Former Finance Minister P. Chidambaram spoke rather prematurely. Preening himself to be the only intellectual among politicians, he often calls the Modi Government ‘ignorant’. He himself performed so well as Finance Minister that long after him the nation has had to pay huge costs in clearing the mess left behind in the banking industry. Any case, his charge that the Prime Minister’s huge economic package was only ‘headlines’ and a ‘blank paper’ is belied by Finance Minister Nirmala Sitharaman.
On two successive days, she has unveiled major features of the stimulus package, giving her critics something to chew on at leisure. Of course, how well these provisions do to boost growth and benefit the targeted groups will be known with the passage of time, but for now there is little to crib about the bonanza promised to MSMEs, NBFCs, HFCs, MFIs, salaried and self-employed classes and, above all, power discoms. Micro, small and medium entrepreneurs, the core of the industrial ecosystem, which employs majority of the migrant workforce, can access collateral-free loans. Through equity and debt support a package of Rs. 3.7 lakh crores is earmarked for it alone. Non-banking financial companies, housing finance companies and micro finance companies will have additional funds and easy liquidity. Real estate sector has been given additional time to complete projects and promised a further injection of soft credit. Even the availability of easy credit at lower interest rates is not to be sniffed at. The objective is to not only to make up for the loss of economic output during the lockdown period but to incentivise different sectors of the economy to grow at a fast clip. Removing the roadblocks in growth is not a small achievement, that is, if the tranche of incentives do succeed. On Thursday, Sitharaman focused on migrant workers, street vendors and small farmers. One universal ration card throughout the country was a long overdue reform. This should go a long way in alleviating the lot of the poor.
Even those without ration cards can now get cheap rice and wheat for the next three months. For migrant workers, a new rental housing scheme in urban areas is to be launched. Street vendors too can now access cheap credit. For small and marginal farmers a provision of additional Rs. 30,000 crores under NABARD is being made over and above the existing Rs. 90,000 crores already allocated. Increased enrolment under MGNREGA is made to allow migrants in their home States to avail of the scheme. Daily payment for MGNREGA work was already increased from Rs.182 to Rs.202. The first and second tranches of reforms to flesh out the announcement the prime minister made in his broadcast on Tuesday evening sets out in some detail specific provisions for different sections of the people. Whether they succeed in their objective will depend crucially on how sincerely these are implemented at the bureaucratic level. Whether banks will shed their deep reluctance and extend credit, as promised by the government, whether welfare schemes for workers, migrants, small farmers, etc., can be easily accessed by the intended beneficiaries will depend on changing the mind-set of the babudom in government and other institutions.
A supportive and sympathetic approach at all levels of the system is needed to put into effect all the measures being announced. On paper, all these sound excellent. Also, there is some concern about the source of the additional resources to be expended on the booster package. How the government will finance such gigantic spending without printing new notes, and will not risk the country’s ratings, remains unclear. Thus far, there is also no indication how the Centre will help the resource-starved state governments. It is all very well to create an impression of feverish activity to kick-start the economy but doubts remain about the last-mile delivery. We are not pessimists. But experience tells us to remain cautious since all the good intentions of the political executive come to naught at the implementation stage, because the permanent executive is hard to change under its skin.