A running start
Relief package rolled out by the Indian government is the first step towards a longer, more involved process of formulating a balanced approach for the longterm
The announcement about the income support scheme by Union Finance Minister, Nirmala Sitharaman, has come at an opportune time. In the prolonged lockdown, it would be the casual low-income workers who would be the worst hit. Therefore, it is this group of people who needed urgent succour.
The Finance Minister has made several announcements like contributions into the employees' provident funds for smaller units employing fewer than 100 workers and those earning up to Rs 15,000 per month. This will help the smaller units and at least give them the incentive to retain their workers. The Prime Minister has already made an appeal to employers not to lay off their workers in his national broadcast announcing 21-day lockdown.
There are two aspects to the support that is needed. First is physical, that is, the supply of food and fuel for instance, to the distressed families. These shortages would be faced by all, irrespective of income and wealth in times like this when there is a society-wide lockdown. Maybe, those in better income groups would be in a better position to order these from suppliers.
The government will have to work out detailed and practical strategies for physical supplies of these essential items. Foodgrains are in ample reserve and in fact, these stocks could be liquidated in offering the supplies. One existing advantage is that the extensive public distribution system could be revived to deliver these essential items to the needy.
If this is not done quickly, the lockdown could provoke an adverse public reaction. Already, there are early signs of that public antipathy. Besides, if this is not properly done, the entire advantage from the lockdown could be negated in harried and crowded marketplaces where people seek to meet their daily needs in haste.
The second aspect is financial. That is, people must have money in hand. If there is a prolonged lockdown, this would become a scarce commodity. The daily wage casual worker truly must earn really his daily bread. Even his purchases are tuned to his daily earning cycles. They will not buy provisions for a week, let alone a month. They will return to purchasing the wheat or rice requirements for a day or two maximum.
Then they do not buy in the normal purchase timing. They will rather buy in the evening after their daily chores and employment. These days when lockdown is in force, they would face difficulty in meeting their requirements of food and essentials in the absence of employment.
One way would be to directly transfer their entitlements into their Jan Dhan accounts and they could be issued debit cards along with the transfers of the money. The PDS outlets could also be urgently empowered with digital facilities and point of sales instruments to allow the DBT beneficiaries to directly purchase their requirements. Such facilities will ensure there are no big crowds at the banks which would defeat the basic objective of a quarantine.
An income support scheme was in order even without the Coronavirus onslaught. There was a pre-existing condition of demand recession in the economy which had brought down the level of activity and growth.
The income support scheme is principally in anticipation of the loss of employment and income consequent upon the forced lockdown. After having announced this scheme, it might be prudent to attempt a detailed study of the loss of income and employment.
However, it is not easy to maintain this level of employment at such times. When there is no activity for over three weeks, it will be the smaller and even medium scale units which will be hardest hit. It will be difficult for them to maintain their employee strength. We have to remember that tiny and small units are the mainstay of employment in our country.
The toughest job will be to manage the aftermath of the Coronavirus fight, which now looks like to not be a short and intense one. It will drag on for a bit longer. Hence, the armoury will have to be full. The lockdown must have varying intensity in different areas in order to minimise the economic impact.
Obviously, the impact of a protracted lockdown would be more severe in urban areas than in rural ones. The urban areas are more thickly inhabited and their exposure to the imported virus would be maximum. It might be in order to put some restrictions on travels between urban centres, smaller towns and other areas like industrial clusters and the rural hinterlands.
The supply chains between these two parts could be more closely monitored to minimise the impact on the supply of essential goods. The continued movement of such supplies from the less affected rural areas into the urban areas could help create an income stream in the rural areas and keep the supply lines full for the more affected urban areas.
In the rural areas, in open spaces, the work in the fields could continue unhampered. More intensive approaches for creating off-farm but value-added agro-progressing activities in rural areas could help create more jobs in such areas. Incomes could also rise in these areas, taking off the pressure for income support schemes.
Many of these are by their very nature long term and cannot be operational in a short time frame. But whatever little we achieve in these directions could be helpful.
These are difficult and trying times. We have to stretch ourselves a society to achieve ambitious goals. In difficult times we give our best accounts.
Views expressed are strictly personal