Decoding Barbell Strategy

Budget 2020 had mentioned Indian economy's approach towards Barbell strategy focusing the shift from the conventional waterfall approach which had a number of shortcomings. So, what exactly is the barbell strategy and why India had to adopt the same. I read several articles on this topic but almost all of them used technical terminologies and hence were quite difficult to interpret. Therefore, this is an attempt to simply the concept.

During the pandemic 2020, there was a lot of uncertainty amongst the public as many people got laid off from their jobs, businesses doomed, along with paucity of medical resources . Hence, there was a need to address these problems in a strategic way which are conventional policy approaches couldn't mitigate.

Barbell strategy uses a combination of safety nets to which are placed in the most vulnerable sectors of the economy so as to tackle the challenges on a real time basis contrary to the waterfall approach which involves assessment of the economic indicators at the beginning of a period and assumes that this assessment more or less remains constant and accordingly plans implementation.

Barbell on the other hand is a hands-on method that takes into consideration the rapidly changing geopolitical, technological and environmental factors. 

So how did we implement it?

Firstly, prioritizing peoples lives over economic growth as that was most important! Several initiatives were taken one of which was 'Made in India' vaccines which was connected with PM's vision of Atmanirbhar Bharat abhiyaan 2.0. This included plans to privatize numerous sectors, the welfare of migrants, growth of the PPE segment ( personal protective equipment).

Next was PLI schemes for domestic manufacturers such as food products, telecom, automobiles, pharma etc. This was designed to give a boost to these industries. Further, the govt proposed to deregulate such as space , drones , increased FDI in defense sector, moratorium periods and asset monitization, building health infrastructure, making funds available for MSME's and the poor including migrant workers.

The strategy involved continuous monitoring of the information obtained and making required changes to the set plan of action . The possible indicators which were used to track the progress of this strategy was GST collections,cargo movements, digital outlays, satellite photographs etc. 

Some of the key initiatives undertaken

Economic stimulus packages announced to combat Covid

(Fiscal policy measures announced by the Centre after the lockdown was imposed.)

Atmanirbhar Bharat package 1.0

• Rs 3 lakh crore collateral-free automatic loans for businesses, including MSMEs
• Rs 20,000 crore subordinate debt for stressed MSMEs
• Rs 50,000 crore equity infusion through MSME fund of funds
• Global tenders to be disallowed upto Rs 200 crore
• Relief of Rs 1,500 crore to Mudra- Shishu loans
• Extension of Partial Guarantee Scheme to help NBFCs & MFIs
• Special credit facility to street vendors
• Housing credit linked subsidy scheme - MIG
• Additional emergency working capital through Nabard
• Additional credit through KCC
• Creation of agri infrastructure fund, animal husbandry infrastructure development fund
• Beekeeping initiative
• Viability gap funding scheme for social infrastructure projects
• Rs 90,000 crore liquidity injection for Discoms

Atmanirbhar Bharat package 2.0

• Rs 25,000 crore as additional capital expenditure to the ministry of road transport and ministry of defence
• Boost capital expenditure
• LTC voucher scheme
• Festival advance

Atmanirbhar Bharat package 3.0

• Rs 1.46 lakh crore boost for Atmanirbhar manufacturing production-linked incentives for 10 champion sectors
• Rs 18,000 crore additional outlay for PM Awaas Yojana (PMAY) - Urban
• Boost for Rural Employment
• R&D grant for Covid Suraksha - Indian vaccine development
• Atmanirbhar Bharat Rozgar Yojana
• Industrial infrastructure, industrial incentives and domestic defence equipment
• Support for agriculture - fertiliser subsidy
• Boost for project exports - support for Exim Bank
•  Source: Economic Survey 2021

Structural reforms announced in the last one year

(All reforms were introduced after implementation of nation-wide lockdown to curb spread of Covid-19 virus)

Agriculture

3 farm laws passed

• Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, 2020
• Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020
• Essential Commodities (Amendment) Act, 2020

MSMEs

• New MSME definition covering almost 99% of all firms enabling MSMEs to grow in size and create jobs
• Removal of artificial separation between manufacturing and service MSMEs

Labour

• Enactment of four labour codes namely, Wage Code, Industrial Relations Code, 2020, Code on Occupational Safety, Health & Working Conditions Code, 2020 & Social Security Code, 2020
• ‘One labour return, one licence and one registration'

Business Process Outsourcing (BPO)

Simplification of other service providers (OSP) guidelines of the department of telecom. Several requirements, which prevented companies from adopting ‘Work from Home' and ‘Work from Anywhere' policies have been removed.

Power

• Tariff Policy Reform: DISCOM inefficiencies not to burden consumers, progressive reduction in cross-subsidies, time-bound grant of open access, etc.
• Privatization of Distribution in UTs

Privatization of PSUs

• PSUs in only strategic sectors
• Privatization of PSUs in non-strategic sectors

Mineral sector

• Commercial mining in the coal sector
• Introduction of a seamless composite exploration-cum-mining-cum-production regime

Industry

• Production Linked Incentive (PLI) Scheme

Space

• Level-playing field provided to private companies in satellites, launches and space-based services
• Liberal geo-spatial data policy for providing remote-sensing data to tech entrepreneurs

Defence

• Corporatization of Ordnance Factory Board
• FDI limit in defence manufacturing under automatic route will be raised from 49% to 74%

 Source: Economic Survey 2021

To sum up, as stated by Mr Sanyal, Principal economic advisor, "The problem is that the real world is a complex and unpredictable place buffeted by all kinds of random shocks and unintended consequences. The response of traditional economics was to create ever more detailed plans/regulations, and elaborate forecasting models despite more than adequate evidence that this did not improve outcomes.