Budgeting for jobs, skilling and economic revival (Top priorities for Union Budget 2020-21)

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 Budgeting for jobs, skilling and economic revival (Top priorities for Union Budget 2020-21)

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• A decisive budget: The 2020-21 budget will give a clear idea of what lies ahead - economic revival, or stagnation. The youth's future too depends on what govt. does now.
• Some facts: Surveys show that (a) the LFPR (labour force participation rate) for 15-64 yrs is just 46.5% and for urban youth it is just 37.7%, (b) the unemployment rates are high, and (c) general wage levels are not rising. That is the case of employment poverty. Surprising that 22 lakh vacancies exist in central government.
• Problematic structural issues: The ongoing slowdown in economy is responsible for what’s happening to jobs. But there are other factors too.

1. Poor consumption demand growth, and low investment are hurting GDP growth severely, and that came in at 4.5% for Q2. Aggregate investment in now less than 30% of GDP, from the usual 35%.
2. Private sector capacity utilization is just 70-75%.

• Rural demand: It is true that PM-KISAN and MGNREGA are useful tools to boost rural consumption demand, as farmers and landless labourers spend almost all they get. Sadly, PM-KISAN didn’t get disbursed fully in 2019-20.
• Rural employment: This will rise if spends on rural roads, cold storage, logistics and irrigation projects is done.
• Integration of farms with mandis: If this is done, inflationary shocks will reduce substantially.
• Urban employment: Construction sector is the biggest employer, after agriculture. More than 5 crore work in construction, a sector that has sharply slowed down due to its own ongoing crisis. Legal disputes exist – between buyers and developers, lenders and developers, and law-enforcement and developers!
• What about resolution: Since multiple agencies have jurisdiction (NCLT, RERA, consumer courts), things get stuck. So the NPAs of NBFCs pile up.
• Special fund: Centre had announced the Rs.25000 cr fund for 1600 stuck projects. Use it right now!
• NIP: The ambitious National Infrastructure Pipeline (NIP) must be actuated soon, so that its multiplier effect can be seen urgently. But more than 60% investment is expected from States and private sector! That will not happen in the absence of regulatory certainty. That is what the government can help with.
• Only Centre: States are hamstrung due to poor GST collection, and so the 1.11% of GDP support from Centre to NIP needs to be raised. Else NIP will fail.
• Focus on ongoing projects: Since bidding and contracting for new roads, highways, railway tracks and urban dev. projects is a lengthy process, it’s best the govt. focusses on ongoing projects instead of totally fresh ones. That is called “front loading” of funding.
• Inverted duty structure: MSMEs are under duress, because GST on inputs is often higher than that on output. So annually Rs.20,000 cr gets stuck in form of Input Tax Credit (ITC). Resolve it quickly.
• Skilling: Give all possible support to skilling programs, and tax incentives to firms that take apprentices.
• Summary : Multiple pain points in the economy can be addressed by smart planning through the Union Budget 2020-21.

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