Economists seek stimulus package for nation's working poor | business | Hindustan Times
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Economists seek stimulus package for nation's working poor

business Updated: Dec 09, 2008 18:48 IST
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A stimulus package for the country's labour force should be top priority to tide over the slowdown, as it would boost demand among the nation's largest consumers, leading economists say.

Highlighting a steep disparity in the pay hikes of executives and the labour force during the economic boom, Raymond Torres, director at the ILO's International Institute of Labour Studies in Geneva, pointed out that worldwide the average hike in executive pay was 10 per cent as compared to a mere 0.7 per cent for workers.

Predicting a global slowdown in the Indian economy in coming years, Torres said the government's efforts to stimulate the economy would be of no use if low-income groups and ongoing infrastructure projects in the country do not receive "a timely booster".

"Supporting people with low income is a priority as they are the major consumers in this country. Ensuring more employment guarantee schemes or a hike in minimum wages would provide the requisite incentive to spur demand," said Torres.

"In India the taxation system is progressive. Keeping more reliance on income tax levels rather than on indirect tax will also boost demand in the economy to tide over a reversionary trend," he added.

Rajya Sabha MP and National Commission for Enterprise in the Unorganised Sector (NCEUS) Chairman Arjun Sengupta told PTI: "We have already submitted a report to the Prime Minister for taking measures for protection of the unorganised sector amidst this global slowdown."

A suggestion is to provide a Rs 10,000 crore loan package to this segment under the priority sector policy of all scheduled banks to avoid job cuts in the unorganised sector, which employs more than 92 per cent of the workforce and contributes 50 per cent to the nation's GDP, he added.

Leading columnist and JNU's Centre for Economic Studies and Planning Chairperson Jayati Ghosh said that a supply bottleneck in India for food could aggravate the recessionary effects.

"Food prices -- a main driver in inflation -- have not come down. In fact in India, food prices are among the highest. No fiscal measures will be required if the supply bottleneck in food availability could be removed," she said.

Ghosh added: "Give a booster to the lower-income spectrum, who are sure to spend it for right consumption, thus driving the right demand at the right time, which is now. Industries only may or may not be able to make the most of it (stimulus package)."

Suggesting the pattern in which the government can initiate a booster, ICRIER Director Rajiv Kumar said the government could provide assistance to the poor by sharing their cost of using public goods and services.

"Enforcing labour laws that ensure social measures as incentive and increasing public sector spending are also effective ways to extend the stimulus package to the working poor," he added.