By Naliniprava Tripathy and Darshan Gosalia
Atmanirbhar Bharat Abhiyan: The GDP growth rate of the Indian economy touched a six-year low in the first quarter of 2020-21. The economy has been experiencing a slowdown since 2016 and saw the growth rate declining for five consecutive quarters. All the four drivers of economic growth — domestic consumption, exports, private investment, and government spending — were hit by the slowdown. The slowdown set in when the government was targeting a $5 trillion economy by 2025.
The policy makers were involved in reviving the economic growth rate. Various monetary and fiscal measures were taken to boost growth. However, the onset of the Covid-19 pandemic seems to have nullified all the efforts of the government. In the matter of a few weeks, the pandemic affected the lives and livelihoods of the public at large. The absence of adequate healthcare infrastructure, medication, and vaccine doses made the situation challenging. In a scenario where the existence of humanity itself was at stake, the vision of a $5 trillion economy became a distant dream because of the lockdown measures rolled out to fight the pandemic.
Despite the ongoing war on the Covid-19 pandemic, there was continuous unrest at the India-China border in the Galwan valley. India’s dependence on Chinese products was widely discussed. This dual objective of reviving the Indian economy from the shackles of the pandemic and the China factor led to the conception of Atmanirbhar Bharat.
Twin objectives of Atmanirbhar Bharat
Atmanirbhar Bharat, aimed at making India self-reliant and self-sufficient, is a programme launched for the country’s economic development during and after the pandemic. It is an umbrella concept that aims at making India a more significant part of the global economy. It seeks to create a self-reliant India and focuses on the five pillars — economy, infrastructure, systems, demography, and demand.
The pandemic impacted people from different sections of the society and companies operating in various sectors of the economy. To tackle the economic slowdown triggered by the pandemic, it was essential to implement a programme that offered benefits to different sections of the society and various sectors of the economy. With a total allocation of Rs 29.87 lakh crore, three Atmanirbhar Bharat packages were announced by the government.
It looks to bring systematic reforms by providing interim liquidity infusion and direct cash transfer to the poor in acute stress. Further, it emphasises long-term reforms in growth-critical sectors to make them globally competitive. The packages look to benefit businesses and MSMEs; the poor and farmers; agriculture; new horizons of growth, and government reforms intended to benefit those hit by the pandemic.
Focus on MSME sector
As part of the first tranche of the Atmanirbhar Bharat package, various schemes were launched to benefit MSMEs by providing collateral-free loans, setting up a fund of funds for MSMEs, and supporting stressed MSMEs. Concessions were given for Employee Provident Fund contributions and Statutory Provident Fund Contributions to boost liquidity. A scheme was also launched to provide credit facilities to street vendors. Various policy measures were undertaken to expedite payment of dues to MSMEs, insolvency resolution, disallowing global tenders, reducing TDS and TCS rates, and to improve ease of doing business for corporates.
Concessional credit facilities were provided for agriculture and allied sectors. Other measures such as the agri infrastructure fund, emergency working capital for farmers, supporting fishers, and development of animal husbandry infrastructure were also implemented. The programme also focused on delivering benefits to migrant workers through policies such as ‘one nation one ration card,’ free food grains supply to migrants, and affordable rental housing complexes for migrant workers and urban poor.
The civil aviation industry also benefited from the easing of air space restrictions. The government also laid out a plan to build more airports across the country under the PPP model. The FDI limit in defence manufacturing was raised from 49% to 74%.
Thrust on energy, infrastructure
In the energy sector, schemes were launched to provide liquidity support to distribution companies. Also, infrastructure development for coal evacuation was taken into consideration. Specific policy measures were also undertaken in the energy sector such as not passing inefficiencies of discoms on to the consumers, eliminating regulatory assets in the power sector, privatising power distribution in Union territories, and opening the coal sector commercial mining.
The programme also covered the housing and real estate sector by extending credit-linked subsidy schemes for the middle-income group. The government also increased customs duty to 40% to discourage importing modules, incentivising local production in India. It has also set up the National Mission on Transformative Mobility and Battery Storage to obtain overarching cohesiveness in the policy framework for promoting e-mobility and battery storage in the country, thereby providing leverage to the niche renewable energy sector.
India needs to come up with a strategic roadmap to become more energy efficient, taking a leaf from the German model. Further, to speed up energy self-reliance, investment in research and development is needed. Less than 2% of India’s budgetary resources are allocated for R&D, while it is as high as 7% in case of certain western countries like Germany and the US. Providing an impetus to R&D should be the focal point of Atmanirbhar Bharat.
The social sector also received sufficient focus under the Atmanirbhar Bharat programme. Investment in public health was set to increase investment in grass-root health institutions in urban and rural areas. To boost the rural economy, more allocation was made to MGNREGS. Further, Viability Funding Gap (VGF) for social infrastructure projects was increased up to 30% of the total project cost. To make education a technology-driven process, PM eVidya was launched for multi-mode access to digital education.
In addition to the above, various reforms such as increasing borrowing limits of the state governments and privatisation of Public Sector Enterprises were also made. To complement the efforts of the government, the RBI undertook several measures to improve the liquidity in the system such as reducing CRR and increasing bank limit for borrowing under MSF. Efforts to boost various sectors of the economy were undertaken in Atmanirbhar Bharat 2.0 and Atmanirbhar Bharat 3.0.
The MSMEs are the most influential units of the economy, accounting for 45% of the exports and 31% of the country’s GDP. There are nearly 56 million enterprises in various industries, and approximately 124 million people are employing by them. Almost 14% are women-based enterprises, and close to 60% in situated in the rural areas. Hence, the implementation and monitoring of the policies laid out is of prime importance for ensuring that the benefits are received by the targeted groups.
It is essential to create linkages between policy, budgetary provisions, and financial mechanisms for convergence among various departments. It is also equally crucial to plan a systematised framework in policy documents to specify the roles and responsibilities of the implementation agencies to monitor progress. The monitoring agency needs to review and suggest changes and also implement an umbrella action plan listing all targets of ‘Vocal for Local’ Mission.
Each state should be required to develop an action plan for the umbrella plan. A separate organisation needs to be established in each state to effectively implement the action plan. This organisation should also conduct regular studies to identify local and global trends of market demands and the efforts of the programme should be directed towards the new and emerging market trends.
Atmanirbhar Bharat has benefitted various industries and people belonging to various sections of society. It is a programme of enormous magnitude and scope, aimed at bringing about far-reaching benefits to the economy. However, most of the schemes under the programme would show tangible benefits only in the long run.
With the second wave of pandemic hitting India, it is not far off when the adequacy and capability of the measures undertaken under the existing programme are put to the test. A systematic review of the current and ever-evolving situation would go a long way in making Atmanirbhar Bharat programme a more robust one.
(Dr Naliniprava Tripathy is Professor of Finance at IIM Shillong. Darshan Gosalia is alumnus, IIM Shillong.)