Q/What does the economic package attempt to achieve?
A/ The package addresses only part of the concerns. It in essence addresses the issues of production centres as most of them are staring at the possibility of closure because they are unable to manage their debts. This is to ensure that companies do not go bankrupt. This may ensure that the production capacity does not die, but what it does not address is whether the production capacity will produce. They will survive, but will they undertake production is the real question. The focus is on the supply capacity. There is little on the demand side.
Q/What could be the government thinking when it went for such a measure, instead of putting money in people’s hands?
A/ If we were to look at it rationally, this was merely a logical first step. There is nothing intrinsically wrong with what they are doing. It cannot be treated as the final step. If they had not done this, when the lockdown is lifted, a large amount of production capacity would have become non-functional. In that case, even if demand revives, one will be incapable of producing. Logically, as a first step, it is sensible.
Q/The government has introduced several key reforms. Are these as substantial as the ones in 1991?
A/ I am extremely sceptical on this front, because there is not even one reform which has not been under active consideration of the government at some point, but the government had backed out for one reason or the other. Now, they have done it. As a statement of intent, it is fine. But will they see it through? That is why I am sceptical.
Q/The government’s current remedy is also the difference between the Manmohanomics and Modinomics.
A/ The main thing is your reading of the situation. If you are looking at a situation where the demand is weak, then Manmohan Singh’s approach of supporting demand is the right approach. If your reading is that it is the problem of the supply side, then what is being done today is the right approach.
We are in a situation where these are not absolute categories. While the lockdown is on, it is the supply problem. Then demand stimulating measures are not going to work. But once the lockdown is lifted or is in the process of lifting, you will gradually move from a supply problem to a demand problem. At that point in time you have to act.
Q/What are the follow-up steps you recommend?
A/ The government should come out with a second set of packages which focuses on reviving demand.