Investment in these areas will create demand in the short run and make the economy more competitive in the long run
In recent months, the government’s macroeconomic policy has gained new importance in the context of reversing the current slowdown. The current policy has as main objective to motivate potential investors by facilitating the ease of doing business and making large-scale concessions for the corporate sector. In this context, the government relies on a relatively higher, although somewhat surprising, private foreign capital outflow, and the progress that India has made in classifying commercial activities. In addition, the tax concessions granted to the corporate sector in the last budget are estimated at more than Rs 1.40 million rupees.
In addition to these, the remaining restrictions on foreign investment are relaxed or eliminated. In the process, the conditions established for these investments are abandoned to meet social objectives and assist in resettlement. But despite these measures, and in the midst of the absence of demand, there is little evidence of a significant increase in private sector investment.
Call for more liberalisation
However, economists who support the previous development strategy would like the government to move forward with other issues on its reform agenda, such as labor market liberalization and the elimination of land tenure restrictions for industrial purposes. These economists ignore the negative effects that these reform measures can have on income, living conditions, the economic security of workers and the agricultural class. In addition, the policy of freedom of employment and dismissal of workers will have adverse effects, since it will increase the pressure on demand in case of massive demand deficits.
Some economists in the previous category are also asking for an acceleration of infrastructure investment. No reasonable person would oppose additional efforts to build the infrastructure still very severe in our country. But while talking about infrastructure, these economists refer only to physical infrastructure and these are just the big projects in the field of transport and energy. They do not maintain a shortcut to investing in human infrastructure, especially in education and health. In addition, it should be remembered that investment in physical infrastructure does not require as much labor as in other sectors and that large projects in this field have long periods of pregnancy.
Social sectors and demand
Abhijit Banerjee, one of the winners of the Nobel Prize in Economics, was one of the few economists who requested the transfer of income to the poor who probably spend additional income to buy goods and services, and improved production that offers the best opportunity to reverse the current deceleration In this regard, he described the mechanisms of Mahatma Gandhi’s national law to guarantee rural employment and direct income transfers. However, he did not even mention the potential for investment in the social sectors to create short-term demand by opening large-scale employment paths and transferring competitiveness and sustainability to the Indian economy in the medium and long term.
It is widely recognized that the social sectors of India are severely lacking funds. None of the prevailing economists or policymakers presented a proposal to boost spending in these sectors. On the contrary, they conditioned spending in the social sectors to greater growth. Most economists and conventional policymakers also believe that public spending in social sectors can only have a long-term impact on growth, and what is now required are macroeconomic policies that can have an immediate or short-term impact. This belief is extremely flawed since it can be demonstrated that increasing public spending in the social sectors according to the standards required to achieve constitutionally established objectives can have a short and medium-term impact on the promotion of employment, the generation of demand and the investment attraction.
RTE and teacher employment
Let us take an example of the impact of investment in school education on employment, and thus create demand. The Law on the right to education sets the goal of universal primary education in five years. The National Education Policy of 2020 states that “the law will be revised … to ensure that all students … have free and compulsory access to equitable and high-quality education from early childhood education (three years old hereinafter) to higher education (that is, to the degree “). 12) In the Con