As India enters the fifth week of an unprecedented lockdown, factories remain largely shut, movement of people continues to be restricted and most economic activity is at standstill.
While such a stringent lockdown is a necessary bitter pill for India to flatten the COVID-19 infection curve, it has already decimated our economy.
Various international agencies have predicted vastly lower GDP growth rate for the just-concluded fiscal year (2019-20) and there seems to be little hope of any significant economic growth in the current fiscal, with large scale unemployment, a crash in consumption demand and idling factories becoming the new realities.
Tiding over the current crisis
Our vast population of migrant labour and numerous small businesses are in urgent need of a massive fiscal relief from the government to keep afloat. This expectation, of a big bang fiscal package from the government, is neither delusional nor selfish – governments around the world have either promised or already injected trillions of dollars into their respective economies to tide over the current crisis.
India’s Central Bank (RBI) has already stepped in with two sets of monetary relief measures so that the system has enough liquidity and banks are encouraged to lend to businesses, big and small. On its part, the government too came up with a Rs 1.7 lakh crore package through the Pradhan Mantri Garib Kalyan Package (PMGKP) on March 26. Under this scheme, foodgrain and pulses are being distributed by various states to ration card holders as per April entitlement. Besides, nearly 20 crore women Jan Dhan account holders have been given Rs 9,930 crore; another Rs 1,405 crore has been offered to aged widows, divyang and senior citizens; PM-KISAN payments have been front loaded and over Rs two crore building and construction workers have been helped.
Support for those who have lost incomes
But this is nowhere near enough. India’s migrants and businesses are still without succor as we continue to seemingly worry more about worsening fiscal deficit than reviving the economy. On the issue of income loss alone, the numbers are staggering. An analysis by the State Bank of India (SBI) estimated that there are 37.3 crore workers in India, engaged as self-employed, regular and casual workers. It said income loss for these workers due to the ongoing lockdown was Rs 4.05 lakh crore for the entire lockdown period and any fiscal package should at least strive to more than make up for this income loss. So in effect, any fiscal package being worked out by the government should exceed Rs 4 lakh crore in value.
Economists have suggested that not only should the government transfer a hefty amount to all the Jan Dhan accounts to help the needy, it should also do away with the need for ration cards and feed the hungry for free. These twin suggestions require sizable money from the government. The government repeatedly claims it is offering free food and rations to the poor and migrants who have been forced to reside in state facilities and will announce relief in tranches.
Protecting & reviving livelihoods
So even if one were to believe that the state is leaving no one hungry, there still remains the issue of protecting and reviving livelihoods. Unless the government devises a comprehensive program to do this, and soon, the already record high unemployment will surely rise further in the coming months.
According to the Centre for Monitoring the Indian Economy (CMIE), India’s employment rate fell from 40 per cent in February to 26 per cent in the week ending April 19, implying that 14 per cent or nearly 14 crore Indians comprising the working age population lost employment during the lockdown. This is unprecedented, to say the least. This is the size of the population which will need government hand holding to become self reliant again and job creation obviously requires the government to loosen its purse strings.
Incentives for the MSME sector
Then, small businesses which form the backbone of the economy are in a shambles. Over six crore MSMEs operate across the country (more than half of these are in the rural areas), employing more than 11 crore people. As the country went into a lockdown from March 24, MSMEs had to down their shutters. This meant crores of daily wagers and other informal sector workers were out of work and production of small equipment, spare parts for automobiles, small electrical fittings, packaging material has ceased. Any fiscal package the government may be devising should prioritise incentives for the MSME sector, since an overwhelming majority of India’s workforce works in the informal sector and in such small units.
Helping India Inc.
India Inc. too continues to expect significant relief measures from the government to go about its business in such challenging times. Industry captains have already sought a package worth at least Rs 10 lakh crore, involving significant tax breaks, tweaks in the GST regime, access to cheaper funds etc. The government would do well to heed to requests from a cross section of people and businesses and hurry up with relief measures. It is time to quit worrying over fiscal deficit and buckle up to save the economy from a prolonged downturn.
(Sindhu Bhattacharya is a senior journalist, writing on business and economy)
Disclaimer: The views expressed above are the author’s own. They do not necessarily reflect the views of DH.