Layoffs of construction staff that could arise as a result of the housing slump can be compensated by providing civil construction jobs in new infrastructure projects promoted by government. Urban development projects are particularly good for this purpose as they can mop up workers and contractors left idle by the slow down of private housing projects. Several projects under Jawaharlal Nehru Urban Renewal Mission (JNNURM) are prepared and ready all over the country. Approximately a hundred projects submitted by the state governments are pending approval by the government of India. All these projects should be approved and appropriate grants released. Civil work is also available on irrigation projects in many rural areas.As in JNURM, all that is needed is additional allocation and immediate fund release.

There is also a strong case to introduce rural works programmes for developing high quality internal roads on the Gram Sadak Yojana pattern in bigger villages. This expansion of the Gram Sadak Yojana programme can be easily undertaken as the second phase of Bharat Nirman. By extending the quality of roads into the larger villages, we will be encouraging big investments in rural areas and making our villages as attractive to their residents as urban areas.

The federal nature of contra-cyclical policy has not been addressed in the stimulus package. State governments who experience contractions in tax and other revenue during the recession are likely to compensate by raising taxes and curtailing expenditures (particularly since they cannot print money and must get their borrowing programs approved by other authorities). The budgetary policies of the Centre and the states must be aligned. State chief secretaries and development commissioners should be educated and convince them about the need for coordinated budgetary action to prevent increase in state tax rates and drastic cuts in their expenditure and recruitments during the crisis period. State borrowing programs should also be reviewed and increased.

... contd.