Addressing the nation through his monthly radio show Mann Ki Baat on Sunday, Prime Minister Narendra Modi apologised for taking a drastic step to lockdown the country amid the novel coronavirus pandemic. He was quite right in justifying the tough step, saying the battle against COVID-19 is tough and it did require such harsh decision.
No one doubts the prime minister’s intent and the absolute necessity of the lockdown to prevent the country from going the way of some of the rich Western nations like Italy, Spain, France, Germany and US, which are reeling under a huge medical and economic crisis.
The pandemic has hit with a vengeance many developed and developing nations with more than 6.7 lakh confirmed cases and over 31,000 deaths. The case with India is not much different, though the total number of active COVID-19 cases have crossed 1,000 with 25 deaths, which are far lower as compared to the rich Western countries. India’s lower rate of confirmed cases is said to be mainly because of lower testing rate.
As of Sunday, just 35,000 people had been tested, according to data from the ICMR, a miniscule number given India’s population. However, the challenges India is facing are bigger with the entire economy under lockdown and thousands of daily wage workers and migrant labourers trapped in cities with no income and without food. T
he steps India has taken so far to deal with an unprecedented crisis in food shortage, joblessness, financial losses and economic shutdown are quite inadequate as compared to the developed nations. For instance, US has announced a $2 trillion relief package, over and above welfare spending to tide over the crisis.
Similarly, Britain has pledged over 350 billion pound stimulus over and above 65.5 billion pound aid that was announced earlier by way of grants, tax cuts and wages to mitigate the effects of the outbreak on the economy. But India hasn’t done enough and has taken a piecemeal approach to deal with the crisis.
The 21-day lockdown will hurt poor people the most and the economy even more, as a slowing economy will be paralysed in many ways. As supply chains break and movement of goods and services stop, economic activities come to a halt, impacting all kinds of production, manufacturing and services sector activities.
This has a cascading effect on supply, demand, consumption and wages, which affects salaried employees, daily wage earners, small vendors and workers in small and medium enterprises, thus curtailing their purchasing power. This in turn will have a big impact on manufacturing and big businesses across sectors, leading to massive job losses and a big fall in GDP. Thus the overall ramifications of a total lockdown are huge.
Of a particular concern is the plight of nearly half a billion Indians who earn daily wages and have no meaningful savings. It is for this reason that there have been huge expectations of a big stimulus package and an immediate lifeline to the poor in terms a minimum allowance and monthly rations.
Equally important are the expectations of an economic package for small and medium enterprises as well as industries to tide over the crisis. But the government has so far announced a relief package only for the poor and the hungry to counter the repercussions of the lockdown on their income and survival.
Under the Pradhan Mantri Gareeb Kalyan Yojna (PMGKY), Finance Minister Nirmala Sitharaman pledged 1.7 lakh crore to those directly and immediately affected financially. “We have come up with a package which will take care of the welfare concerns of the poor, migrant workers and those who need immediate help,” the finance minister said.
The PMGKY comprises of two measures: direct cash transfers to the poor and food security for 80 crore people over the next three months to avert a hunger crisis. In addition, Sitharaman also announced a small raise in MNREGA wages, three free LPG cylinders to Ujwala beneficiaries, an exgratia payment of Rs 1,000 for poor senior citizens, widows and physically challenged and Rs 500 per month for women Jan Dhan Yojna account holders for three months.
While the government’s immediate concern was about addressing the crisis of hunger which has been taken care of, though there are lot of concerns about its implementation, the welfare package for the poor could have been made more broad-based to include daily wage workers and migrant labourers who have been rendered jobless.
Reports suggest that there are over 30 crore daily wage workers, including migrant workers, who have no means of income for their survival in both urban and rural areas. Apart from ensuring food for the hungry, which has been the government’s first priority, the relief measures however, do not address the needs of the economy.
The size of the package is too small for the nation to tackle the impact of the shutdown in most sectors of the economy: manufacturing, services, hospitality, tourism, aviation, railways, retail, agriculture and so on.
While the relief package mainly takes care of food, it does not give any substantial relief to the poor because as long as the employers who give jobs to the poor are not taken care of or their businesses are not kept alive or rescued, the long term interests of the poor will not be served.
Neither do such piecemeal measures, apparently a result of lack of proper planning, serve the long term interests of the economy. It would have been better had the government come out with bigger measures as one big initiative which would have looked adequate and satisfying.
While the RBI has done its bit to minimise the economic damage of the pandemic with a host of policy measures which will ensure adequate liquidity in the financial system, the rippling effect of the 21-day shutdown, which might get extended if the situation does not improve, will be severe on the economy. Financial experts and economists have estimated a severe blow to India’s GDP. Moody’s has also cut India’s growth forecast for 2020 to 2.5 per cent from 5.3 per cent, which broadly affirms the estimates of independent financial experts and economists.
When the impact of the pandemic-related recession is likely to reduce GDP by 3 per cent, ideally the government’s relief package should have been at least of the same size. Instead, it is barely under 1 per cent of the GDP, against 10 to 15 per cent of the GDP in the US and nearly as much in the case of UK. The lesson for India is clear: lose the purse strings, be liberal with fiscal deficit and increase relief package at least three times. The writer is an independent Mumbai-based senior journalist.
