The relief package announced by finance minister Nirmala Sitharaman is welcome, to the extent that it is the beginning of pushing purchasing power into the hands of some of the most vulnerable sections of society to be hit by the Covid-19 pandemic and the resultant lockdown. However, it is incomplete and insufficient to either shield the poor, particularly the urban poor, or to provide a boost in purchasing power for industry. It would have been welcome if the government and RBI had together announced a comprehensive package of relief, rather than what would appear to be a piecemeal rollout of the proposed relief.
Transferring ex gratia payments to pensioners and women holders of Jan Dhan accounts would be effective.
The amounts could be larger. Dipping into superfluous grain stocks — 60 million tonnes against the buffer stocking norm of 21 million tonnes — to offer additional rations is the sensible thing to do. Raising rural employment outlays would help, after the lockdown is over. Offering greater collateral-free credit to women self-help groups is welcome.
Hollowing out the pension pot is not a great idea, however. The construction workers’ fund and the district mineral fund have large amounts of unutilised money, and it makes sense to deploy it, but strict guidelines must guard against wastage of funds. The offer to pay provident fund contributions might not be the best way to guard against layoffs, cheaper working capital would work better. The actual outgo from the government would be a fraction of Rs 1,70,000 crore. The US fiscal package, in contrast, is 10% of GDP.
The poor do not live in isolation from the non-poor. Just the opposite. The greater the dynamism of the non-poor parts of the economy, the greater the benefits that flow to the poor. This is why for six years on the trot, over 2008-14, rural wages grew in real terms, reducing poverty sharply.
During the Covid-19 crisis as well, the support offered to industry and other productive sectors of the economy would determine how the poor would be able to survive the crisis. This is the time to think big.