Tackling economic distress

Kashmir Times. Dated: 5/20/2020 12:37:26 AM

NDA-government’s response to the economic distress caused by Coronavirus crisis needs to be bolder than mere announcements

The BJP-led NDA-government does not appear to be serious in tackling the economic crisis caused by the Coronavirus in the country if the announcements made by the Finance Minister Nirmala Sitharaman over the past few days are to be believed. The measures announced in the past few days have been underwhelming and the economic package of Rs 20 lakh crore announced by the Prime Minister Narendra Modi does not come up to the expectations of the people. Either the NDA-government is not serious or it is totally clueless about the scale of the economic distress caused by the pandemic so far. As the figures stand so far, the actual and immediate financial outgo works out to be just one percent of the Gross Domestic Product (GDP) which amounts to be a pittance to alleviate the distress unfolding across the country. The economic crisis of this magnitude should be tackled at multiple levels that should include relief to the most vulnerable, support to the specific sectors, short to medium term measures to boost demand, and structural reforms. They are not only to be formulated but also implemented in different stages over the next few years to provide much needed succour to the vulnerable and marginalised sections of the society. But, so far, the government’s response has centred around only providing some relief measures, extending liquidity to certain sectors, and stating its intent to push through contentious pieces of reform. Direct demand-side support has been minimal if the announcements are to be considered at this stage. This signals a disappointing under-appreciation of the risks to the economy. In fact, the planning of the reforms and compensation to the vulnerable sections should have begun in March itself when the first lockdown was announced haphazardly by no less a person than the Prime Minister himself giving only four hours notice to the citizens, which did not mean anything for the migrant labourers and the industrial workers in the informal sector.
The announcement of measures to alleviate the suffering of the vulnerable are too little, and in many cases, too late. The provision of foodgrain through the public distribution system and its expansion is welcome. But the delay in pushing through the portability of benefits is not. By the central government’s own admission, this process will take months or may be more than that. A better alternative would be to universalise the PDS temporarily so that the workers not carrying any papers with are benefitted without any discrimination. Cash transfers of Rs 500 are simply inadequate to tide over this crisis. The measures to provide support to income to the unemployed or out of employment persons could have been utilised in a better way. And while increasing allocation to MGNREGA is the right step, the number of days of work provided should also have been increased. While government finances are constrained, adherence to fiscal conservatism at a time when governments across the world, even those ideologically committed to conservatism, are loosening their purse strings, is a let-down. Considering that, of the four engines of growth, only government spending can drive economic activity as this stage, this was the time to ramp up spending. On the question of reforms, the announcements so far mostly spell out the government’s intent but not the implementation. The issues that have been on the policy agenda for years, the details of what is being worked out, and how, should have been sorted out by this time. The developments so far only suggest that the over 50-day lockdown period has not been effectively used by the government to firm up its plans. As this health crisis is likely to play out over the coming months, there is an argument for the government to keep the power dry — for the unknown issues that are yet to emerge. This pandemic has led to both drying up the demand and supply. In view of the scale of disruption, far greater policy support is required than has been visible over the last five days.

 

Video

Indian History... Read More
 

FACEBOOK

 

Daily horoscope

 

Weather