By Dr Manju Dagar, International Journalist, Ireland
Rupee 20 Trillion Economic Package Announced – to fight the damage done during 60 Days of lock-down. India so far has had the harshest lockdown in the world accompanied by the measliest fiscal support to vulnerable sections of the economy. In fact, the narrative spun by the finance ministry over the past 45 days was that India did not have the resources for a big bang fiscal package similar to those delivered by many developed nations. Must be Praised, without any “if and but”.
The crux of the Prime Minister’s“aatma ki aawaaz” –“Prime Minister Narendra Modi addressed the nation on 12 May at 8 PM and the focal point placed vocally in the speech was on “Aatma nirbhar bharat” a self-reliant India. Finance Minister Nirmala Sitharaman will announce the details of the 20 Lakh Crore Economic Package at 4 pm on 13 May. PM Modi said India produces more than 2 lakh N95 masks and PPE Kits each day, India has transformed the emergency to a possible opportunity this is a big example of self-reliant India. India believes in “vasudhaiva kutumbakam” world is one family. India’s progress has always included the world’s progress at large”. Dr. Ajay Kumar chairman of Fox Petroleum Group of Companies. His main business region is in Gulf Countries but apart from this, Fox Petroleum already spread its wings worldwide more than 15 countries. So he is the right man to ask the government of India policy and politics of the government India Rupee 20 Trillion Economic Package Announced, He speaks to our international journalist Dr. Manju Dagar.
Q: A question comes in my mind Dr.Ajay Kumar and its valid question – do we have 20 Trillion Rupee and, if yes, what is the source of this money?
See Dr.Manju As we know, the Indian government has already been running a high deficit which has become worse post-COVID-19 pandemic due to lower tax collections. And now we are in such a scenario where the government is required to spend more to keep the economic health intact. Therefore, in such a scenario the governments usually resort to their central bank and borrow more to spend and get the economy back on track. The money we have to arrange by sources, and it has been arranged before the announcement.
Q: No, Dr. Ajay my questions is , how is it going to be done ?
Dr.Ajay replied So simple, “my name is Government of India. I own RBI and Printing Press to print new notes – against Bonds or Gold”. The government issues a bond or series of bonds to the RBI at a pre-decided interest rate and pre-defined tenure which RBI buys. Now, the RBI will print money for the Government of India. Well, they print (Didn’t we learn this in high school). This has become a common phenomenon and governments across the globe have done it in the past and continue to do so till today. They borrow from their central bank in times like these to keep the economy on track. Remember Quantitative Easing. Half of the money will come from Bonds issued to RBI.
Q: Mr. Kumar, If printing is the solution, why don’t we always keep printing the money? India and Indians will be happy forever, and the government can go for an indefinite lock-down.
Dr. Ajay smiled and said Are you playing with me? It’s not that easy. ”Fortunately in India, the central government acted very decisively in implementing the national lockdown”. Consider this, printing money increases the supply of money in the system. That means more money is now chasing the same amount of goods which leads to price increase i.e higher inflation. To make it simpler, if you have Rs. 1,00,000 and suppose the government gives you an additional Rs. 10,000 (either by reducing taxes or additional income), wouldn’t you spend slightly more than you used to in a normal economic scenario. Therefore, for the overall economy, if everyone spends that extra money, the aggregate demand for products and services would increase which will increase the prices leading to inflation.
Q: Mr Kumar, Why are we doing it if it will lead to inflation? Inflation again can use chaos. It means, countering one problem, to have another problem?
Let’s recap a pustule; we have mentioned above that if you get the higher income you would spend more in a NORMAL economic scenario. But are we living in normal conditions? Definitely No. We are living in possibly one of the most frustrating times at least in recent decades. Coming to inflation, it is unlikely that we would see a spike in inflation because of two main reasons, a) disinflationary pressure is huge as commodity prices worldwide have practically crashed which would keep the inflation under control, b) Secondly, it is not going to lead to a sharp surge in demand which in hindsight could have happened in the normal economic scenario. But all these problems are very small compared to lock-down. And, we know the techniques to Counter Inflations and were successful in that so many times.
And, let me clear you, inflations can’t be seen, as in these uncertain times wherein there is no clarity on how long will this pandemic lasts, it is unlikely that people would think about spending, rather people would focus on building its savings to be prepared for any unforeseen scenarios. That means people would save more in their banks. Now banks would have higher Saving/Fixed deposits with themselves for which they would have to pay interest. In order to earn that interest, they would either lend it to companies/individuals (which is less likely as banks would remain more cautious in these trying times) or they park their funds with the RBI and earn nominal interest (Reverse Repo).
Q: Mr Kumar, Senior Congress leader P Chidambaram on Wednesday mocked the prime minister’s announcement of a Rs 20 lakh crore financial package as a “headline and blank page”. You know the credentials of Chidambaram, he was former Finance Minister. He can’t be fully wrong.
Dr. Kumar : You are putting wrong questions to me. And, For our Former Finance Minister’s comment, let current Finance Minister respond, I am no one to reply the two. But yes, Real Cash Outgo Will Determine the Credibility of Prime Minister Shri Narendra Modi’s Rs 20 Lakh Crore Package. Offer yourself to bring a smile to someone. Share a shoulder to bear someone’s pain. Have love for someone in your heart. This is the name of life …. This is the name of life …. This is the name of life.
Q: Mr Ajay Kumar, Are you fully assured Rs 20 lakh crore can reboot the economy, add jobs, tackle climate change? Do you see everything is normal from here onwards?
Mr. Kumar : Oh God, Let us for a moment pretend that the Modi government is actually going to raise or save Rs 20 lakh crore and it will use it to reboot economy after lockdown shock. Then I am sure, you have no escape but to praise the Government of India, and The PMO> lead by Shri Narendra Modi.
I know, your doubts, I have too, but Governments are accountable to Citizen as well as to the world community. Hence no chance of giving a second thought to your assumptions that –“additional money, over and above the routine expenditure, that the government spends for a specified purpose or its Annual Budget re-telecasted.”
Q: Mr. Ajay Kumar, Yes, Industry and people are not buying this announcement. Still, they are seeing riders in this announcement, as you said above. I have asked too many people the same question. Please if possible clarify – this 20 Lakh crore is additional to that of Budget Allocate for 2020-21.
Mr. Kumar: No, even if it is suspicious, I will never doubt the integrity of the Prime Minister of India’s word before his own citizens. But, you are right, prima facie, the political optics of the package clearly suggest that Prime Minister Modi wants to be seen as generous in spending like other big countries. This includes the United States, which put together a rescue package of about 13% of GDP. However, one will have to wait for the package to be unveiled by the finance ministry because the devil is often in the details. And details to date seem okay. Only, fear is that it should get implemented. BUT I HAVE NO FAITH IN IMPLEMENTATION. IT WILL BUST IN THE MIDDLE. At the same time, I reiterate, the magnitude of the package seems to reflect a desire to compensate for things that have gone horribly wrong these past few weeks – especially the terrible plight of migrant workers and their families, who have been all but abandoned by the Indian state. The details of the package will show how much has really been provided for the impoverished and unorganized working class.
Q: Mr Ajay Kumar, Now, responsibility comes on the industry side, Government has done its part. The Industrialist must not show-off their powers to staff by cutting don salaries, firing, blackmailing …etc etc etc. Do you think after this Industrialist are allowed to misbehave with staff in the name of firing, even with lady staff, fact is I had word with woman staff too.
Mr. Kumar: Hold on, Package, or no package, no one is allowed to misbehave with staff, male or female hardly matters. Industrialists to be treated as we treat Indian Army. They deserve equal respect. Army taking care of Borders, industrialists, taking care of their back home.
Relax coming to your point, it is the moral liability of the industrialist now, stop firing, stop pay cut. And I am totally against if Industrialist firing lady staff or decreasing salary or what you said blackmailing. You are a journalist, if you find any girl or woman worker suffering must report in your paper or by various means, name – shame them in public. I will JOIN YOU IN THAT.
Now, Prime Minister has done his job, its Industrialist needs to do their duty. I repeat, there should not be any firing. Delete Six Days of your life with 20 Trillion Package. Reboot with a new advanced look.
Dr.Manju my Conclusion is: It’s a loan, not a gift. I repeat, its loan not a gift especially to the industrialist. Remember, RBI was the one who started this cycle of lending them money and at the end of it, the central bank would have received a decent amount back which is not circulating in the economy and therefore would not lead to inflationary pressure. However, one must note that the government would have to still pay this debt to the RBI that too by not just borrowing like it plans to do now. It has to earn higher taxes in order to keep servicing this debt which will happen if the economy is up and running. Or it would have to keep borrowing more to service the debt which is a vicious cycle and could potentially lead to rating downgrade (India Sovereign rating is as it is just a notch above Junk grade) or even default.
To conclude, well difficult times call for bold measures and that is what the government has intended to do, and has been done. It will have repercussions (every policy does) but at this point increasing spending and reviving the economy outweighs them. Let us join hands with Prime Minister Shri Narendra Damodar Das Modi in “make India self-reliant”. God Bless India, God Bless You. Jai Hind.
In the end I convey my thank you to Fox Petroleum chairman Dr. Ajay Kumar who shared his valuable time with us on this very important Rupee 20 Trillion Economic Package Announced.
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