On Thursday, Finance Minister Nirmala Sithamaran announced a slew of measures to address and alleviate the economic hardship caused by the coronavirus. The measures follow a two-pronged approach: They are aimed at ensuring a steady supply of food and cooking gas, and second, easing cash woes of the vulnerable sections. These are welcome first steps. But, given the massive disruption in economic activity, even seen alongside steps announced by various state governments, the Centre’s cash transfers appear modest. The total outlay of the package has been pegged at Rs 1.7 lakh crore (around 0.8 per cent of GDP), though some of it has already been budgeted for under existing schemes.
To ensure food security, Sitharaman has announced that 800 million people will get 5 kg of wheat or rice per month free of cost, over and above their existing 5 kg allocation, along with 1 kg of pulses (per household) for the next three months. Given that food grain stocks with the FCI are well above the required norms, ensuring these supplies should not be a problem — though the extent to which migrant labourers are able to take advantage of this is uncertain. To ease cash flow woes, the government is banking on front-loading the first instalment of PM-Kisan. While using the existing infrastructure will certainly help speed up the process, this is not an additional allocation, but the implementation of an existing scheme. Rather than disbursing Rs 500 per month to 20 crore women Jan Dhan account-holders for three months, perhaps a better mechanism might have been to club this with the MGNREGA — given the element of self-selection, better targeting could have been achieved. The package also does not address the challenges being faced by unorganised/informal small and medium enterprises and other hard-hit sectors. This will be the third shock that the informal economy faces, after demonetisation and GST. As their revenue dries up, these businesses will not be in a position to pay wages. And as workers in the unorganised sector have no safety nets or savings to fall back on, the economic costs of an extended lockdown will be grave.
Given the long and arduous road ahead, the announcements on Thursday should be considered as only the beginning of emergency measures — they should be reexamined and reevaluated as the crisis plays out. The government must consider the option of a larger economic package. The authorities, including the RBI, should be prepared to intervene at multiple levels — providing regulatory forbearance, a moratorium on interest payments, changing classification norms, and ensuring easy access to credit. At the same time, questions must also be asked of the corporate sector. Where is the compassionate capitalism that is often spoken of here? Sure, some industrialists have spoken up to offer relief to their workers. But it is not even close to what is required. This crisis requires a societal response. It needs everyone to step up to it and to reach out to those who cannot.