Open Forum
New Delhi, 23 June 2021
Ailing Economy
EYE NOT GDP BUT EWS
By Dhurjati Mukherjee
In the midst of the economy being hit
severely and government suffering a financial crunch, Prime Minister Modi’s
announcement of giving free vaccines to all States and extending the Pradhan
Mantri Garib Kalyan Anna Yojana (PMGKAY) till Diwali this year, which entitles
beneficiaries to 5 kg free foodgrains every month, South Block would need to do
a juggling act with finances. Judging the economy from merely GDP growth, which
too has been lowered to around 8.5 percent by various agencies, is erroneous viz
the ground reality at grass-root level and the income of lower segments of
society.
A case in point is a recent petition in the
Supreme Court filed by NGO, Distress Management Collective, pleading that the Reserve
Bank of India and banks should be directed not to declare any assets of
borrowers as NPAs for non-payment of EMIs. This, at least for the period from
April to August this year and consider rolling out a financial package
primarily focusing on “the severely affected sections of society and also
keeping in mind an imminent third wave”. The petition stated that the second
wave of Covid-19 is pushing India’s middle class towards poverty with an
estimated 32 million people losing their jobs and sources of livelihood.
It would not be difficult for even a student
of economics to understand the quantum of job loss, the under-nutrition of
children, the ongoing severe sufferings of EWS, poor and the underprivileged
since the beginning of last year. Added to this, the after effects of cyclones
last year and this year has made matters bad from for worse for the poor. The
extent of poverty and squalor has been ravaging at least 30 to 35 per cent of
the population.
The CMIE report on loss of jobs and growing
unemployment is thus alarming. Over 15 million jobs were lost during May while
the urban joblessness rate hit 18 per cent in the week ending May 30, the
highest in the past one year. “Employment fell from 390.8 million in April 2021
to 375.5 million in May 2021. This translates into a loss of 15.3 per cent
million jobsor a 3.9 per cent fall in employment” in May. April and May
witnessed a particularly severe fall in employment and it is understood that this
accounts for 22.7 million of the 5.8 million job losses in the past four
months.
The Congress party termed 2020-21 as the “darkest
year of the economy” in four decades and accused Prime Minister Modi of
refusing to pay heed to good advice and global experience of management during
the pandemic and lockdown. The combined reports of CMIE and also research and
survey of Azim Premji University have concluded that 23 crore people have been
pushed below the poverty line and into indebtedness and worse the figure is
likely to have increased by May-end.
The resource crunch, has forced the
government to turn a blind eye to the problems being faced by particularly migrants,
unorganised workers and daily wage earners, who have been worst-hit. All that
the Centre has done is giving five kg of free grains for individuals, enlisted
under NFSA through the Public Distribution System for May and June But the allocation
for MGNREGA has been just Rs 73,000 crore, which is around Rs 38,500 crore less
than that of the revised estimate of the last fiscal.
According to one estimate, total households
demanding MNREGA work in the next two months would be somewhere around 30 per
cent more than that of 2019-20 during the same period; six crore households are
expected to be working in the programmeinthe current fiscal. At the current
rate of Rs 268 per day per person, at least Rs 1.3 lakh crore would be needed
to be made available in the current fiscal, if around 75-80 days of employment
has to be given. Moreover, the government has to hike MNREGA wages by say 10
per cent.
Therefore, there is need for formulating a
spending programme. The first being the need for cash transfers to as many
low-income households as possible. However, this should reach both the rural and
urban poor. This cash transfer has to be realistic and time bound. The report,
‘State of Working India, 2021, from Azim Premji University rightly
suggested that Rs 5000 per month for three months be distributed to many
vulnerable households.
Secondly, there should be employment
guarantee schemes beyond MGNREGA. as urban unemployment has risen to over 15
per cent. As this segment has no access to any State-funded social insurance
scheme, introducing a MGNREGA scheme for urban workers would go a long way
towards insulating them. Hundred days work at say Rs 250 per day for 15 per
cent of urban labour force would help such workers and would take around 0.7 per
cent of GDP. Finally, the government mustn’t bother about deficit targets and take
a form view that these need to be relaxed
It is unfortunate that the government has yet
to decide on how it would redress the sufferings of the impoverished, as so far
there is no strategy shared. The only concern of the government, which is
backed by extensive media reports, is the percentage of GDP growth but such
growth has no bearing on the impoverished and marginalised sections of society.
One is inclined to refer here to Keynesian
economics and acknowledge the decisive role that public policy and the State
can play in a populous country like India. As is well known, Keynes advocated
that demand deficiency and persistent unemployment can be tackled if the
government were to chip in resources by various public investment programmes,
thereby raising demand and public expenditure.
But in today’s prevailing situation in the
country, where informal sector is the main source of livelihood and where
millions have been affected due to the pandemic and lockdowns, public spending
has is minimal and therefore has become imperative. Even well-known economist
and Nobel laureate, Abhijit Banerjee, has taken the Keynesian line of thinking
and argued in favour of cash transfer from the government in order to inject
demand as well as to battle poverty as resultof job loss.Sadly, the government
has not followed this policy, specially at this critical juncture when public
expenditure is badly needed in rural health infrastructure development.
Significantly, West Bengal Finance Minister has
in a letter to his counterpart at the Centre suggested extending the
compensation period by another five years while also raising their borrowing
limit by 5 per cent of GSDP (gross state domestic product), without any
conditions to enable them to carry on vaccination and deal with damages caused
by cyclones. This would help the cash-starved States to revive their ailing
economy and carry out development work in a better manner, specially those
relating to social and physical infrastructure in rural areas.
It goes without saying that the Centre must offer
incentives and subsidies for the poor and EWS and so also job opportunities such
as expanding schemes like MGNREGA so that they are assured of income support
for meeting basic necessities of life. The government need not worry about
fiscal deficit which may go up to 7-8 per cent of GDP. It must look at the
ground reality and address the suffering of the people. Sooner the better.---INFA
(Copyright, India
News & Feature Alliance)
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