The period of expected economic slowdown and ongoing livelihood hardship for the lower-to-middle class income group amid COVID-19 outbreak and semi-lockdown scenario places the government in a formidable position of choosing the right intervention approach to support the economy and the vulnerable class. Meanwhile, the budget declarations that were recently made by the government at the beginning of the new fiscal year was a crucial time that exhibited or hinted its decision regarding the choice of interventions that it saw as being most appropriate.
Regardless, the intensity of the inertia generated in the economy and the business sector as the result of the public health crisis and lockdown measures enforced by the government certainly demands more installment of interventions in order to return the economy to normalcy and make it adjustable to permanent structural shifts geared by the pandemic. On such note, the discourse regarding the sort of government intervention that can be effective to return affected industries to its foot and also set course for prosperous future is relevant and sought. And therefore, whether the government should invest in expanded government spending on capital or allow the wave of deregulation across all industries as the right intervention to be taken is definitely a million-dollar question.
Of course, the jaw dropping amount recently pledged for infrastructure spending by economies across the world as part of their stimulus packages to solely recover the economy from the effect of pandemic might make it attractive to follow the global order and choose the spending approach. In fact, modern history also shows expenditure-based stimulus packages of the government to have worked satisfactorily in boosting the economy at a short-period of time after an economic slowdown or global recessions. But, would that intervention approach based on expanded government spending have similar affect for the Nepalese economy founded upon its unique political economic structure? It is doubtful!
It is doubtful not because the government induced infrastructure spending program may not reflect on the economy and trickle down until the vulnerable class of people. It is doubtful because the government infrastructure spending program may not be materialized timely in order for it to inject momentum in the economy. And, this accusation of spending ineffectiveness builds over the historical observation that finds government to have performed poorly in terms of executing its infrastructure projects or mobilizing the budgets allocated for capital expenditure.
Instead, unlocking the wave of deregulation across all industries as the intervention approach could not only be the momentary impetus for the wounded industries to return to operation, but also can set course for the progressive growth of the economy beyond returning to normalcy. As such, expediting deregulation that concern business establishment, paying taxes, and operational standards can encourage more businesses to be set up also in unchartered areas, and promote the much-needed culture of self-employment through entrepreneurship.
In fact, deregulation could also be the most effective resolution to tackle expected surge in unemployment that the economy is likely to witness as significant number of migrant foreign labors are returning (i.e., the structural shift) with no arrangements or plans to engage in income-generating activities at home. By enabling them to easily start and operate businesses, such returned foreign labors can also more easily be absorbed in the economy whilst most of them are expected to have gathered certain technical skills and knowledge during their tenure of foreign employment that they can salvage through entrepreneurship. As such, deregulation packages also targeted at returned foreign labor could be the most effective measure to shorten their period of frictional unemployment than any government funded employment welfare programs often mired in bureaucratic red tape.
Hence, the current economic instability caused by the pandemic is not entirely an unfortunate event for the economy. Instead, it could be an opportune period to unlock wave of deregulation measure across all industries to set course for progressive industrial growth. In fact, to encourage the culture of entrepreneurship and finally obliterate the longstanding problem of structural unemployment haunting the economy.