Within 36 hours of the 21-day lockdown announced by Prime Minister Narendra Modi, the Union Finance Minister announced a slew of measures to avert economic distress that the COVID-19 pandemic would bring to many. The relief package announced by the Finance Ministry is hoped to bring equity; however, the delivery of the schemes appears dodgy at many levels. The success of it will depend on the extent to which the government can reach the needy.
As fear and uncertainty rise around the COVID-19 pandemic, the governments across the world are responding to contain this virus. Owing to the surge in COVID cases in India, Prime Minister Narendra Modi declared a 21-day lockdown. It was a bold move, albeit an indispensable one, considering the severe economic implications it entailed. Within 36 hours of the lockdown, the Union Finance Minister announced a slew of measures to avert economic distress that the pandemic would bring to many.
The key announcements made on March 26, 2020, included a total outlay of Rs 1,70,000 crore under the PM Gareeb Kalyan Scheme consisting of both Direct Cash Transfer and Food Security related measures. The Ministry has undertaken timely and good-intentioned measures aiming at the most vulnerable population hit by the nationwide lockdown, but many aspects are overlooked which can result in exclusion.
The fresh announcement on Direct Cash Transfer is set to benefit 8.7 crore Indian farmers. The path to reach these identified at-risk population, however, is crammed with inefficiencies. Last-mile connectivity, limited banking networks and financial literacy are to name a few. Although there has been a rapid provision of bank accounts (80 per cent) since the Jan Dhan initiative, the World Bank’s 2017 Findex database shows that half of India’s bank accounts are inactive. Having an account does not equate to access. Access to accounts, the next step to financial inclusion, is a goal that India is yet to realise.
Putting aside the concern over access for the time being, the
government’s identification of “poor households” itself is problematic when
there is an inevitable risk of pushing many households into poverty. Moreover,
the cash transfers declared to the construction workers also exclude many
workers not registered under the Building and Other Construction Workers Board
(BoCW). A lack of reliable statistics on the size of this sector adds to the
existing woes, putting many lives at stake.
Another point of concern is regarding the migrant workers. Urban and seasonal migrants risk being ineligible for welfare schemes due to the factors like residency requirement. PDS ration cards are linked to fair price shops and movement to another region requires a proof of residency that the migrant labourers cannot avail, which inadvertently will exclude them from the scheme.
Holding these factors into account, there is an air of scepticism regarding the execution of the scheme. In times like this, such inefficiencies become more pronounced. While it also offers an opportunity to plug the loopholes, it will come at a human cost.
The government also outlined plans for medical insurance cover of 50 lakh per person for doctors, paramedics and healthcare workers on the frontline for three months. At a time when the medical professionals and frontline workers are ill-equipped to care for COVID-19 patients, increasing the production of personal protective equipment should have been the priority. It is hoped that the government will take due consideration in expanding the production to ensure the workers’ safety.
The earlier measures announced by FM included expanding the threshold of insolvency filing to 1 crore from 1 lakh, extending the tax deadlines, etc. It provides some relief to the small and medium-sized enterprises facing the threat of defaults amid the crisis. However, more stimulus measures are expected for MSMEs to tide over the crisis.
At large, the government has directed its efforts to address the immediate concerns of the masses. The sectors such as Aviation, Tourism and MSME that are presently undergoing an extreme stress test are awaiting relief packages and relaxation from the Ministry to offset the losses borne due to the outbreak. While such crucial measures are needed in a crisis situation like this, the government should be conscious of the limitations in the system and act upon them to ensure that everyone is protected.
In all of these developments, another important point left unaddressed is regarding the source of money. How will the government finance these welfare schemes? Whether it is a redeployment of money from the existing schemes or fresh money pumped into the system, the matter is unclear. Perhaps, what is clear is that the lockdown is going to cost India dearly. It is a trying time for India, especially in the backdrop of an already slowing economy. With the outbreak, the country is in for a more difficult period of economic recovery where normal rules of the game will no longer apply. The government has to ensure that it will leave no stone unturned. Only a strong political will coupled with coordinated action can help us win this war against this virus.
Views expressed are personal and need not reflect or represent the views of Centre for Public Policy Research