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Last Updated : Mar 26, 2020 10:49 PM IST | Source:

Economic package | A beginning has been made. More needs to be done.

Putting money into the hands of the people would have been simpler, quicker and more effective

Finance Minister Nirmala Sitharaman
Finance Minister Nirmala Sitharaman

The finance minister has announced a Rs 1.7 lakh crore relief package for the poor who are increasingly getting hurt by the coronavirus. Let’s get one thing clear. Any relief for those at the bottom of the pyramid is welcome in these troubled times. However, while a beginning has been made, more needs to be done.

The relief package is around 0.8 percent of nominal GDP and will be shared by the Centre and the states. That is just not enough when we are staring at a deep recession that threatens to break the back of an economy that was already hobbled by a slowdown. This compares to around 10 percent of GDP for the US and 4 percent for New Zealand to name two examples. While comparison with developed countries might not be appropriate, the small relief package seems to suggest the government seems confident that the pandemic will blow over soon or that it will follow up with another package.

Moreover, today’s package is fiendishly complicated. A laundry list of government schemes and yojanas has been invoked. When the Prime Minister himself has compared the pandemic to World War II, why not go for an aggressive cash transfer instead of making things needlessly complicated? Putting money into the hands of the people and ensuring that the supply of food and other essentials is unrestricted would have been simpler and more elegant solution.


While the direct benefits transfer and the Jan Dhan Yojana aren’t flawless, a simple cash transfer would still have been a better alternative to some of the proposals announced today. Take for instance, the proposal to contribute to the provident fund of workers in the organised sector. A narrow set of conditions – those with less than 100 workers, 90 percent of whom are earning less than Rs 15,000 per month – is likely to make the implementation go awry and embroiled in red tape.

The decision to raise the wages of MGNREGA workers is unlikely to do much if there is no work at all. In any case, aren’t MGNREGA wages raised every year as a matter of course?

As far as the cash transfers that have been announced go – like Rs 500 per month to women in the Jan Dhan scheme and Rs 1000 to senior citizens and widows – they too are inadequate. Allowing people to withdraw from their provident fund is not of much help when people are unsure about their future and prefer to save rather than spend. Remember, even FICCI and CII suggested to the Prime Minister that a direct transfer of Rs 5,000 to each worker and Rs 10,000 to senior citizens be made.

The additional food grains under the food security scheme is welcome, but we need more details on implementation. Most if not all parts of the country has been on lockdown since Sunday, but the record of local governments in many places to ensure supplies of essential goods and services leaves much to be desired.

While the immediate task was to provide relief to the poor, it doesn’t fully address all issues. Many migrant workers are stranded on the road without food, water and transport. The government could have announced measures to provide resources for community kitchens so that they don’t suffer from hunger.

Moreover, it should have gone ahead and addressed the concerns of MSMEs and industry too. Loan forbearance, announcing a freeze on payments etc. would have addressed the cash flow problems of many and would give them the confidence to retain employees more than say 3 months’ s PF contributions. A large stimulus package is the need of the hour. One hopes that there is more to come.

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First Published on Mar 26, 2020 04:35 pm
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