1/n The NUMBER of transactions in the economy have come down.

That’s the core issue.

Liquidity is a necessary, but not a sufficient condition.

Liquidity is fuel, but we need to jumpstart the economy’s frozen battery.

Most of the the current 20B$ "package" is...

2/n Most of the the current 20B$ "package" is Monetary, where credit & timing of cashflows has been made flexible.

Cutting my TDS will not incentivise me to spend - I may not even notice it. It's my money anyway.

It doesn't thaw the demand "freeze" - doesn't make me transact.

3/n We need to STIMULATE demand.

Incentivise fearful consumers, who have been whipped by Covid to start consumption - as soon as the lockdown is over.

Demand has to be examined sector by sector.

4/n Can we incentivise people directly to buy cars in next 3 months, buy a mobike in next 60 days. Buy a house because buying it NOW is so attractive.

By directly I mean not just make interest lower.

Give a break on duties on a car. Give 100% depreciation on certain purchases

5/n Can we hand direct cash into hands of the consumers by creative mechanisms - many mechanisms exist to put money back in hands of taxpayers.

The real creativity is needed how to reach it to the informal, invisible workers who don’t fall into any “net” of the Government.

6/n Government needs to take the lead in SPENDING, so that it mobilises the engine.

MSMEs have a problem of Demand and Revenues. Of course, I need liquidity, but taking more debt is INCREASING my risk in the face of UNCERTAINTY.

7/n Demand FIRST and THEN the liquidity to SERVICE it.

Certainty of Demand/Income drives certainty of spending and borrowing.

Else the sentiment will ensure that consumers save vs. spend, and stay away from borrowing - shrinking the economy, which will cascade into more issues

8/n An earlier thread talks about how this Demand-Liquidity-Supply-Demand shock can spiral into a shrinkage.

That has to be stopped: https://twitter.com/hchawlah/status/1240542886069809152?s=20

9/n Give people reason to spend, and borrow.

Covid is given them reason to save and worry.

Stimulate incomes and certainty by stimulating demand. Government has to lead - spender of the first resort.

10/n Worry that we'll play all our cards on the monetary front and that will create a bad, broken bridge to the future.

What we need is DEMAND + REFORM which drives higher productivity, so that we can pay this pandemic bill tomorrow.

11/n I know it sounds crazy but we need some bursts in some sectors which are like: “here’s an order with a cheque” versus the broad, generalised “come apply for a cheaper loan”

Govt to behave like the spender of the first resort - get the whole value chain to start moving.

12/n Extending this since someone asked.

Economies grow as the NUMBER and QUALITY (value, variety, domestic or export) of transactions grow. Everything follows from that - taxes, welfare, per capita.

In this situation, we cannot get stuck on the point of moral hazards...

13/n It's a fight against nature.

It's Man vs. Wild.

The Government has to encourage transactions and become:

The Spender of First Resort, AND

The Lender of Last Resort.

14/n Examine each value chain - and its implications on transactions.

Example - maybe order a half million tractors, give them to farmer cooperatives under a 3-yr moratorium.

Auto, steel, iron and agriculture industry gets blood flowing again. Jobs get created all around.

15/n Maybe scrap old trucks and government passenger vehicles and recharge the industry. Maybe order thousands of buses to transform public transport.

Transactions will create taxes, create jobs and create wealth.

16/n Of course, remove FRICTION while doing it.

We have the entire, brilliant, Civil Services cadre who can mobilise these initiatives if they are empowered.

Can't fear of few bad apples hold up decisions and bind them in endless red tape.

These suggestions are directional.