Economy

Centre’s decision on schemes reflects its conservative approach to economic revival

It will also impact the vulnerable who are already bearing the brunt of COVID-19 and the countrywide lockdown, they said

 
By Kundan Pandey
Last Updated: Friday 05 June 2020
The finance ministry announced on June 5 that there will be no new government schemes for at least a year. Photo: Nirmala Sitharaman's Twitter account
The finance ministry announced on June 5 that there will be no new government schemes for at least a year. Photo: Nirmala Sitharaman's Twitter account The finance ministry announced on June 5 that there will be no new government schemes for at least a year. Photo: Nirmala Sitharaman's Twitter account

The Union government’s recent decision to not come with up with any new scheme for at least a year and to put on hold all new schemes announced in the 2020-21 budget indicates its conservative approach towards the economy’s revival and will also impact vulnerable sections facing the brunt of the COVID-19 pandemic and the countrywide lockdown to contain it.

There has been a demand for schemes for unemployed people in urban areas, especially on the lines of the Mahatma Gandhi National Rural Employment Scheme.

A good number of people have been left out from existing schemes due to exclusion errors. Hence, there is a demand to universalise the Public Distribution System (PDS). There is a strong demand to take additional measures for migrant labourers like direct cash transfer for at least three months.

If the government will not come up with any new scheme, all these demands that are quite important at the moment, will not be met, experts said.

It was also clear that the government was having a tough time with regard to resource mobilisation, Subrat Das, executive director of Centre for Budget and Governance Accountability, said.

In the 2020-21 budget, the government had estimated a gross tax revenue of Rs 24 trillion (Rs 24 lakh crore) which, most said was quite an over-ambitious target. Even if COVID-19 and the related lockdown had not happened, the Union government would not have been able to achieve the estimated gross tax revenue target.

Das said the government could have at best achieved the target of Rs 20-21 lakh crore if everything would have been normal. In the last financial year (2019-20), there was a gap of around Rs 2.5 lakh crore in the budget estimate and the revised estimate, when it came to gross tax revenue.

Now, with COVID-19 and the lockdown, it was quite clear that the government’s income would fall further. There were estimates by ICRA, a credit rating agency, that said government revenue collection would be reduced to Rs 17 lakh crore. That would mean a 30 per cent loss in estimate.

These facts indicated the tight purse the government had even as COVID-19 had crossed 0.2 million cases.

If the government continued with what it had planned in the budget and also released a package to deal with the pandemic, it would have to increase its borrowing. Several renowned economists like left-leaning Prabhat Patnaik, centrist M Govinda Rao, Nobel Prize winner Abhijit Banerjee and former Reserve Bank of India governor Raghuram Rajan have supported debt monetisation. 

However, the people advising the government were conservative, Das said. They had suggested that it not borrow much and not do debt monetisation. It was quite a short-sighted approach, Das said. Things were crumbling and this was the time to take risks and go for bold measures, he added.

But former member of the Planning Commission of India, Arun Maira, felt otherwise. 

PM Garib Kalyan Yojna and Aatmnirbhar Bharat (which the government will continue) were not sufficient to boost the economy, Maira said. But at least the government was thinking in a new paradigm, he noted.

Maira said that though there was a demand of opening the purse from the government, the direction before spending had to be clear so that it could reach out to really needy people.

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