COVID-19: Economic package for poor is incomplete

Arun Kumar

Malcolm Adiseshiah Chair Professor, Institute of Social Sciences, and Retd. Prof. of  Economics, JNU

The much awaited economic package for the poor has not come a day too soon since the poor face a far grimmer than was imagined by most. It is to be welcomed that the poorest and the farmers are being provided support under a package which is worth Rs.1.7-lakh-crore. This is for the next three months and perhaps more will be allotted if the situation does not normalize. 80 crore people will get grains and lentils. Workers under MGNREGS will get increased wages and farmers under the PM Kisan scheme will get an immediate installment of the Rs. 6,000 promised to them annually. Senior citizens, women, and workers in the organized sector are all to be given relief in different ways. 

Not all of this is from the budget or fresh allocation so the budgetary implication will be less than what the figure of Rs.1.7-lakh-crore suggests. For instance, some money is to come from the EPFO, Provident fund, Central Welfare Fund and the District Mineral Fund. This is welcome but perhaps more needs to be done since the loss of income of the people being targeted is far greater than the sum being offered to them. 

If the rate of growth falls by say 10%, and given the lock down it could be even greater if it persists, the loss of incomes in a year will be about Rs. 20-lakh-crore and 45% of it will be the loss of the unorganized sector. So, broadly speaking the loss for the poor would be about Rs. 9-lakh-crore in a full year. Thus, much more allocation would be required to maintain the unorganized sector in the state of poverty they were in before the crisis. The only thing one can say is that the package will help them to survive, if implementation can be guaranteed.

The FM repeatedly clarified that this is only for the marginalized and not for businesses. Why this is important is that Rs.1.7-lakh-crore is 0.85% of the current year’s GDP of about Rs. 200-lakh-crore. This seems negligible in comparison to the US package of $2 trillion which would be about 10% of their GDP. But that package is for the full year and not just for the poor but for everyone, including businesses. So, it is not comparable to what has been now announced in India. But the US package was worked out with bipartisan support of both the ruling party and the opposition. 

In India too we need the ruling party and the opposition to work together. Whatever is announced has to be implemented in the States and many of them are ruled by the opposition parties, so they need to be on board. Given the poor state of governance in the country, implementation of what is announced depends on the state governments. They should all work together. That would enable a more complete package to be drawn up, keeping in mind the need to prevent the situation from deteriorating and taking State level specificity into account.

In India, with very limited testing, we do not know how many people are already infected and where they are. Large numbers have gone from urban to rural areas since they have lost work and have little to eat. If these people have already contracted the disease, they would spread it wherever they go. With rural areas having limited health facilities, the problem could turn acute.

We need to anticipate and prepare ourselves for the likelihood of a rapid spread of the disease, as it has happened elsewhere, where testing was limited to begin with. So, an immediate package on health is required. After all, this is above all a health emergency along with an economic one. Testing has to be rapidly scaled up and that too free so that the poor come forward to get themselves tested. At Rs.4,500 per test, the poor will hardly come forward for testing. 

Secondly, facilities should be planned for isolation of the patients. Plans should be put into place to rapidly convert hostels, hotels, community centres and so on into isolation wards and hospitals. Thirdly, there would be need of equipment and protective gear and its increased production should be put into motion now by asking specific factories to ramp up production of these items. Fourthly, since there would be medical manpower shortage so medical students and student of nursing should be trained to act as paramedics at short notice. Also, retired medical professionals should be invited to make themselves available if the need arises.

Farmers are another category that need greater support and that may have to be different from the one being promised, namely, the immediate release of Rs. 2000 under the PM Kisan Scheme. The Rabi crop is likely to be a bumper one and it is now going to come into the market but trade and transportation is severely disturbed. So, the farmers may either not be able to sell or sell at a low prices. Thus, their income could fall substantially, like, during demonetization. So, the support they would need would be much larger. Alternatively, the procurement scheme should be expanded so as to bring in many more crops under it. This could be distributed to the consuming centres via an expanded public distribution system.

This would neatly dovetail into the need to supply basics to the urban populations so that they do not come out in large numbers to buy essentials. If they do, the purpose of lockdown would be defeated. This would be a herculean task but it is required. Public transport has stopped so a large number of buses are available to perform this task in each city. There are also a large number of buses at the airports. With the help of the police and army, equitable public distribution should be ensured. This would also curb malpractice in trade and profiteering by traders.

In brief, the package announced is welcome but more needs to be done to take care of the poor who are facing a challenge of survival given the huge loss of income they are suffering. A package on health, procurement and public distribution is also crucial at this stage. This is not just a financial challenge but also an organizational one, given the poor state of governance.