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Economic package is welcome, more needs to be done

By DM Deshpande

At last the Finance Minister has come with a package which could bring relief to millions of Indians who are at the lowest strata of the society. The announcement of Rs.1.7 lakh crores appears big but looking at the enormity of the challenge majority of countrymen face there is a doubt whether this is enough.

  The principle idea behind the measures is that no Indian should go hungry during this period of complete lockdown of three weeks. This is notwithstanding the fact that millions of poor go to bed with hungry stomachs in India even in normal times.

  In order to alleviate hunger and deprivation, included in the package is free supply of additional 5 kg of rice/wheat and one kg dal per person  in the next three months. This according to the government will benefit 80 crores people through country wide PDS. This is a good move as there are huge stocks of food grains with the government- nearly 585 lakh tons of  wheat and rice against the mandated buffer stock of 241 lakh tons.

  The carrying costs of these stocks itself is quite high. If it can be delivered to feed the poor it would indeed be a commendable job. Much depends on implementation; PDS has not exactly covered itself with glory in the past. Given the logistics challenges at present, it has task cut out for itself.

  In a significant measure, all women Jan Dhan account holders will get Rs 500 per month for next three months. This will cost Rs 30,600 crores for 20.8 crore women with Jan Dhan accounts. Since the informal sector is all but collapsed this is a better method of quickly putting money in the hands of women. Two quick points may be made. One, the amount could have been higher considering cost of living and extraordinary circumstances that prevail now. Second, in a more inclusive move, all Jan Dhan accounts, a little over 38 crores could have been given the benefit. The otherwise positive discrimination may not actually be beneficial to the poor now.    Under MGNREGS, adult member of every household gets 100 days of work if one is prepared to undertake unskilled manual work. Per day wage is currently Rs 182 which has been hiked by Rs 20. So, this will generate additional Rs 2,000 income per year. However, under this social security scheme, on an average only 47.2 days work/wage was given in 2019-20.

  In poorer states, the number of days will be lesser than the average. Even now the government can mandate higher number of working days that can be allocated to a household.

  Package includes payment of EPF by the government for the next three months. It is applicable to firms that employ less than 100 employees and draw a salary of less than Rs 15,000. Perhaps the objective is to incentivize retention of workers by small firms. But a better method would have been to ensure adequate working capital at competitive rates.

  There is already an ongoing PM Kisan Yojana whereby farmers owning land will get Rs 6,000 every year, Rs 2,000 installment will be released immediately and credited to beneficiary accounts. Here again the government could have released two-three installments that would have helped farmers to tide over the current crisis. Issues of logistics during lockdown will mean huge losses to farmers. Post lockdown too the price scenario is not bright for farmers due to bumper crop, large grain holdings with FCI and possible recession globally.

  Though the Finance Minister took some time, the package is comprehensively devised. Total 800 million beneficiaries are identified upfront. Probably for the first time, government has gone beyond ‘below the poverty line’ bench mark to include a very large section of the poor. The RBI too has come out with its set of monetary measures to fight the virus hit economy. Had both RBI and the Finance Minister combined and announced fiscal and monetary measures together, it would have probably created a big bang effect. But given the constraints at this point of time and the enormity of the situation, substance is what matters more than the timing or the strategy.

  At the time of writing, official line is that there is no community transmission. This is notwithstanding the fact that numbers of those tested positive have gone up significantly in the last week.

  Besides following all the instructions, there is little one can do except pray and hope that the virus spread does not replicate EU. The USA has announced a US $ 2 trillion package, the largest in history. Perhaps, we may take a cue or two from it to make our package bigger. More importantly, it has laid out a detailed plan for helping out SME’s. Our small businesses deserve a better deal; they are also passing through a worst phase which is not their making.

The author has four decades of experience in higher education teaching and research. He is the former first vice chancellor of ISBM University, Chhattisgarh.

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