The widely touted bailout package being presented by the Centre does little to protect or create jobs in an economy that is set to be swamped with unemployment
At least 200 million people may have lost job since the nation-wide lockdown was clamped on March 25 to curb the spread of COVID-19. Although the Centre for Monitoring the Indian Economy (CMIE) in its last report said that 122 million Indians lost their jobs in April pushing the country's unemployment rate to a record high of 27.1 per cent, the actual figure by May-end will be much higher taking into account the lockdown impact on the vast informal and unorganised sectors.
Indian workers are losing job everywhere — inside and outside the country. Lakhs of jobless migrant workers are homebound. Few can blame industries for mass layoffs. First of all, industries do not run business to benefit only their employees. Private sector companies are not operated like government departments or state-owned enterprises. They have to earn to pay for inputs, including labour. The delayed government action to fight COVID-19 and unplanned lockdown across the nation choking markets and movement of people and supplies are principally responsible for the massive job losses. Life is not going to be the same again even if lockdown is withdrawn anytime soon.
Large and medium industries will keep squeezing employment in keeping with market demand and profitability. The medium and small scale sectors will go for more contract jobs linked strictly with a particular business. The lockdown affected everyone. Unfortunately, the government did not consult social and industry bodies before taking such a major decision, unilaterally. Everyone caught unprepared. The latest round of the government's bailout package, involving an unbelievably large sum of Rs 20 lakh crore, is unlikely to change the employment situation. The amount is far too large to repose public trust. Most opposition states and their leaders have trashed the package. Where will this vast amount come from? What are the sources of such a huge fund? Will the fund be disbursed by the government? After all, it has no budget sanction.
The amount is larger than the expected total budget receipts for 2020-21, following the lockdown and its possible impact on the economy and the government's income. The union budget for 2020-21, announced on February 1, more than seven weeks before the declaration of lockdown, made a revised estimate of receipts for 2019-20 at Rs 19.32 lakh crore. The government's total expenditure for the last financial year was revised upward at Rs 26.99 lakh crore. Of course, the budgeting exercise, this fiscal, could not visualise the import of already spreading Coronavirus, which was detected in Wuhan as early as in December 2019. By January, this year, it took an epidemic form and soon turned pandemic. However, the government of India took it easy almost until the middle of March. While declaring the national lockdown on March 25, it did not officially revisit its economic impact on the budget for 2019-20 and, more importantly, for 2020-21. The government's income is expected to have fallen sharply even as the expenditure may have vastly increased.
Paradoxically, the massive bailout fund doesn't exist physically. A very large part of the financial package is rather virtual than real. This will only create pressure on the financially stressed banking system with the government taking no responsibility for the consequences. The incentives are largely designed to help MSMEs to get back on their feet. Borrowers with up to Rs 25 crore outstanding and Rs 100 crore turnover will be generally eligible for more loan. Will that protect the old jobs or create new ones? Most unlikely. If revised official estimates of GDP growth this year is a bare one per cent, the virtual investments will neither protect, nor create jobs. Ironically, while presenting this years budget, the Finance Minister spoke about the need to ensure that scarce public resources are spent optimally.
Revised fiscal deficit estimates in the 2019-20 budget was 3.8 per cent though it must have far exceeded at the end end of March 31. There is no point in guessing at this stage the possible fiscal deficit at the end of 2010-21. The current year's budget has targeted a net market borrowing of Rs 5.36 lakh crore. The bailout package appears to be at best imaginary. It will neither benefit the economy nor its growing population of unemployed. If employment does not grow, income and demand will not grow. As a result, the economy will not grow. The jobless millions need government financial support until they are back to work. There is no provision for the jobless.
With lakhs of migrant workers desperately trying to return home, the prospect of employment in their job-starved home states look remote. There is nothing in the bailout package to protect their livelihood now or soon.
Scenes of hapless migrant workers, particularly daily-wage earners, fleeing cities on foot to return to their villages, filled TV screens and newspapers for most of April and this month. Informal jobs, which employ 80 per cent of the adult population, were the first to be hit by the lockdown. The post-lockdown job scene appears to be even more difficult. The practice of issuing pink-slips is going to be routine in private companies. The economy is likely to witness a tsunami of job losses for employees who don't have a regular salary or those without a written contract. The current labour market crunch can easily turn into a nightmare. Many fear the possibility of social unrest. It may be the time that the government comes out with a real-time bailout package for the jobless. The general lockdown needs to be completely withdrawn for a smooth transition. The people must first live to fight the virus.
Views expressed are strictly personal