The two important decisions with financial implications which Union Finance Minister Nirmala Sitharaman announced on Sunday as part of the government’s COVID-19 relief package are the plan to release an additional Rs 40,000 crore for MNREGA and the enhancement of the states’ borrowing limit from 3% to 5% of the Gross State Domestic Product (GSDP). The usefulness of the first is limited by practical problems, as MNREGA is never effectively implemented in states where it is now really needed to be implemented. As much as 75% of the additional borrowing that states can make is conditional, and they cannot access it now when they need funds. The plan for higher expenditure on public health and to set up more hospitals, wellness centres etc, is for the future. The increased use of technology in education and the e-learning initiatives are needed and are welcome, but the minister has not mentioned their cost to the government.
The most important announcements, both in the fourth and the fifth editions of the government’s package, are about policies and reforms to be pushed in future and not about relief to be given to the people now. These decisions are basic and structural, will change the nature of the economy and can well be considered as part of the three-decades-old liberalisation process. All the sectors of the economy are to be thrown open to the private sector, and the public sector will exist only in some strategic areas where too its presence will be limited. Privatisation is the dominant theme of the government’s economic policy now, and this was clear even in the fourth tranche of announcements on Saturday when major sectors like coal and minerals, defence, civil aviation, power distribution and space were thrown open for greater private sector role and participation. These have been considered till now as economically too important, sensitive and strategic to have any significant private sector presence. The commanding heights are changing.
There may be merit in the new thinking and the government has the right to move in new directions. But it is wrong to present a policy package on reforms in the garb of COVID-19 relief and an economic stimulus. There is little in the serial announcements made by Nirmala Sitharaman that will help the distressed industry, big and small, the farmer in the field, the common man locked down at home and the migrant worker on the streets to cope with the situation here and now. Even after strenuous explanations from the minister, the Rs 20 lakh crore package remains unconvincing, misleading and deceptive.