There is a distinct feeling of let-down about the earth-shaking promise of Rs. 20 lakh crore economic salvage package. How we wish the Prime Minister had not hyped it so high that a feeling of let-down was inevitable — even if the actual package was really good. Which it certainly is not, actually not even half-as-good as the people had expected.
Modi has to know that people are not fools, they have feelings and they can discern things for themselves. Even if the central concern was to protect the already pressured fisc, denying actual financial assistance to those in real need, namely, the BPL component of the population, would have helped them tide over the complete loss of incomes due to the lockdown. There is hardly any significant cash component, major economies had packaged their post-pandemic offerings with outright monthly payments to their citizens and businesses to cushion the blow of abrupt economic disruption. Without incentivising demand, the supply side generosity can hardly help pull the economy from the boondocks where most experts are convinced it may be headed now. That the Rs 20-lakh crore package has left most people feeling cheated is beyond doubt. Witness the sullenness of the markets. On Monday, after chewing over for five consecutive days Finance Minister Nirmala Sitharaman proposals meant to flesh out the package Modi had announced on May 12, stock markets gave a huge thumbs-down. Offering loans on easier terms even without a collateral is not the recipe for the current economic crisis. The micro, small, medium enterprises can have no use for easier credit in the absence of demand for their goods. The key lies in spurring demand. With no surplus money with the consumers, with key sectors of the economy such as real estate, automobile, consumer durables, capital goods, etc., in the grip of slowdown, the package needed to put money in the hands of consumers. Instead, it dangled the promise of cheaper bank loans. Even before the package, there was too much liquidity sloshing around in the economy without any rise in demand for credit. At least, at the very minimum the government should have launched a version of the uniform basic income scheme for those below the poverty line. Such money in the hands of the people would have also helped boost demand since the poor are unlikely to save the money. Besides, it would have avoided to a large extent the horrifying spectacle of millions of migrant workers walking back to their villages. Fear of the fisc going sour so immobilised the planners they missed a great opportunity. Doubtless, the package contains a promise of far-reaching policy reforms, and, if taken to their logical conclusion, these are most welcome. But it failed to address the immediate coronavirus-induced crisis of lack of income with the poor workers, especially those in the informal economy. Transformation of the agri sector by ending the monopoly of the agricultural produce market committees, opening up of hitherto reserved sectors to private, domestic and foreign, investment, selling off deadweight public undertakings, etc., were long overdue reforms.
But what was missing in the Rs. 20 lakh crore package was the sight of actual cash in the hands of the poor and the needy. Maybe, the Prime Minister will soon make amends.