New Delhi: After some delay, the Narendra Modi government announced a Rs 1.7 lakh crore relief package aimed at alleviating the hardship that India’s poorest are facing as a result of the COVID-19 national lockdown.
The economic measures that were announced by finance minister Nirmala Sitharaman include an extra distribution of five kg grain and one kg pulses under the public distribution system , cash transfers to the elderly (Rs 1,000) and women (Rs 500), free gas cylinders and increased wages under the National Rural Employment Guarantee Scheme.
While the relief package has been much awaited, economists and experts The Wire spoke to expressed caution over whether it would be enough to address the plight of millions of workers and impoverished households that have been hit hardest.
‘The Centre needs to do more’: Professor Jayati Ghosh, Jawaharlal Nehru University
This is just a very small first step, and it is clearly extremely inadequate given the magnitude of the problem. Remember that we are talking of a more or less complete cessation of economic activity, so that most people will have no choice but to draw down on their savings, and those without such savings will be destitute.
In macroeconomic terms, the total amount mentioned (Rs 1.7 lakh crore) is only around 0.8% of estimated GDP, and therefore as a fiscal stimulus it is tiny and will do little to counter the absolute declines in income resulting from the lockdown. In any case, this total is also the result of window-dressing, since existing schemes like PM-KISAN have been included even though amounts have not been increased. It suggests that the central government has no idea of the depth of the unfolding economic collapse. More measures and much larger amounts will certainly be required for the target groups mentioned, and also for other sectors.
Expanding PDS and MGNREGS
The demand to make free food grain available was widespread and it is a welcome move. However, it is not clear whether only the additional 5 kg of wheat/rice will be free, or whether existing allocations will also be free—the latter is what should be done. However, the government needs to be very mindful of the difficulty of ensuring adequate food supply and distribution during such a lockdown. It is not just the breakdown of transport links because of lack of clarity and confused implementation of lockdown orders; it is also that those producing essential commodities require other goods and services that need to be maintained to ensure production and distribution. Otherwise specific shortages may emerge in different locations, creating various other problems.
MNREGA wages are being increased by 12%, which would have happened anyway since the wages are linked to the CPI-AL. This is hardly a measure that should have been included in what is supposed to be an emergency package.
But this relatively minor nominal wage increase would anyway kick in after some time, whereas people are without wages and livelihood right now.
Given the need for physical distancing, MNREGA works may not be so easy at the district level – it is much better to just provide some incomes directly to workers during the period of the lockdown.
Cash transfers of Rs 1,000 and Rs 500 and the broader picture
These amounts are pitiful and even insulting, and really minute relative to the minimum requirements for survival. These amounts should have been increased by a multiple of at least five to be at all meaningful. Also, why give half the amount for women Jan Dhan holders? Why are they seen as deserving smaller amounts? The central government provides a pathetic amount of Rs 200 as widow/elderly/disabled pension – it should be increased tenfold anyway, and now would be a good time to do it.
In addition to this, I would have liked to see the Centre clear all its dues with state governments (MNREGA, GST, other dues) to provide them more urgently needed resources. Also, specific additional resources to provide shelters and community kitchens for migrant workers and other homeless and displaced people; and o enable the necessary expansion of health infrastructure to cope with the crisis and provide proper wages, protection and security to frontline health workers.
What should have been done is emergency cash transfers of Rs 7,000 per month for at least two months (April and May) to households in the NFSA database, to those registered with MNREGA, to those receiving Ujjwala, and then other deserving beneficiaries based on state government advice.
There is also a need for a moratorium on interest and tax payments until some weeks after the end of the lockdown, to enable businesses to recover from the closure – to be applied to small account holders and those taking small loans as well as small and micro enterprises.
‘What has been done for migrant workers?’: Reetika Khera, Associate Professor at IIM-Ahmedabad
A combination of in-kind and cash transfers was necessary to cope with this situation. I welcome the doubling of PDS entitlements for three months, as well as the addition of dal to the commodity bundle. It will protect people from inflation and hoarding that might result due to the lockdown.
The big miss here though is those stranded in urban areas, for whom community kitchens could have been set up. The cash relief is also disappointing for two reasons – apart from pensioners, the choice of the target group is ill-conceived, and the allotted meagre amounts are too niggardly.
On PDS increase and NREGA wages
Providing 10 kg per person per month (instead of 5 kg/person per month) for the coming three months will be a huge relief to the two-thirds of the population who are entitled to PDS grain under the National Food Security Act (NFSA). The government is dealing with a situation of excess stocks, with the next procurement season upon them at the moment. I think the logistics can be managed if the government allows the movement of trucks for these commodities, which they are supposed to do – this needs to be communicated better.
An important miss, which will not cost any money, but will be a huge relief to the poor is to stop Aadhaar-based biometric authentication at the time of lifting their grain. It is a source of exclusion and has been shown to have no impact on improving the functioning of the PDS. Aadhaar attendance was stopped for central government employees about two weeks back (due to risk of community transmission). Why not for PDS beneficiaries?
Every year around Feb-March, the central government notifies the increase in the NREGA wage. What special this year is that this year instead of a notification being issued, the Finance Minister has announced it.
In fact, there is nothing in the relief package for NREGA workers – you cannot expect them to risk their lives right now and work in groups. They should have been given 10 days worth of wages for the coming three months, instead of giving free cash to female Jan Dhan Yojana account holders (though some of them might be NREGA workers) – also what if one family has more than one female Jan Dhan account holder? There is likely to be duplication too. NREGA workers, on the other hand, tend to be the most vulnerable group in our society (such as the landless).
On cash transfers and the broader picture
The first claimants of any cash transfers should be old age pensioners, single women and persons with disabilities. Here, the government has got the target group right. However, the central government only gives Rs. 200/person per month as pension (states top up this amount because its so small). These should have been increased – giving Rs. 1000 is not just enough.
Apart from NREGA workers for whom there is no relief, the ones who are stranded in urban areas, or trying to get home have got nothing. Immediate setting up of relief camps with community kitchens – where the excess food stocks could have been used – was the most obvious thing to do.
We are all seeing images of people walking long distances along highways – one group walked 300km from Surat to Dahot – in the heat, penniless, hungry, with 10-month babies, sometimes being terrorised by the police. How could the government not have noticed this?
‘Delivery is key, more packages should be announced’: Madan Sabnavis, chief economist, Care Ratings
The finance minister’s package announced on Thursday must be viewed as the second in the series of measures to be announced by the government to address the negative impact of the COVID-19. The first announced was in the area of compliances regarding time lines, which were relaxed by three months to June. The same is being done now for the poor in what can be called the second package, which is again looking at a three-month horizon.
The outlay is to be Rs 1.7 trillion – around 0.75% of gross domestic product (GDP) and can be taken to be a fiscal stimulus. The variety of stimulus is, however, different as it is not for reinvigorating the economy but sustaining human life, which is the important goal given the disruption caused by the 21-day shutdown where several people have been displaced.
The package looks at cash transfers as well as delivery of goods, which is good for the poor. What has not been mentioned is whether this will be part of the Budget allocations, or beyond the same. If it is additional spending, it can trigger a slippage in fiscal deficit under constant conditions. The 5 kg scheme of food grains per month for three months is to be given free to every poor individual. This will impact 800 million people and would involve around 12 million tonnes of food grain (15 kgs for 800 million over three months), which is not a challenge given the stocks with FCI. Also, 1 kg per family would involve around 480,000 tonnes (3kgs for 160 million families). Pulses distribution, however, will be a challenge as there is no machinery present to collect them unlike rice and wheat which is procured by the FCI.
The challenge will be in delivery of the same which is always a challenge as the last mile connectivity tends to be weak. Further, the package has spoken of increasing the NREGA wage by Rs 20 from Rs 182 to Rs 202, which on the basis of 100 days of labour can give workers Rs 2,000 more. Here, too, the government has to strive to create projects and get people to work as experience shows that the average utilisation of the scheme has been around 50 days. But to the extent that the provision is there, agricultural workers would have to be sensitised to the same and ensure they make use of the scheme. The states have to pitch in with appropriate projects.
The package also includes insurance of Rs 50 lakh for all the healthcare workers who are involved in combating the disease which is very useful given the uncertainty of the disease and its impact. There are other announcements concerning reaching out to women, elderly, destitute etc, which will work to alleviate their suffering. The “Kisan” scheme in the Budget that gave Rs 6,000 per annum to farmers would be released with the first tranche of Rs 2000, is not an additional allocation but a frontloading of an already existing scheme.
The FM has not committed on whether there will be more schemes being announced by the government for corporate India that face a series of challenges. The present announcements have been directed to the people affected the most in terms of loss of livelihood, and hence, has taken front stage. Business, too, would be expecting something from the FM given that across the governments across the world have been announcing stimulus packages that go beyond 10 per cent of GDP to resuscitate their economies. There would be expectations of something more to be announced probably this weekend or early next week before the start of the new financial year.
‘Misleading NREGA wage figures’: Jean Dreze, visiting professor, Ranchi University
I welcome the measures related to the public distribution system, including doubling of foodgrain rations and inclusion of dal in the PDS. But I feel that the framework for cash transfers leaves much to be desired. For instance, the allocation for social security pensions is very stingy, and cash transfers would have been better directed at NREGA workers than PMJDY account holders. Overall, the measures are a step in the right direction, but inadequate. The budget estimates are padded, for instance by including some pre-committed items such as PM-KISAN and billing the release of excess food stocks at economic cost. The figure of Rs 1.7 lakh crore gives an exaggerated impression of what is being done.
Expanding PDS and NREGS
It will not be easy, but it is feasible. The system is in place, it is a matter of scaling up the distribution. One problem is that the private dealers who are running PDS shops in many states may try to take advantage of the confusion to siphon off some of the extra rations. To avoid this, it is extremely important to ensure that people are clear about the new entitlements. Distribution will have to be tightly supervised. Further, strict action will have to be taken against corrupt dealers, instead of treating them with kid gloves as normally happens. All the anti-corruption safeguards will need to be tightened.
Not only is it for work carried out [which is unlikely to happen], but this increase is nothing more than the routine annual wage increase on account of inflation that has already been notified on 23 March by the Ministry of Rural Development. In fact, it is less! Indeed, according to the finance minister, the Rs 20 increase will raise the average NREGA wage from Rs 182 to Rs 202 per day. But the notified NREGA wage for 2020-21 is already well above Rs 202 per day in most of the major states. The finance minister has badly shot herself in the foot on this. More importantly, there is nothing of any substance for NREGA workers in this relief package.
It should not even be counted as part of the COVID-19 relief package. NREGA workers get virtually nothing from it.
Cash transfers and broader picture
I did not exactly expect something higher, but I was hoping for it. The Central government’s contribution to social security pensions has stagnated at a measly Rs 200 per month since 2006. This is shocking, and the relief package was an opportunity to repair this injustice. Pensions should have been raised to Rs 1000 per month at least, on a permanent basis. Instead, pensioners are getting a one-off grant of Rs 1,000. This is very stingy.
I feel that instead of using the PMJDY list as the base for cash transfers, it would have been better to use the NREGA job-cards list, with larger monthly payments. The job-cards list consists mainly of poor households, and is fairly comprehensive. The PMJDY list includes a lot of middle-class households, some of them with multiple PMJDY accounts. It excludes many poor households. The job-cards list is also far more transparent than the PMJDY list. Aside from this, I would have liked to see measures for the urban poor such as community kitchens and relief camps for migrant workers who are unable to go home because of the lockdown.
(With inputs from Business Standard)