Economic package of Rs.1.7 lakh cr. good but inadequate & short of expectations
By Pervez Bari
The Rs.1.7 lakh crore economic packages announced by Finance Minister Nirmala Sitharaman for the vulnerable sections is a welcome step but it is inadequate in quantity and is short of expectations. It works out to 0.8% of GDP. In the current circumstances anything under 3% of the GDP is totally inadequate. This too came after a delay of 15 days!
The financial packages are meant for farmers, women, construction workers, senior citizens, widows and the disabled. But it fails to cover all susceptible categories of the Indian society. However, the issue at hand is the urgency of monetary transfer to unorganised sector workers, who have not only lost their jobs and income, but also face a massive health scare. Bitter Truth: Many who have been hit still left out, relief too little
It would be wrong to call these fiscal support measures as some kind of a stimulus. The additional expenditure was required to provide a safety net for workers — a compensation for loss of income — so that it greases the machinery for them to buy daily need items, mostly food. The government’s stimulus can kick in only after the economy is unlocked, about which there is little certainty now.
The Central government’s packages, as it is, comes a week after Kerala first announced Rs. 20,000-crore support for its people. Many states including Uttar Pradesh, Uttarakhand, Punjab, Telangana, Rajasthan and Madhya Pradesh followed suit.
Meanwhile, there is no evidence that the government has a plan for unorganised sector workers such as dhobis, rickshaw pullers, barbers, rural labourers etc. even if they are registered with state governments. Neither for the construction workers who are not registered with states will be eligible. Workers in both these segments will not be eligible for any payout.
It seems that the government and the economic gurus are trying to avoid the middle class working people who have regular EMI to pay mostly by the 10th of every month. How is the relief fund going to help solve this issue? The major population which is the working class is not getting salary to pay for the daily expenses, how they will pay for the extra fine for late payment. It sounds like banks will enjoy an additional income in terms of mass fine for the non-payment of EMI. Surely Corona virus is in favour of Banks and money lending institutions. People are religiously following the guidelines of the government to stay at home but the government is not providing any notification to Banks that they should not impose any fine or waive the EMI which is easy mostly for the coming month.
It is intriguing to note as to why every catastrophe comes during BJP rule at the Centre?
Such as Tsunamis, Earthquake, Godhara, Demonetization, GST and many more have occurred while the saffron brigade is holding the reins of power at Centre.
Modi’s ‘Masterstroke’
One must ponder over Corona virus spread and Prime Minister Narendar Modi’s “Masterstroke”. In January 2020 Mr. Modi was found saying no need to fear. In February 2020 he said India will not be affected. On 17th March 2020 he charged Rahul Gandhi of spreading unnecessary fear among the masses. And finally on March 24th 2020 he abruptly declared 21-day Lockdown in the country.
It must be noted here that World Health Organisation, (WHO), in January 2020 itself had called Corona virus a public health emergency of international concern. Thereafter, on March 11, 2020 declared COVID-19 a pandemic, pointing to the over 118,000 cases of the Corona virus illness in over 110 countries and territories around the world and the sustained risk of further global spread.
Perhaps it would have been astute, at least for the duration of this Corona virus crisis, to set up a task force bringing together the skills of the Opposition parties. Sometimes you have to know how to dare, and open the eyes of the government majority. Indeed as Raymond Aron wrote: “The choice in politics is not between good and evil, but between the preferable and the detestable”.
Living in between war & peace
It looks like as if we are living in between war and peace. After the Delhi riots, the pandemic is like the last bundle of straw upon the camel’s back. How long should humanity remain indoors wearing masks? With Corona people seem to have forgotten everything like minority majority divide, representation of undeserving, communalistic preferences in delivery of quota, citizenship given to persecuted minorities etc.
Had a support programme for all unorganised sector workers preceded the lockdown, it could have just been possible for the government to make them stay back at urban centres, instead of exposing them to the risk of catching the disease and further infecting their families back home.
According to estimates by leading analysts, the 21-day lockdown may affect 4 per cent of annual GDP. It may also lead to spike in prices, but this is expected to be short-lived. That’s why, for now, the Centre’s fiscal support for the unorganised workers, who are estimated to contribute between 48 per cent and 56.4 per cent to the economy, falls woefully short of the requirement.
The way lockdown happened in India is the craziest thing. India is not USA or France. Mr. Modi claims he was a Chaiwala but how he didn’t get the issues of common people.
Die of hunger
One fails to comprehend: 1. how the 24% will survive who have to earn every day to be able to eat? They will die of hunger much before they may catch the virus. But who cares for the poor, maybe he thought a good way of getting rid of poor. 2. Around 5% of population from rural areas are working in cities. He stopped flights, trains and busses, how will these poor go back to their villages hundreds and some thousands of km away? 3. Social distancing is possible for a country where most people have a house to retire and have amenities to survive. Over a third of population lives in huts with no supply of water and sanitation. He suddenly stopped everything without a plan and what about those who have no house or who are caught stranded in another city with no money and place to go.
Mr. Modi must understand simply because he is invited to dine with G20 leaders India doesn’t become Japan or France. India due to its size the GDP may qualify it among top 20 but in fact as per the living standards and infrastructure it may not qualify in top 100. India has more hungry people than any other country in the world. A fifth of India is below poverty.
Awareness and buy-in are required for this lockdown to have a meaningful impact on breaking the chain of transmission. A family’s maid calling in to say that she would not be coming for next 21 days, reflecting on PM Modi’s address to the nation, suggests that awareness is not an issue. Janata curfew pointed to buy-in by the Indians for a day. Whether this is sustainable for 21 days is a big question. This requires addressing the anxiety of earning the daily bread and essentials. States can play a decisive role on the latter by preventing panic-buying and working with small and big retailers to maximize the gains of this lockdown and minimize the anxiety of the populace. It is heartening to see that Indian States are addressing the former through PDS and aid amount. More than Government intervention, the compassion from fellow Indians are going to be crucial to this buy-in. Payment of the salaries to their employees (maids, helpers, drivers, etc.), would go a long way in promoting this buy-in.
No Battle Plans for Covid-19 war
Prime Minister’s speech did not provide Battle Plans for the Covid-19 war except for the lockdown. Is this adequate? What about a holistic plan to track the virus & isolate it? What about starting of vaccine trials under license e.g. separate 3 to 4 trials in partnership with Russia, China, USA, EU Germany, Israel etc.? What about dedicated medicine trials similarly? What about using Indian Auto/Engineering industry to produce 1,000,000 ventilators; 10,000,000 masks? What about Liquor industry to produce hand sanitizers & disinfectants? What is the road map? What is the effect of Covid-19 on the economy; especially on the Banks, NBFCs etc.? Will Performing Assets remain above iceberg levels? Above 10%! Please recollect Naren Bhai & Co looted RBIs reserves (built over 70 + years) most recklessly, increased public debt by 50% & has put India back by 30 years.
It may be recalled here that the Reserve Bank of India (RBI) in August 2019 had decided to transfer a record high surplus reserve of Rs 1,76,051 crore to the government after approving all the recommendations of the Bimal Jalan-led expert committee, which was constituted to decide the size of capital reserves that the central bank should hold.
There is no denial that Covid-19 is extremely dangerous and spreading very fast. The best method to fight is to contain it and only way to contain it is by Total Social Isolation. And social isolation/lockdown was most effectively practiced by Chinese totalitarian regime in Wuhan. West is struggling to bring the message home, perhaps they may have to use force to make people stay home.
The issue in the Indian sub-continent is different because of acute poverty and a large population survives on daily wages can’t afford a 3 week quarantine. It is now for the State machinery to work at full throttle and maximum efficiency and be able to provide basic food supplies for survival. Do the government have the potential, the means and the commitment?
We are living in the age of internet and mobile world. Everything is mobile, moves at the speed of light. However, PM Modi has penchant to turn anything moving into complete stop or make it completely immobile. In 2016, he announced at 08:00 pm Demonetization which immobilised over 87 lakh crore rupees that affected entire work force in informal sector. The money has natural tendency to move or roll which is why every Rupee coin is round or circular in shape. After that disaster, in 2020, again at 08:00 pm he immobilised entire population of 130 crores for 21 days to face Corona virus.
The economic effect will be disastrous. India’s GDP growth rate is 5.2% of $2.6 trillion. That is addition of $135 billion in 365 days or ₹2,815 crores per day or ₹59,000 crores in 21 days. That growth rate will be zero or India will lose ₹59,000 crores in lockdown period.
President Trump, Mr. Modi’s good friend from the USA, just mentioned that he cannot let cure to be worse than the problem (disease) and informed Americans to lift all curbs within a fortnight. At the same time he announced special payment of $1200 per month PLUS $500 per child for next two months. That is, cool $2,400 per tax payer plus $2000 for his two children. His spouse will also get $2,400 in two months. That is, $6,800 per family as direct aid = ₹516,800 per family of four. This is in addition to unemployment allowance as entitled. In India there is no such compensation or unemployment allowance. Does Modi government ever think of consequences of its actions?
CoVid-19 la vintage Demonetisation
The mismanagement that Modi has exhibited during the course of CoVid-19 is la vintage demonetisation. This government has weakened the country from within through GST. They want to bypass the state through Direct Transfer, (DT). During a crisis, such as this, DT is useless. Centre has to rely on the states to help the people. Their partisan approach to government is a prescription for misery.
Even before the financial pack for the organised sector poor, it was possible to address the plight of homeless, jobless migrants in these trying times. Rather than push them to walk hundreds of miles to home, they could have been asked to report to nearest temple, mosque, church Gurdwara etc. with guidelines to these institutions as to how to help them maintain health regimen and social distance with support for food and sleep. Many more could be accommodated in stationary trains. But all this would go against the current government’s unstated partisan policy. Also if crowded countries like S. Korea and Taiwan could cope without lockdown, Government of India could have also examined their model.
Extraordinary situations warrant extraordinary measures. All is not lost. There is a silver lining. With the lower emissions, the environment is limping back to normal reversing the global warming trend. It would have saved trillions of dollars and years of global collaborative efforts among heads of states.
