Day 59: India’s Covid Economic Package

22/05/2020

Day 59

The direct interfacing that governments across the world are now having with citizens is higher than normal times. With work from home being the default mode, it has opened up possibilities of watching press conferences on long play. In one of the important series, the Ministry of Finance and Corporate Affairs held a four-part press conference to present the economic reform package that government of India has developed to counter the effects of the pandemic and the lockdown.

In the concluding press conference by the Minister of Finance last week, specifics of action plans in education, healthcare, business and livelihood were presented. I began taking screenshots of the slides to keep for future research. More importantly, I think the information in these slides offer a useful reference point to look back at the current crisis and reflect on the state and its response.  The budget for the INR 20,00,000 Crore package divided into three parts –

  1. Government to Business
  2. Government to People
  3. Government to the Banks and Financial Institutions

Key to understanding public finance in India is not to examine it from the need perspective. Though, financially one would argue that one spends on what is needed. Therefore, look at the need and the allocation for that need. But public finance does not always lend itself to such thinking. In fact, it doesn’t have to. The Atmanirbhar package seems to be adopting a teleological approach. It seems to try and look at the course of events and where these events might leave the economy than trying to respond to the effects it has caused right now.  To this, the designers of the package have seemed to have preferred allocating money to a government sponsored scheme in an area over doling out cash transfers to supplement current expenditure for individuals who have gone out of jobs. While other economies have been doling out cash for three or more months, India has stuck to its preferred mode of in-kind allocations like food via the PDS. Pauperisation of the low income and already poor people is near certain in the months ahead. Would cash transfers to them have guarded them against this pauperisation? Maybe it would have for the months that they receive cash worth their food and emergency needs. But that would also empty up the government’s coffers with no guarantee that in the fourth month these beneficiaries will be able to find work to earn themselves a decent sum to afford food and basic needs. Analysts across the world have been using a fancy term for this kind of space that a government has and the choices it has to make within it – fiscal space. In simple words, India is not rich enough to afford that path. What it intends to do with the Atmanirbhar package is interesting because we can only speculate what its effects will be. No one knows for sure. And so, I see this a good reason to gather the highlights here for future reference. All the material here is extracted as screenshots from Press Information Bureau of India’s web stream.

On a second reading, some of the actions in education and healthcare don’t seem to mean much. But there is always a possibility that the situation and the response will trigger unexpected and unforeseen changes in the economy.

The structure of the entire package is in Tables 1 & 2 –

Table 1: Atmanirbhar Package Items
Table 2: Atmanirbhar Package Items

On education in covid and post-covid times –      

On livelihoods the focus has been rural areas via the MGNREGS route –

On healthcare during covid and reforms for the future –

This is likely to re-energise healthcare infrastructure in the country.

On businesses –

The biggest move according to the ministry is to decriminalise violations of Companies Act that involve minor technical and procedural defaults. Ease of Doing business seems to be a sacred issue for this government.

On Center-State cooperation and support  –

There are several commentaries to be made on the state of affairs in all of these sectors. If the slow days continue, I might be writing some.

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