Extreme times call for extreme measures. India is reeling under a chronic economic crisis. If the Indian government takes these measures then it will go a long way in mitigating the economic fallout of the COVID-19

Financial Emergency - the need of the hour

The word ‘emergency’ is like a Pandora’s Box to say to the least. The ruling regimes in India at different points of time have misused emergency provisions to overthrow state governments for either settling political scores or under the ludicrous garb of bad governance. But the emergency may emerge as a messiah at this point of time. India is reeling under extreme economic pressures, revenues are low, layoffs in companies are high, and on top of that, the prolongned national lockdown has forced economic activity to come to a grinding halt.

I certainly believe that the central government must resort to extreme measures to contain this pandemic at all costs even if democracy takes a backseat for the time being. The need of the hour for the Union government is to activate Article 360 of the constitution to impose a financial emergency in the country. It will enforce fiscal discipline, will reduce all non-essential expenditures, will help in reducing salary and perks of key officials such as bureaucrats’, and judges will allow the augmentation of fiscal resources which then can be used for bolstering the reserves in the consolidated fund of the country. The imposition of the financial emergency using the economic crisis as a solid pretext will play a pivotal role in mobilizing all monetary resources to contain the fall-out of the economic costs of the crisis.

Shiny yellow metal – a game-changer

Since the coronavirus pandemic began spreading its tentacles in India and the economic crisis became more pronounced, none of India’s top economists, policymakers suggested this measure. A few years ago the World Gold Council (WGC) estimated that total gold holdings in India are around 24,000 tonnes, out of which the temples in India, hold close to 3,000-4,000 tonnes. What the central government needs to do is that after declaring a financial emergency they need to take immediate steps to declare the huge stashes of gold reserves locked in the temple vaults as “government property”. The duty of the protection and the right for its financial use should be given to the Reserve Bank of India. This gold can be utilized under the Gold Monetization Scheme (GMS) to convert gold into monetary form.

India is currently ranked 11th with the total possession of 607 tonnes of gold, according to the World Gold Council, with this measure India’s position can zoom to the zenith. Using the gold reserve, the government can then make full use of the JAM (Jan, Aadhar, Mobile) trinity to alleviate the economic woes of the masses.

Some of the steps that can be taken after this are: Firstly, directly transferring Rs. 4 lakh crore of money through the Jan Dhan bank accounts of India’s poorest 500 million people. This re-monetization will help bring purchasing power in the hands of the people.

Secondly, make use of surplus reserves of the non-core assets of the Central Public Sector Enterprises (CPSE), which will pay rich dividends in the fight against the pandemic. Devising an economic stimulus package worth over 5 percent of the GDP would help further.

Thirdly, since private investment is projected to remain subdued for the near future, the gold assets can be used to bolster public investment. The central government's total expenditure (both revenue and capital) has been declining sharply since 2010-11. From a high of 15.4 percent of the GDP in 2010-11, the total expenditure has hit a low of 12.2 percent of the GDP in 2018-19. Also, the capital expenditure component has dropped from 2 percent of the GDP in 2010-11 to 1.6 percent in 2018-19. The revenue expenditure has gone down from 13.4 percent in 2010-11 to 10.6 percent in 2018-19.

The public investment is the only lifeline that can save the country from degenerating to a path of a prolonged economic slowdown. It is imperative that the government ramps up public investment to over 40 percent of the budgeted estimates (BE) in the fiscal year 2020-2021.

Fifthly, India should put in place suitable policies to emerge as a hub of manufacturing goods in the world. Steps can include tax holidays, setting up of special economic zones (SEZ) and even liberalizing the taxation structure further to embrace globalization further. India must also team up with anti-China groupings to bolster the trade of gradually reducing its dependence on Chinese goods.

Conclusion: The idea of utilization of the temple’s gold reserves even against their wishes can become a game-changer for the Indian economy in the coming decade. These efforts can certainly catapult India into the league of an economic superpower.

(The writer is a student of international relations from Jadavpur University, Kolkata)