COVID-19: Experts urge fresh stimulus package to boost economy, help marginalised

Experts have called for a fresh stimulus package aimed at boosting the economy and putting cash in people’s hands, especially the marginalised, as the second wave of the novel coronavirus disease (COVID-19) pandemic continues to rip through India.

They observed that the Rs 20 lakh crore stimulus package announced post-lockdown last year to revive the economy and address the pandemic had been termed as ‘insufficient’ by economists.

The package catered to various sections including migrant workers, the agriculture sector, micro, small and medium enterprises (MSME) street vendors and distribution of free rations under the public distribution system, among others.

It consisted more of loan offerings and long-term measures, instead of immediate relief, the experts said, adding there was not sufficient data on the actual benefits of the package.

The government had maintained that the package was equivalent to 10 per cent of India’s gross domestic product (GDP). However, economists had estimated that its fiscal component was barely 2.2 per cent.

“Only 2.2 per cent of GDP was fiscal stimulus. In contrast, this was 4.7 per cent on average in emerging market economies,” Santosh Mehrotra, economist and chairperson of the Centre for Informal Sector and Labour Studies, Jawaharlal Nehru University, told Down To Earth.

The weak fiscal stimulus did not change even with the 2021-22 Budget, he added.

“If you look at the expenditure in absolute rupee terms, it is just 0.1 per cent more than last year’s. The government is claiming a V-shaped recovery. But in fact, it is a K-shaped recovery because all that is happening is a rebound from the end of the lockdown,” Mehrotra said.

Informal workers, MSMEs and food security

The pandemic and subsequent lockdown worsened the situation for the informal sector, hitting informal workers and firms the hardest.

A Rs 5,000 crore special credit facility to benefit five million street vendors was also announced under the 2020 package. But only around 40 per cent of the target vendors have received loans almost a year later and 40 per cent of the total allocated amount disbursed.

MSMEs were among the worst-hit because of the lockdown. They are again finding it difficult to conduct business due to the second wave and different restrictions being imposed in different states.

A Rs 3 lakh crore ‘Emergency Credit Line Guarantee Scheme’ was launched in the 2020 package for MSMEs to tide over the crisis.

The credit has provided liquidity support according to a survey in August last year by the National Credit Guarantee Trustee Company on behalf of the National Institute of Bank Management, Pune.

However, the distribution patterns have been unequal and this has reduced its liquidity benefits for the smallest borrowers and manufacturing firms.

The survey, which covered 1,722 firms, also found that 80 per cent of the total borrowers got only 30 per cent of the total amount. Most respondents also observed that the amount disbursed was inadequate and that they had not utilised it subsequently.

The utilisation rate was low for the smallest borrowers, manufacturing firms and those worst-affected during the lockdown phase.

Mehrotra said a big problem with the scheme was that it was targeted only registered MSMEs that constituted a small fraction of the total.

“There are so many units that are ‘own account enterprises’, that work with unpaid family labour and have small shops. Those that have sought a loan will not be able to repay it because businesses have not picked up,” he said.

A recent assessment of stimulus packages of nine countries in the Global South done by the Financial Transparency Coalition revealed something else.

It pointed out that the Indian government’s amendment of changing the definition of MSME (by increasing the investment limit used to define MSME) allowed larger companies to access the scheme, at the expense of smaller businesses.

Around 800 million poor people were given five kilograms of wheat or rice per person and one kg pulses for each household for free till November 2020 under the stimulus.

But people without ration cards were left out of this. Later, another Rs 3,500 crore was kept aside for around 80 million beneficiaries who were not covered under the National Food Security Act and the states were asked to identify such people.

However, this time around, people without ration cards have again been left out of the latest announcement. The ration card was to be made portable nationwide by January under the ‘one nation one ration card’ scheme. This has not been completed yet.

The Rs 500 per month for three months to 200 million women Jan Dhan account holders was also said to be insufficient.

Ravi Srivastava, director, Centre for Employment Studies, Institute for Human Development, said:

The package has run its course and we still don’t know the actual expenditure. Migrant workers are again moving back now. The entire informal sector is again hit. The unemployment situation is dire. If people are not unemployed, their incomes are being hit. Many people like domestic helps are underemployed. If they were working three jobs earlier, now they are working only one. There has to be a substantial income transfer and social security by the government.

Mehrotra explained that while the government had raised wages under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), there’s only so much support that the scheme could provide.

He said:

MGNREGA wages are less than what workers get in cities. So once again, incomes will drop sharply. At this time, the government should put money in people’s pockets; a cash transfer to ensure a minimum income guarantee and raising private consumption. Almost every country resorted to cash transfer as a means of alleviating the pain of job losses on account of lockdowns. India offered barely Rs 500 monthly to women Jan Dhan account holders and then it stopped.

Subscribe to Daily Newsletter :

SUPPORT US

We are a voice to you; you have been a support to us. Together we build journalism that is independent, credible and fearless. You can further help us by making a donation. This will mean a lot for our ability to bring you news, perspectives and analysis from the ground so that we can make change together.