The government needs to bail out those who are hit hardest by Covid

As the nation enters almost the seventh week of the lockdown, one questions the government’s lack of effort to have a comprehensive economic (and health) strategy for the bottom half of India’s socio-economic class.

 |  5-minute read |   11-05-2020
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The heart-quenching images of weeping workers stranded with no food, walking back on state-highways, railway tracks towards their homes – with children on their back – reflect a ghoulish reality of the India we live in today. An India, whose political and (upper) middle income economic class elite remains oblivious and comfortably ignorant of the plight of those who, in sun and shade, have paved the nation’s dreams by building roads, houses, and structures. Each of them might have statistically remained invisible – being part of the unorganised sector – but their visibility has been evident for decades in urban landscapes across India.

Apathy and inaction

A pandemic brought by India’s own rich and elite from travels to other nations has now forced millions into destitution and joblessness. Adding to this comes the news of dozens of cadaverous workers falling asleep on railway tracks after walking for miles to reach home killed by a goods train in Maharashtra. As the nation enters almost the seventh week of the lockdown, one questions the Union Government’s lack of effort to have a comprehensive economic (and health) strategy for the bottom half of India’s socio-economic class.

The administrative response thus far has been largely designed, executed through orders released from Ministry of Home Affairs in Delhi, while states are left to deal with the pandemic; its healthcare response; the economic emergency, and also to cater to the needs of millions of casual workers. What seems most troubling is the apathetic state of the Union Government’s conduct against the nation’s most vulnerable groups. This has been almost a consistent, a more disturbing reality now seen over the course of the last seven to eight weeks. Barring a few state governments most governments have outsourced and abdicated their social, economic responsibility to local non-governmental organisations, members of civil society and social groups, to ensure the most vulnerable are protected and provided for. It is vital to recognise how most states have limited economic resources in hand – especially in seeing through this crisis. The burden of ensuring fiscal devolution of funds for relief falls entirely on the Union government. The Indian Constitution doesn’t mention Central Government anywhere but sees it as a “Union” of States.

The Union leadership cannot afford to uniformly adopt a transactional approach in addressing the fiscal requirements of states or to justify less government spending for being fiscally prudent.

Rethinking policies

Fiscal-conservatism of this kind has no coherent basis in FRBM act requirements, nor is justifiable from an administrative, or economic standpoint, especially when 70 per cent of the population, all small-medium scale firms, as well as in the organised sector are all suffering. The bureaucratisation of agency in delivering basic public services through complicated forms to be filled for determining suitable “eligibility criterion for providing aid/help” – including the arrangement of special trains for stranded (migrant) workers, has made the condition of those stranded only worse. The apathetic misconduct in this entire administrative operation has been a multi-layered mess.

main_migrant-laboure_051120102241.jpgThe images of workers walking back on state-highways towards their homes – with children on their back – reflect a ghoulish reality of the India we live in today. (Photo: Reuters)

The Union government isn’t short of financial resources to help those it needs to. There have been excellent financial proposals made by eminent economists like Raghuram Rajan, Abhijeet Banerjee, Kaushik Basu, Rathin Roy – to name a few – on what could be done to immediately increase (and devolve) greater funds to States; make all affected groups have access to basic nutrition, shelter, and healthcare without having them walking back to their own states.

For meeting medium-term fiscal requirements for cash-strapped states (for this fiscal year), I argued for the need to propose a Covid-cess on specific services (say, business class air travel, high-end cinemas, five-star hotel services etc.); a Wealth tax at two to three per cent (depending on estimated revenue expenses for the next six to eight months) on the top five per cent; and an elite-consumption tax on luxurious goods (plus goods like tobacco, alcohol).

A new taskforce

A general rebate on direct and indirect taxes (including GST) can be considered for this fiscal year to incentivise companies with higher earnings.

In the short term, Prof Rathin Roy’s proposal to have a Covid-19 bond in raising short-term capital borrowings and transferring the funds to states (even as lines of credit) is appealing. More importantly, constituting a time-bound GST-style council with members from states and opposition parties (with technical expertise) in the form of a National Economic Relief and Recovery Task Force can be urgently constituted to frame (and executive) a comprehensive economic plan for states in a 3:6:9:12 month(s) timeline. The presence of such a task force will help in having a coherent, actionable plan in a timed strategy for providing short-term aid, meet medium-to-long term financial support to states, especially those that have lost or seen a huge influx of (migrant) workers. Many require an urgent line of credit to meet their rising cost needs on public service deliveries and may need sustained grants from the Union government to boost opportunities for crowding-in private investment and generate employment. There was no better time than this to actualise PM’s motto of cooperative federalism in both spirit and practice. For now, what we unfortunately see are elements of apathy and misconduct. And both of these need a resolution by bringing forth a transformative-not transactional-form to Union leadership.

(Courtesy of Mail Today)

Also read: How the pandemic is an opportunity to create a ‘more equal’ world


Deepanshu Mohan Deepanshu Mohan @prats1810

Assistant Professor of Economics, OP Jindal University; Director, Centre for New Economics Studies; Visiting Professor, Department of Economics, Carleton University

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