India needs great encouragement – editorials
Finance Minister Nirmala Sitharaman announced a relief package of Rs 1.7 lakh crore involving cash transfers and food security, with the aim of ensuring that the most vulnerable sectors of society have sufficient resources to survive the continued blockade and the loss of livelihoods caused by the Covid-19 pandemic. Over the next three months, the package will see a payment of around Rs 50,000 crore to around 315 million families (although this could involve a double count). It also involves some prepayment (not new). The number will rise to around Rs 60 billion to 365 million families if the increase in wages is taken into account in the employment guarantee scheme (although this would imply finding work for 100 days).
The reason the number of beneficiaries can be counted more than once is because it is theoretically possible for the same family to benefit from more than one scheme. For example, a family of farmers where the farmer is enrolled in PM-Kisan (the government’s iconic cash transfer scheme previously announced for farmers), the woman of the house has a no frills Jan Dhan bank account, and where there is A registered senior citizen will receive Rs 4,500 in the next three months.
The relief measures announced Thursday also involve another important component: food. Up to 800 million people (approximately 180 million households) will receive an additional 15 kg of basic grain (rice or wheat) and one kg of legumes in the next three months, free of charge. This is welcome AND very necessary. It will ensure that the poorest in India do not bear the brunt of the pandemic. So far so good.
What’s puzzling from the finance minister’s press conference, where the package was announced, was simply that Ms. Sitharaman chose to sidestep questions about a similar package for the industry, including specific questions about sectors such as tourism and aviation that are suffering a lot. While the government is understandably looking for the most vulnerable first, some reassurance of the upcoming business aid would not have hurt. So far, the government has announced a relaxation of legal requirements, which is important but not as critical as an aid and stimulus package. And some of the relaxation stops halfway. For example, while companies with incomes above ~ Rs 5 million have been allowed to postpone their goods and services tax (GST) payments from March, April, and May until the end of June, they will have to pay interest of 9% on late payments (down payment of 18% otherwise).
Many countries have announced generous packages that cover individuals, businesses, and states. For example, the United States has unveiled a $ 2 billion package that includes direct payments of $ 1,200 to Americans making less than $ 75,000 a year, with an additional $ 500 per child. The amount will be progressively reduced for anyone earning between $ 75,000 and $ 99,000. The package also includes a $ 500 billion stabilization fund for businesses, $ 150 billion for state and local administrations, $ 100 billion for hospitals, $ 45 billion in disaster aid, $ 30 billion for education, and $ 16 billion for critical medical supplies such as ventilators. The UK has announced a £ 330 billion lifeline for companies, institutions and individuals, including tax cuts, new loan facilities for large companies and a three-month vacation payment for those with mortgages. The United States package represents about 10% of the country’s GDP; The UK package about 15%. But there is still more that is happening. For example, the US Federal Reserve. USA He has announced that he will enter the market to buy corporate bonds, something that would have been unimaginable not long ago.
Clearly, India needs a well-funded, aggressive aid and stimulus package to help companies cope with the unprecedented crisis. The government is fully justified in asking employers to protect jobs, but it needs to follow up with measures that provide relief to companies. The Indian economy was expected to grow at 5% in 2019-20, the lowest in 11 years. The crisis may bring that number even lower. The economy appeared to be emerging from a structural and cyclical slowdown, and it could grow faster in 2020-21. The pandemic has ended such hopes. Businesses, small and large, freelancers, the salaried (and tax-paying) middle class, all need help.
Prime Minister Narendra Modi quickly moved to stem the spread of the pandemic by announcing a blockade that will hopefully crush the infection curve. Now, the finance minister must move equally quickly (and aggressively) to contain the economic consequences of the crisis. As in the case of highly virulent infection, a delay could be fatal to the economy.