In June 2020, the finance ministry directed all ministries and departments to suspend implementation of all new schemes till March 2021. The directions read that “In the wake of COVID-19 pandemic, there is unprecedented demand on the public financial resources and a need to use resources prudently in accordance with emerging and changing priorities”.
In pursuance of these directives, many ministries have issued instructions to their respective departments not to initiate any new project or scheme, and suspend the spending on existing projects where no significant progress has been made so far. For example, the Ministry of Railways, issued directions to all the general managers of Indian Railways that-
(i) New works proposed in the budget for FY21 (Pink Book)shall be kept in abeyance; except for the works which impact the safe running of trains and are considered essential and inescapable may be considered for sanction.
(ii) Works which have been approved till 2019-20 but have made insignificant physical progress shall be kept frozen till further orders except those which are essentially required for safe running of trains.
(iii) Unutilized provision of Umbrella Works of 2018-19 and 2019-20, if any, may be suspended.
(iv) GMs of Zonal Railways/Pus may review the works already approved by them for possible suspension.
(v) Exemption for sanction of works which are considered essential and inescapable will have to be obtained from the Ministry of Finance. Given that the center has already expressed its inability to pay GST compensation to states, most states will also be under pressure to implement material cuts in their expenditure plans. It is common knowledge that a large number of small contractors and sub contractors completely depend on the business awarded by the governments. Most of them have been already struggling with inordinate delays in the payments due to them for the goods and services already delivered in FY19 and FY20. Now the flow of new orders shall also stop, rendering large capacities idle. This shall reflect on the financial stress and unemployment conditions in general; and may also lead to increased litigation as the change in scope of work; extension of timelines; delays in payment etc give rise to a multitude of disputes.
Another aspect that needs to be noted carefully is the tendency of the central government to impose licensing requirements and trade restrictions on increasing number of goods and services. This is gradually threatening to reverse the process of liberalization started in 1991, leading us back to the era of Mrs. Indira Gandhi which was underlined by centralization of powers; variety of controls; rationing of consumption; excessive taxation; and focus on import substitution.
Just like 1970's when Mrs. Gandhi swayed the common public with the perception of threats from external forces and internal traitors; the present regime also appears to be using the crisis created by Pandemic and evil designs of China to centralize the authority in the country. The whole campaign of 'self reliance" and "make in India' lacks credibility given that just few months ago the top leadership of India and China were sipping coconuts in Mahabalipuram discussing how to increase trade between two fastest growing large economies.
This whole anti China sentiment therefore cannot be accepted as part of a long term policy of self reliance and localization. And if this campaign is just about nationalist shenanigans, and government seeks to reverse it anytime in next 5-10yrs, the cost to the economy would be tremendous. My fear come from the fact that historically Indian policy makers have taken many midway diversions at the expense of economy and society.
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