The Rs 1.7 lakh crore economic package announced by Finance Minister Nirmala Sitharaman for the vulnerable sections — farmers, women, construction workers, senior citizens, widows and the disabled — is less than 1 per cent of India’s GDP.
The issue at hand is not just the size of the package relative to the GDP but the urgency of monetary transfer to unorganised sector workers, who have not only lost their jobs and income, but also face a massive health scare.
The central government’s package, as it is, comes a week after Kerala first announced a Rs 20,000-crore support for its people. Many states including Uttar Pradesh, Uttarakhand, Punjab, Telangana and Rajasthan followed suit.
Even now, there is no evidence that the government has a plan for unorganised sector workers such as dhobis, rickshaw pullers, barbers, rural labourers, etc, even if they are registered with state governments. Neither for construction workers who are not registered with states. Workers in both these segments will not be eligible for any payout.
A decade back, the strength of the unorganised sector force stood at 47.41 crore, according to the NSSO’s Employment and Unemployment Survey, 2011-12. While the Labour Ministry does not keep data on migrant workers, the Economic Survey in the past had assumed it at 20 per cent of the total workforce. What is deeply worrying policy experts is the ability of the government to locate and deliver support to the migrant workers, many of whom were trekking hundreds of kilometres to their homes or lining up at shelters for a meal, even as the package was announced.
Union Finance Minister Nirmala Sitharaman.
Migrant workers are of two kinds: permanent and seasonal. March, in particular, sees large number of seasonal migrants because it is harvesting time, and not much labour is required now. Seasonal migrants keep moving continuously, from one place to another, in search of work. This has only exacerbated the problem.
Had a support programme for all unorganised sector workers preceded the lockdown, it could have just been possible for the government to make them stay back at urban centres, instead of exposing them to the risk of catching the disease and further infecting their families back home.
A back-of-the-envelope calculation of the money transfers that could be immediately effected following Thursday’s announcement shows that it adds up to Rs 61,380 crore over the next three months. Women Jan Dhan account holders: Rs 10,000 crore; Widows, elders, and the disabled: Rs 3,000 crore; Farmers: Rs 17,380 crore and, Building and construction workers: Rs 31,000 crore from the Welfare Fund.
The Rs 25,000-crore corpus of the District Mineral Fund is for augmenting and supporting medical facilities and testing, and not to be handed out as cash transfers.
The Rs 17,380 crore to be released for farmers is not an additionality – it is already budgeted for in 2020-21, but the government is front-loading the payment of the first tranche of Rs 2,000 (of the budgeted Rs 6,000 per farmer a year under the PM KISAN scheme).
Even the money for construction workers does not require the government to borrow extra. The corpus of the fund actually comes from a 1 per cent cess on the cost of construction and collected by states and UTs, as mandated under the Building and Other Construction Workers’ Welfare Cess Act, 1996. The states and UTs had collected Rs 45,473.1 crore and spent Rs 17,591.59 crore up to September 30, 2019.
The Rs 20-increase in MNREGA wages to Rs 202 a day doesn’t mean much since in many states works have been halted given the health scare due to spread of the Covid-19 disease and the subsequent total national lockdown since Tuesday midnight. Given that most states have seeded Aadhaar card details of MNREGA workers with their Jan Dhan accounts, the government could have made DBT transfers for immediate relief.
Those who opt for MNREGA are the poorest of the poor, and the best antidote given that they cannot find work for at least three weeks, could have been to credit their bank accounts with at least wages for 15 days — approximately Rs 3,000 per worker. This could have been reviewed mid-April, and additional transfers made.
Of the total 13.65 crore job cards, an estimated 8.22 crore are active. A payout of Rs 3,000 each (active) would have meant less than Rs 25,000 crore and Rs 41,000 crore if all had received it.
Did fiscal constraints bind the Finance Minister in expanding the financial package for the unorganised sector workers?
This argument can hold good when any additional borrowing by the government may adversely affect the borrowing prospects of the private sector. Called the crowding out effect, this hurts private sector when demand in the economy is robust. In India, private investment has been sluggish for six years now on the back of a series of disruptive events such as demonetisation, GST, bad loan pile-up in banks, and the NBFC liquidity crisis.
It would be wrong to call these fiscal support measures as some kind of a stimulus. The additional expenditure was required to provide a safety net for workers — a compensation for loss of income — so that it greases the machinery for them to buy daily need items, mostly food.
The government’s stimulus can kick in only after the economy is unlocked, about which there is little certainty now.
According to estimates by leading analysts, the 21-day lockdown may affect 4 per cent of annual GDP. It may also lead to spike in prices, but this is expected to be short-lived. That’s why, for now, the Centre’s fiscal support for the unorganised workers, who are estimated to contribute between 48 per cent and 56.4 per cent to the economy, falls woefully short of the requirement.