Economy

India Should Stop Kidding Itself and Prepare a Much Bigger COVID-19 Package at the Earliest

Some easy financial maneuvering would allow us to enhance the relief package's size to $80 billion.

What are the immediate priorities for India amidst the devastation caused by the COVID-19 pandemic? Save lives, boost healthcare, and prevent economic disaster.

All of this requires a massive injection of funds. So far, a paltry 0.75% (Rs 1,70,000 crore) of GDP has been announced in the form of an economic package. This is far from what is needed — the Indian economy needs support and stimulus to the tune of Rs 5,00,000 crore to tide over the crisis.

While this might seem like an eye-watering sum, it is entirely possible. How can it be achieved?

Firstly, cut expenditure where it is possible. This includes curtailing Centre’s establishment expenditure (Rs 6,09,000 crore) by 25%, reducing defence expenditure (Rs 3,23,000) by 20%, slashing  pension expenditure (Rs 2,10,000) by 10%, scrapping the bullet train project and shelving the revamp of Parliament House, India Gate and the Central Vista area.

With this curtailment of expenditure, immediately Rs 3,17,000 crore would be generated (1,52000 + 64,000+ 21,000+ 60,000 + 20,000).

The COVID-19 financial package would then become Rs 4,87,000 crore (1,70,000+3,17,000) which is only 2.2% of GDP. I have assumed a savings of Rs 60,000 crore for scrapping the bullet train project and another Rs 20,000 crore for shelving face lifting of Lutyens Delhi.

Also read: The Emperor Has No Mask: The Indian State in the Time of COVID-19

America’s corona package is 10% of its GDP. Other countries afflicted with the virus have allocated much more than India. Why are we so stingy to spend?  The corona fire has to be quelled. If we don’t spend now, when shall we?

When the house is burning, do we wait for distilled water to extinguish the fire? Even polluted water can quell fire as effectively. Let’s not wait for a rosy fiscal day. Let rating agencies not scare us. Posterity will never forgive us if we don’t act now.

All the above measures would not impact India’s fiscal deficit. The projected fiscal deficit of 3.56% for Financial Year 2020/21 would remain the same except the additional Rs 1,70,000 crore already announced (this too not fully as some of it the package is budgeted expenditure that is merely front-loaded).

These measures would entail only one-time slashing of non plan expenditure and diverting it to a one-time COVID-19 package. After the current financial year ends, originally proposed expenditure may be restored.

In fact, it would be desirable to increase the fiscal deficit by half a percentage point, which would yield an additional Rs 1,12,000 crore, to be channeled towards the COVID-19 package. The total package would then become Rs 5,99,000 (Rs 4,87,000 + Rs 1,12,000) crore, which is 2.7% (2.2+.5) of GDP. This will increase the fiscal deficit this year to 4.81% (3.56+0.75+0.50).

It is unfortunate that the Government does not seem to have realised the enormity of the economic fire fighting exercise that has to be undertaken. For a $3 trillion economy, with annual central expenditure of $400 billion, to have announced a $22 billion relief package is grossly inadequate. The suggestion above would enhance it to $80 billion.

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Amid this dismal situation, now, another PM CARES fund (in addition to PMNRF) has been created to garner private donations. How much funds will this newly created public charitable trust mop up? A maximum of $3 billion? Not even that, perhaps.

Is this not merely optics? Where is the sense of proportion about the enormity of the economic challenge ? Besides this, nothing prevents private parties from donating voluntarily, which they are doing in any case.

What was the need to duplicate a PM fund and implore upon private parties to spend instead of government spending even more when it needs to spend massively?

The aftermath of the COVID-19 pandemic has hit India’s poorest the hardest. The plight of migrant workers bears ample testimony to our collective insensitivity. There is no option now but to plan out an Universal Basic Income (UBI) for the poorest. Total annual expenditure of Centre and states combined in India is now hovering in the range of approximately Rs 75,00,000 crore.

Even if 4% of this is earmarked annually, then Rs 3,00,000 crore can be spent annually towards UBI. Therefore, on average, 30 crore of our poorest can earn an annual income of Rs 10,000. Why can’t we implement this, come what may ? It would have to be a joint venture between the Centre, the states, and those who are a little more fortunate than the poorest. No politics of caste, creed, or religion should creep in.

Governance and ruling means spending someone else’s money. That’s very easy but allocation thereof requires wisdom and political will. Will COVID-19 pave the way for a united politics of India?

Bishwajit Bhattacharyya is a former additional solicitor general of India and a senior advocate in the Supreme Court.