Economic stimulus Tranche IV: Old wine in new bottle

Re-purposed old and existing initiatives mixed with new elements made up Tranche IV of Finance Minister Nirmala Sitharaman's Rs 20 lakh crore economic stimulus for the economy. With the FM refusing to tie them to a timeline, how these measures will revive the economy in the midst of COVID misery, remains a mystery.

"Once again, it is the supply side which has received emphasis while demand initiatives are still awaited The enhanced role of the private sector in coal, minerals, defence, energy, aviation and space sectors is an element of medium-term efficiency-improving reforms. The proposal to restrict imports of specified defence items, aimed at promoting self-reliance, was long overdue," says D.K. Srivastava, Chief Policy Advisor, EY India.

The biggest initiative was an approval for private sector mining in coal sector. It's a decision that was taken by the Cabinet in February 2018. The decision to open up commercial coal mining for private sector was hailed as the most ambitious coal sector reform since the nationalisation of this sector in 1973 at that time. Hence today's announcement, even with additional allocation of Rs 50,000 crore towards coal evacuation infrastructure, isn't a spanking new announcement.

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The second one, self reliance in defence production and corporatisation of Ordinance Factory Board, was announced last year. Much before COVID-19 became a discussion point, the ministry of Defence had announced its plans to corporatise Ordinance Board, though the decision got delayed due to opposition from employee unions. It is an idea in discussion for several years now. If indigenous defence production in the private sector has not taken off the way the government wants, it is not because there wasn't any policy push before, but for lack of a concerted effort at local manufacturing.

The decision of 'more' world class airports under PPPs is not a fresh idea either. India has already announced privatisation of 12 airports, six of which have already been bid out. Adani group has already emerged as the highest bidder for at least 3 of them.

Space technology, another area where minister announced a slew of reform measures will also qualify only as work in progress as PPPs have been driving India's space mission in terms of indigenous component manufacturing for satellites and launch vehicles for a long time.

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Re-purposed measures were also mixed with some new announcements. For instance, after mobile phones and electronic goods, new items such as Solar PV and advanced cell battery storage have been identified for local manufacturing. A scheme for New Champion Sectors will be announced as well.

But then, there is always a tomorrow, and one can hope for clarity when the minister announces the 5th tranche of COVID-19 stimulus at 11 am on May 17.

"The fourth instalment of Finance Minister's announcement contained a stimulus of Rs 63,100 crores of which the direct budgetary cost was only Rs 8,100 crores relating to enhanced viability gap funding to support augmenting social infrastructure. The government seems to be relying on this crisis to fast-track industrial reforms which might otherwise face resistance. The enhanced role of the private sector in coal, minerals, defence, energy, aviation and space sectors is an element of medium-term efficiency-improving reforms. The proposal to restrict imports of specified defence items, aimed at promoting self-reliance, was long overdue. Once again, it is the supply side which has received emphasis while demand initiatives are still awaited," said DK Srivastava, Chief Policy Advisor, EY India.

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