Yogendra Yadav Articles
Rs 20 lakh cr can reboot economy, add jobs, tackle climate change. If there’s political will

Rs 20 lakh cr can reboot economy, add jobs, tackle climate change. If there’s political will

Rs 20 lakh crore is a lot of money for a country like India. This translates into a little over Rs 15,000 rupees per person and a little less than 10 per cent of our GDP. That’s more than what anyone expects the Narendra Modi government to deliver, more than what many economists and activists had asked for. Prime Minister Modi’s critics would have little to complain if the ‘economic package’ he announced in his address to the nation Tuesday has the same meaning as these packages have all over the world: additional money, over and above the routine expenditure, that the government spends for a specified purpose.

Sadly, this is a big if. You would be very naïve to believe this figure, given the track record of this government on fudging, padding and inventing budget sums. If Arun Jaitley was known for his creative accounting, Nirmala Sitharaman would be remembered for economising on truth.

Let us decide to be naïve. Let us pretend that the Modi government is actually going to raise or save Rs 20 lakh crore over and above what it had announced in the budget. Let us overlook analyses of unrealistic revenue targets in the budget and reports of sharp fall in revenue and disinvestment proceeds. Let us also assume that the government would like to spend this package on rebooting the economy to deal with the lockdown shock. Let us limit ourselves to a simple question: What can the Modi government do with this kind of money?

Dividing relief

There is a simple way. If you leave out the top 35 crore of the Indian population, the remaining 100 crore people could be handed over Rs 20,000 each. An average family of five could be given a cheque of Rs 1 lakh, which works out to more than the annual income of half of these families. The other, wiser, route is to spend the money in such a way that generates economic activity, helps the poorest families and meet other societal objectives like climate resilience.

That is what Table 1 suggests. It divides our requirements into four parts. First includes the most urgent and pressing needs of relief and disease containment. The second part is for addressing the massive unemployment problem in a way that also helps India protect itself against climate change and environmental degradation. The third part is to be used for providing stimulus to those sections of economy that need it most. The fourth is one-time support that the state governments have been pleading for.

The first part is quite straightforward, predictable and easy to compute. If the central government decided to pick the tabs for one way transport of workers back home, the cost (for 30 days, 300 Shramik trains per day) to Indian Railways would have been just around Rs 900 crore. Similarly, assuming that about 10 per cent of our population is going test Covid-19 positive, providing high quality and free testing, medical care, quarantine and free hospitalisation of all patients along with expansion of the capacity of public hospitals to handle this crisis would need somewhere close to Rs 1.5 lakh crore.

The last component in this part, namely providing people with food security would cost much more, though most of it will be notional because the government has already procured rice and wheat stocks. Food rights activists have demanded the central government supply 5 kg additional food grain (which the finance minister had announced earlier for three months), 1.5 kg dal (the finance minister had announced just 1 kg for the entire family) and 800 ml cooking oil per person per month for the next six months. We can add 500 gm sugar and a bar of soap per person per month to this package. These benefits should be extended not just to 80 crore people with ration cards, but to another 20 crore as well, whose names should have been added earlier. An additional budget of Rs 2.2 lakh crore for food security at this critical juncture is hardly a high cost for warding off hunger.

Expanding jobs for rural and urban India

The second part of this plan is not just about providing people employment but about utilising this opportunity to prepare India against a similar crisis in future. This can take the form of two separate missions for rural and urban India.

Several scholars and activists have already demanded an expansion of MGNREGA by raising the number of employment guarantee days from 100 per year to 100 days per person (or better, 200 days per year per family) and allowing new cards to be made on the spot. The best way of using this labour force would be to engage it in the largest-ever mission to make the country climate change resilient. That would involve the creation of 10 lakh small water storage or harvesting structures, irrigation ponds, up-gradation of water distributaries, conservation of forests, grasslands, wetlands, coasts and promotion of agroforestry. At an additional cost of Rs 75,000 crore, this mission would save 10 crore rural families from falling into destitution, besides its massive ecological gains.

A similar mission for urban India has been proposed by economists at Azim Premji University Bangalore. The idea is to engage urban unemployed youth for at least 100 days (I suggest a modest wage of Rs 400 a day, lower than what the economists recommend) in various green jobs such as protection and regeneration of water bodies, water harvesting, drainage, recovering urban common spaces, green spaces, carrying out health survey, care of elderly, solid waste management and sanitation. This could help address the pollution crisis of our towns and cities, besides offering the much-needed bridge to the temporarily unemployed at a cost of Rs 1.3 lakh crore.

Helping MSMEs and boosting demand

The final mission in this plan comprises measures to boost rural economy so as to absorb at least part of the reverse migration into meaningful and profitable activity in the villages. This would involve helping farmers with price realisation, reducing their debt burden, supporting nature-related and other small scale manufacturing in rural area. An initial push in this direction would cost Rs 2.5 lakh crore and should give the much-needed demand push to the economy.

The third part comprises a stimulus package for entrepreneurs. Here, too, the smartest way to kick-start the economy would be to begin at the bottom with self-employed micro-entrepreneurs like hawkers, vendors and shopkeepers who constitute an overwhelming majority of enterprises in India. Economists suggest that since these enterprises are usually not registered anywhere, the best way to support them is to add cash credit limit of ‘shishu’ MUDRA loans and provide overdraft facility on Jan Dhan accounts. Small and medium industries can also be supported by providing them with additional cash credit limit and government guarantees for their loan.

Instead of exempting factory and industry from all labour laws, it would be much better to exempt the MSME sector from the Inspector Raj for at least one year. The stimulus package should include that part of the salaried class that is vulnerable because it does not enjoy job security and other benefits of the organised sector. They should be supported with modest unemployment allowance in case of retrenchment. SMEs should be offered subsidies so that they can keep workers on their rolls despite slow down or recession. The stimulus package should contain not just moratorium on debt payment but also a waiver of interest for this period.

Add another 2 lakh crore for stimulus for various sectors of economy (hospitality, transport, etc.) that have taken a big hit during the lockdown. All this adds up to a total of Rs 12 lakh crore. That still leaves about Rs 8 lakh crore to be transferred to state governments to compensate them for their loss in revenue and additional expenditure due to lockdown. All the state governments have been desperately requesting the Centre for this assistance. This one item can go a long way in enabling state governments to devise their own ways to revive the economy.

Rs 20 lakh crore is a lot of money in India. Provided there is a coherent plan to use the money for those at the receiving end of the lockdown shock. Provided we have some transparency about this money. Provided the money is there, and not in thin air. Provided there is a political will.

Author: Yogendra Yadav

Published in : The Print

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