The Narendra Modi government should spend its way out of the current economic crisis by unleashing a big infrastructure programme and expanding the scope of the employment guarantee scheme, the Kerala finance minister, Dr. Thomas Isaac said.
A straightforward approach to the slowdown is to put more money in the hands of people, he said. Also, the Central government should go ahead with its ambitious infrastructure programme laid out by the Highways Minister, Mr. Nitin Gadkari, he said.
'The fiscal constraints to spending are artificial,' Dr. Isaac said. The current situation needed extraordinary measures. Doubling the allocation for MGNREGA and extending the employment guarantee scheme to urban areas could put more money in the hands of people, he said. This along with easy credit availability for the purchase of consumer durables could shore up the sagging consumer demand.
The Indian economy, the sixth largest in the world, recorded 5 per cent growth in the April-June quarter, its slowest since 2014. The economy has been growing at 6-7 per cent annually since 2000 and surpassed China as the fastest-growing major economy between 2014 and 2018, before being set back by the slowdown.
Economists attribute the economic slowdown to weak consumer demand and slow growth in investments. The situation is accentuated by a global slowdown that has affected almost all major economies. The biggest worry for the government is the lack of jobs for the young population. The unemployment rate in the financial 2017-18 was 6.1 per cent, the highest in 45 years.
'The Union government’s focus has been on incentivising private investment. We are not against that. But the tax cuts given to corporates will not have an immediate impact on demand,' said Dr. Isaac.