of the year sees no more lockdowns and a gradual recovery. The public debt of the developed world could run to $66 trillion, which might be 122 per cent of GDP by year end.

India’s economy is suffering a double whammy. While the government will cut public spending all around, including watering down plans for the National Infrastructure Pipeline  (NIP) announced in February earlier this year, its pipeline of projects has been the weakest in past 14 years. Therefore, it is critical that it continues its path of structural reforms. Considering the mandate the current ruling party enjoys with virtually no opposition, it would be foolhardy to fritter away the opportunity of reform. Agriculture and mining reforms have been brought on boldly. Similar courage needs to be displayed in accelerating PSU divestment.

I have witnessed that, over decades; the government has never managed to get the timing right—so it should not try. Each time the market is booming, all experts begin to recommend divestment. And by the time the stage is set for it, the market turns bearish, the divestment calculations fail and so does the divestment plan. Divestment needs to be carried out on a regular basis and the government should stop trying to time it as the gains will be realised not so much through the divestment proceeds as from the improvement in the valuations of companies; and then in turn through the second tranche of divestment from such companies.


Photo courtesy: Express Pharma

The government seems to be listening. Several of my suggestions have been acted upon over the past 12 months. My column uploaded on August 1, 2019, bears testimony to its proactive stance. Six out of 10 of my suggestions seem to have been acted upon:

1. The rental housing scheme
2. The tax amnesty scheme
3. Relaxation of income tax scrutiny cases
4. PSU divestment
5. Incentivising ‘honest taxpayers’
6. Easing the tax system

However, the suggestion made to unclog stuck projects is yet to make progress. The suggestion of saving Rs 1.85 trillion by not buying land for road construction but using a leasing formula can also be a gamechanger as it can scale up across all road networks, including state and smaller urban centres.

Meanwhile, from the ramparts of the Red Fort, Prime Minister Narendra Modi reminded us of the accomplishments of the government as India entered the 74th year of its Independence. This included the launch of the NIP fund with a Rs 110 trillion plan, which now has 7,000 projects ready. He clarified that the intent is to develop a multimodal infrastructure network in an integrated manner, rather than silos. Coastlines are to sport four-lane roads facilitating trade from our ports.

Further, the Prime Minister informed us that although we could only do 300 tests a day in one laboratory when the pandemic hit, we now have the ability totest nearly 7 lakh cases a day. India has also launched the National Digital Health Mission, which will provide a health ID for all Indians. The New Education Policy (NEP) was also launched earlier this month.

To integrate villages into Digital India, the Prime Minister announced taking optic fibre installations from the current 150,000 village panchayats to all 600,000 villages in India within the next 1,000 days. On real estate, he reminded us that home loans have become cheaper and a Rs 250 billion fund corpus was established to complete housing projects stuck in a limbo. Further, he iterated that agriculture reforms were well fortified with a mandate of Rs 1 trillion, which would be used to build up agri-infrastructure in line with the recently announced reforms.

Providing an update on the Jal Jeevan mission, he added that having added water pipeline connections to 20 million families last year, India is adding tap-pipe connections to 1 lakh families daily. During the Coronavirus pandemic, digital measures have helped distribute free rations to 800 million Indians, and Rs 900 billion has been transferred to the bank accounts of the beneficiaries.

There is no doubt that the Modi Government has scaled up social reform and brought a vast majority of Indian within the social security framework. But for the government to continue to provide social reform, revenues from business and, consequently, the economy need to grow. The chord of structural reform he has struck of late needs to resonate even louder to secure the sweet melody of independence. Structural reform is the only vaccine that can cure our economic malaise.

On this 74th Independence Day, economies world over seem to be in the throes of a crisis. Britain has announced that it has slipped into a deep recession. All global economies are set to contract into negative territories. For its part, India has played its cards extremely cautiously. While it did go ‘hammer and tongs’ during the pandemic with its Rs 20 trillion economic package , most of this was non-fiscal. It has instead chosen to act upon sectors needing structural reforms like agriculture, domestic defence production and mining, among others.John Maynard Keynes, the British economist whose theories came to the rescue of industry post-World War, mooted government spending to counteract slow economic growth. He reasoned that extra spending by government is needed to ensure aggregate demand remains high enough to maintain full employment. According to an article in The Economist, these theories collapsed during the 1970s where it was seen that high inflation and high unemployment failed to move in the opposite direction as was expected. Policymakers then concluded that it was no longer possible to ‘spend your way out of a recession’. Milton Friedman, a Keynes contrarian, held that ‘if policymakers tried to stimulate without tackling underlying structural deficiencies, they would raise inflation without bringing unemployment down’.These bailout packages will result in debt shooting through the roof; as per estimates, advanced economies will run an average deficit of 11 per cent of GDP this year, according to the IMF, even if the second half of the year sees no more lockdowns and a gradual recovery. The public debt of the developed world could run to $66 trillion, which might be 122 per cent of GDP by year end.India’s economy is suffering a double whammy. While the government will cut public spending all around, including watering down plans for the National Infrastructure Pipeline  (NIP) announced in February earlier this year, its pipeline of projects has been the weakest in past 14 years. Therefore, it is critical that it continues its path of structural reforms. Considering the mandate the current ruling party enjoys with virtually no opposition, it would be foolhardy to fritter away the opportunity of reform. Agriculture and mining reforms have been brought on boldly. Similar courage needs to be displayed in accelerating PSU divestment.I have witnessed that, over decades; the government has never managed to get the timing right—so it should not try. Each time the market is booming, all experts begin to recommend divestment. And by the time the stage is set for it, the market turns bearish, the divestment calculations fail and so does the divestment plan. Divestment needs to be carried out on a regular basis and the government should stop trying to time it as the gains will be realised not so much through the divestment proceeds as from the improvement in the valuations of companies; and then in turn through the second tranche of divestment from such companies.Photo courtesy: Express PharmaThe government seems to be listening. Several of my suggestions have been acted upon over the past 12 months. My column uploaded on August 1, 2019, bears testimony to its proactive stance. Six out of 10 of my suggestions seem to have been acted upon:1. The rental housing scheme2. The tax amnesty scheme3. Relaxation of income tax scrutiny cases4. PSU divestment5. Incentivising ‘honest taxpayers’6. Easing the tax systemHowever, the suggestion made to unclog stuck projects is yet to make progress. The suggestion of saving Rs 1.85 trillion by not buying land for road construction but using a leasing formula can also be a gamechanger as it can scale up across all road networks, including state and smaller urban centres.Meanwhile, from the ramparts of the Red Fort, Prime Minister Narendra Modi reminded us of the accomplishments of the government as India entered the 74th year of its Independence. This included the launch of the NIP fund with a Rs 110 trillion plan, which now has 7,000 projects ready. He clarified that the intent is to develop a multimodal infrastructure network in an integrated manner, rather than silos. Coastlines are to sport four-lane roads facilitating trade from our ports.Further, the Prime Minister informed us that although we could only do 300 tests a day in one laboratory when the pandemic hit, we now have the ability totest nearly 7 lakh cases a day. India has also launched the National Digital Health Mission, which will provide a health ID for all Indians. The New Education Policy (NEP) was also launched earlier this month.To integrate villages into Digital India, the Prime Minister announced taking optic fibre installations from the current 150,000 village panchayats to all 600,000 villages in India within the next 1,000 days. On real estate, he reminded us that home loans have become cheaper and a Rs 250 billion fund corpus was established to complete housing projects stuck in a limbo. Further, he iterated that agriculture reforms were well fortified with a mandate of Rs 1 trillion, which would be used to build up agri-infrastructure in line with the recently announced reforms.Providing an update on the Jal Jeevan mission, he added that having added water pipeline connections to 20 million families last year, India is adding tap-pipe connections to 1 lakh families daily. During the Coronavirus pandemic, digital measures have helped distribute free rations to 800 million Indians, and Rs 900 billion has been transferred to the bank accounts of the beneficiaries.There is no doubt that the Modi Government has scaled up social reform and brought a vast majority of Indian within the social security framework. But for the government to continue to provide social reform, revenues from business and, consequently, the economy need to grow. The chord of structural reform he has struck of late needs to resonate even louder to secure the sweet melody of independence. Structural reform is the only vaccine that can cure our economic malaise.

Next Story
Building Material

JK Cement emerges successful bidder for Mahan coal mine in Madhya Pradesh

This marks the company’s second commercial coal block win, following its acquisition of the West of Shahdol (South) coal block. "The company is committed to becoming self-reliant for its existing cement plants and upcoming projects," JKC stated. The surplus coal from the mine will be sold commercially. The vesting order was handed over to JK Cement during a ceremony at Shastri Bhawan, New Delhi, a critical milestone for commencing mining operations within the stipulated timeline...

Next Story
Building Material

Prism Johnson's cement division goes live with Ramco ERP Suite

Prism Johnson has successfully gone live with the Ramco ERP Suite for its Cement Division. This milestone marks a significant step in Prism Johnson's digital transformation journey, leveraging Ramco Systems' advanced enterprise solutions and process control systems to streamline business processes, manufacturing operations and drive efficiency. The implementation includes cutting-edge modules for Maintenance, Sales, Distribution, Finance, Procurement, Manufacturing, Quality, and HR Management (HRM). These solutions enable Prism Johnson to achieve seamless integration across its business and wo..

Next Story
Infrastructure Urban

Indian shadow bank Shriram Finance gets record $1.28 billion loan

Shriram Finance Ltd. is reported to have borrowed $1.28 billion in a multi-currency social loan, marking the largest offshore facility ever undertaken by an Indian shadow lender. According to a press release issued by Shriram, the deal is divided across the dollar, euro, and dirham. Sources familiar with the transaction, who wished to remain anonymous, indicated that the tenors in the multi-tranche deal range from three to five years. This loan adds to the surge of offshore debt sales by Indian shadow lenders this year, a trend prompted by the Reserve Bank of India's tightening of rules in Nov..

Hi There!

"Now get regular updates from CW Magazine on WhatsApp!

Join the CW WhatsApp channel for the latest news, industry events, expert insights, and project updates from the construction and infrastructure industry.

Click the link below to join"

+91 81086 03000