What should Modi government do in short term?

In a week’s time Narendra Modi will take over as the next prime minister of India and the government formation process will start in full swing. Given the mandate by the people of India, there is lot of expectation from Modi government to bring back economy on track.

Not an easy task but it is also not difficult and the government will go full throttle to bring back the economy. In the short term, Modi government is focusing on three basic objectives- controlling inflation, boosting domestic consumption and increasing employment.

Controlling Inflation: Modi’s government first and foremost priority would be to control inflation. This would not be easy considering the fact that UPA 2 was unable to control inflation despite their best efforts. The government will have to take some hard steps to control inflation to help housewife’s manage their budget well within their limits.First, fuel prices need to be reduced or it needs to be stable so that inflation can be brought under control and for that dollar needs to be stable with respect to rupee. Second, there are too many intermediaries in the agriculture supply chain and this needs to be broken, making it a free market which will help prices of vegetables and cereals to be brought under control.

In this regard, the focus should be on putting in place strict measures and special courts to stop hoarding and black marketing. Focus is also on setting up a price stabilisation fund, evolving a single ‘National Agriculture Market’, and promoting area specific crops and vegetables linked to food habits of the people in the region. All this will help in bringing inflation under control in the short term.

Boosting domestic consumption: Once inflation is reduced or brought under control, the focus would be to increase consumers’ domestic spending thereby helping the economy to grow. For increasing demand, the government should help in reducing prices of electronic goods say laptop, mobile, smartphone, tablet, TV and others.The government can rethink on decreasing duty structure or asking domestic manufacturers to pass some benefits to end consumer so that there is price reduction in electronic goods. Industries should be encouraged to innovate and collaborate internationally and will be encouraged to produce efficiently and cost effectively so that these benefits are passed on to the end consumer. Focus should be also on stabilizing electricity tariffs which will benefit end consumer in terms of buying electronic products freely.

Increasing employment: In its manifesto, BJP has given high priority to job creation and opportunities for entrepreneurship. The main focus is to strategically develop high impact domains like labor-intensive manufacturing (electronic assembly, textile and footwear) and tourism. A strong manufacturing sector will not only bridge the demand-supply gap leading to price stabilization but also create millions of jobs and increase incomes for the working class. Above all, it will increase government’s  revenue and lead to bringing down the import bill.

With electronic assembly as a high priority area, electronic products will get a big boost and will also open up employment opportunities for Indian youth. Boosting electronic assembly in the country will also help in reducing prices of electronic goods.

Entrepreneurs will be given high priority as they contribute to society both in terms of employment and revenue generation. Focus should be on facilitating fast loan facilities so that there is no hindrance to entrepreneurs with respect to finances for establishing their businesses.

All this will definitely give initial stimulus to bring back economy on track and once things start working, Modi government can go for big ticket programs.

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