Our governments have been in the habit of announcing packages whenever a crisis hits. This government is no exception, even in the midst of a life and death crisis. First a package for exporters and...
Our governments have been in the habit of announcing packages whenever a crisis hits. This government is no exception, even in the midst of a life and death crisis. First a package for exporters and now a package for construction. Spokespersons of the business community have welcomed these packages. This is unfortunate.
Export incentives are meant to boost exports. But where are the buyers? The US and Europe are in the midst of fighting a battle for human survival. Almost all exporters report being asked to hold back on their shipments, and orders are being cancelled.
The fact is that this package is meant for business houses whose investment has gotten stuck. Their industries will not restart production; workers will not get back to the shop floor. Lockdown conditions have frozen the supply chain; export industries cannot operate in a vacuum. The timing of the package is wrong and its benefits will not percolate down to the poor labourers. It is primarily meant to bail out the industrialists.
The package for the construction industry announced by the prime minister is for builders – to enable them to recoup their stuck up investment; which is in any case small compared to the size of the project. This is because builders finance construction from deposits and advance payments made by those who have booked plots or flats. The package will bail the builders out for whatever investment is stuck.
The timing is again wrong. With near complete lockdown in every major urban centre and police pickets restricting movement, how will labourers, including architects, engineers, overseers, etc, come to any construction site? Thus, any expectation that construction activity will resume till lockdown conditions last is misplaced. The benefits of the package will not percolate down to the poor labourers.
Moreover, which investor will invest in a project under the present circumstances and with interest rates more than 10 percent higher than in Western countries? It is well known that the vast majority of buyers of plots/flats are property investors. Estate agents book multiple properties and their investments are now stuck. The decision to do away with the capital gains tax on sale of property is also aimed at rescuing them.
The property market is too distorted to benefit the middle class which cannot afford the speculative prices charged. And those who have invested their hard-earned savings have lost it, as builders raise the structure and then abandon any further work for years. Half built buildings dot the city skyline. And projects that are completed are pock-marked with leaking drain pipes. Recently built buildings are now collapsing, with loss of precious lives. So much for the quality of construction.
The shedding of crocodile tears for the poor is customary, but particularly inappropriate in the present circumstances. Which private sector builder has built housing for the poor or the lower middle class? Projects advertising luxurious housing with gyms, jogging tracks, swimming pools, etc are shameful for a country where two families share a room and sleep 20 to a room.
Moreover, almost everybody has a roof over their heads, howsoever inadequate. Housing conditions are certainly not perfect for the middle class and lower middle class – and worse for the poor. However, the immediate survival need for the people is not housing, but food and medicines. The policy package that is needed is to ensure that the supply chain for food and medicines remain open and functional. Construction can and should wait.
This is the time for the business community to shed their traditional self-centred pursuit of profits at the cost of social benefits. This is the time for them to extend their vision from their personal bank balances to the health of the national economy and the economy of the people at large. Now, there is nowhere to migrate to, there are no safe havens anymore. If our ship sinks, their first class cabins will sink too.
The writer was a member of the 7th National Finance Commission.