Though the PM Garib Kalyan scheme is worth Rs 1.7 lakh crore, around 40% of it is for extending existing programmes like PM Kisan, Ujjwala, MGNREGA, etc.
By Pabitra Kumar Jena & Pravakar Sahoo
The lockdown has stalled the economy, leaving millions without jobs and wages. So it was expected the government gives immediate relief. The first set of announcement came from the finance minister on March 24, giving relief to individuals and commercial establishments relating to tax compliance, loan repayments and business processes like renewal of licences, etc, before the big economic package of Rs 1.7 lakh crore on March 26, addressing basic needs of the majority and vulnerable groups.
Though the PM Garib Kalyan scheme is worth Rs 1.7 lakh crore, around 40% of it is for extending existing programmes like PM Kisan, Ujjwala, MGNREGA, etc. The economic package includes provision of food and direct transfers such as additional 5 kg rice or wheat per person free of cost covering 80 crore people; immediate release of first payout of Rs 2,000 under PM Kisan for 8.69 crore farmers; increasing MGNREGA wages by 11% benefiting 5 crore people; ex gratia of Rs 1,000 for three months for 3 crore widows, pensioners and divyang; and Rs 500 per month for three months to 20 crore women having Jan-Dhan accounts. The package is well spread out and covers relief measures to all worst-affected sections and vulnerable groups.
Free cooking gas for BPL family for three months under Ujjwala, directing states to utilise Rs 31,000 crore from the welfare fund for construction workers, and paying full EPF contribution will benefit households, stranded construction workers, self-help groups and small firms. The package also provides insurance cover worth Rs 50 lakh to sanitation staff, ASHA workers, doctors, nurses and paramedics. This is in addition to the PM’s announcement of Rs 15,000 crore to improve health infrastructure and training of medical and paramedical staff for combating Covid-19.
It’s also the time the government goes all out with countercyclical fiscal measures. RBI has taken steps to ensure that financial markets remain liquid and stable in order to function normally and avoid an economic meltdown. It has announced liquidity enhancement measures in the form of OMOs, $2-billion dollar-rupee swaps, and promises to do more if required. Since February 2020, RBI has injected liquidity of Rs 3.74 lakh crore through various instruments, equivalent to 3.2% of GDP.
However, more needs to be done to give relief to borrowers and firms as certain financial market segments have been experiencing tightening of funds. RBI has to ensure that banks go easy on micro and small firms for mortgage and interest payments until the pandemic is under control, lest these firms cease to operate.
Across the world, central banks and governments are embarking on a policy of ‘whatever it takes’ to bring the world economy out of the ICU. Expansionary fiscal policy measures in the form of tax cuts and higher government spending will increase aggregate demand and employment. The Covid-19 economic task force was expected to deliver a big fiscal stimulus to give relief to millions of poor households. The bailout package by the finance minister has done that to some extent.
The finance minister hinted at another economic package in the coming days, and would include separate packages for MSMEs, EMI holidays for small borrowers, relief for people who have lost jobs, and free food for those not having bank accounts. A tough bailout package was expected for MSMEs, which absorb maximum labour force after agriculture, which is worst affected but nothing was announced for this sector.
The pandemic has come at a time when the Indian economy was at the lowest point of growth trajectory in years. While the government addressed immediate basic needs through this bailout package, much more is needed to bring the economy back to normalcy in the months to come.