New Delhi: New farm laws will benefit small and marginal farmers that did not have any other option outside the Mandi system to sell their produce, said India’s Chief Economic Advisor Krishnamurthy Subramanian.
In an exclusive interaction with ETV Bharat, Subramanian expressed the hope that the deadlock between the agitating farmers and the government will be resolved soon.
In response to a question why the government failed to anticipate the protest to the farm laws, the chief economic advisor said three new farm laws would be particularly beneficial for the small and marginal farmers who did not have any option to sell their produce outside the Mandi system.
“When a small farmer goes to sell his produce in the Mandi then the groups active in the Mandi know that he doesn’t have the choice to go anywhere else,” Subramanian said.
“These laws offer a choice to a small farmer to sell his produce outside the Mandi system. It is a common sense that it is better to have more choices. And a buyer will certainly increase the price offered by him to a farmer if he knows that the farmer has other options to sell his produce. This common sense is embedded in these farm laws,” he told ETV Bharat.
“Big farmers have these choices but it was not available to small farmers,” observed the CEA.
“From an economic point of view, it is a good step. An effort is made to communicate these benefits to farmers. I am hopeful the issue will be resolved soon,” he said.
GDP growth to return to the pre-Covid level
The Chief Economic Advisor K Subramanian says the contraction of over 23% in the first quarter was due to the lockdown that was imposed but it helped the country to save more than one lakh lives.
“The decline came down to just 7.5% in the second quarter which was much better in comparison with the first quarter. The expectation is that it will turn positive in the third quarter and will improve further in the fourth quarter,” he said.
Subramanian says the projection of 11% GDP growth rate for the next fiscal was based on the V shape recovery.
The top economist says India was the only country in the world which understood that this pandemic will hit both demand and supply sides.
“That is why we not only focused on the demand but also stressed upon improving the supply as well,” he said.
“Our projection is that in FY 2023, we should get back to the pre-Covid growth level that was in the range of 6.f to 7.5%,” Subramanian added.
Labour reforms will revive the manufacturing sector
The CEA also rejected the criticism that Prime Minister Narendra Modi’s government was not able to achieve its own target of increasing the share of manufacturing in the GDP from 15-16% to 25%, and it also failed to achieve the target of doubling the farm income by 2022 which, was announced by the Prime Minister on August 15, 2017, from the Red Fort.
“In our survey, we have shown that in case of bare necessities such as food, clothing and housing, things have improved a lot in 2018 in comparison with the situation in 2012,” Subramanian told ETV Bharat.
“This improvement is visible across the states, it is visible both in urban and rural areas,” he added.
Subramanian says the manufacturing sector will now pick up following the labour reforms as these reforms were critical for revival of the manufacturing sector in the country.
The chief economic advisor says manufacturing will pick further momentum due to the production linked incentive (PLI) scheme announced by the government.
“Unlike the previous system of MEIS (Merchandise Exports from India Scheme) in which there was no incentive for growth, the PLI system offers incentives only in case of growth in manufacturing. I believe that with the PLI, manufacturing will grow,” explained the CEA.
Countercyclical fiscal policy
Subramanian says there is an explicit recommendation in the survey that fiscal policy must continue till the country gets back to the pre-Covid growth path.
“My sense is that FY 2023, we should be able to get back to the pre-Covid level of 6 or 6.5% and the way you measure that is by looking at the potential growth. The potential growth for India is somewhere between 6.5 to 7.5%,” Subramanian said.
“I reckon that by FY 2023 we should be back to the pre-Covid growth path, in terms of the growth rate. That might be the right time to start consolidation,” added the economist.
Subramanian says the timing of the withdrawal is important.
“The countercyclical fiscal policy means that you will have to do both sides, of course, the government moves in when the economy is in contraction mode but at the same time it exits out when the expansion is happening,” he said.
“That's a critical part,” he observed.
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