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Context: Measures that can be taken during lockdown to help daily wage earners.
On 21 March, trains leaving Mumbai and heading towards the eastern part of the country were packed. Media reports suggested daily-wage labourers were leaving the city and going back to their native places in eastern Uttar Pradesh, Bihar and Jharkhand. On 24th March, 21 days complete lockdown has been announced in the country.
This brings us to the questions of rebooting India’s virus-hit economy. In this article, we will explain them below:
# What other countries are doing to help low-income earners?
# What are the UBI-like measures that can be implemented in India?
# What are the non-UBI measures that can be implemented in India?
# What are the challenges?
What other countries are doing to help low-income earners?
- The Australian government has announced that a cash payment of $750 (Australian dollars) will be made to six million low-income earners.
- American politicians are also discussing a one-time payment of $1,200 for individuals earning up to $75,000 a year.
What are the UBI-like measures that can be implemented in India?
- Advance payment of pensions: Jean Drèze, an economist, has suggested that “advance payment of (at least) three months’ pension should be made immediately, to help widows and the elderly who are the most vulnerable in this crisis.” This made Kerala government to plan paying the two months of pension in advance. Similar steps are taken in by Delhi government. This can be done at national levels to help vulnerable sections of society in hard-hit times.
- Payment into Jan Dhan accounts:Currently, there are 382.6 million Jan Dhan accounts. The central government can directly transfer money into these accounts. This will be a really mass-market measure that can help the poorest of the poor.
- Advance payment of PM-Kisan amount: The Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme provides ₹6,000 per year per family to all farmers who own land. The government can pay two out of the three installments for 2020-21 at the beginning of the year.
- Payment to daily-wage labourers:The Uttar Pradesh government has decided to pay ₹1,000 to 2.037 million construction workers registered with the labour department and 1.5 million self-employed cart owners, small shop owners and rickshaw-pullers. The money will be paid through direct benefit transfer system. Other states can easily replicate this depending on the kind of data they have for construction and other workers.
What are the non-UBI measures that can be implemented in India?
- Increase of allocation of rice and wheat provided through the public distribution system (PDS): The Food Corporation of India has stocks of 58.497 million tonnes of rice and wheat as of March. This is much more against the mandated 21.41 million tonnes, which includes operational as well as strategic stock. This excess rice and wheat can easily be distributed through PDS all over the country. The Delhi government is planning to implement something along these lines.
- Delay goods and services tax (GST) payments: Finance Minister Nirmala Sitharaman on March 24th extended the deadline for filing GST returns for March-May to June 30. On late filing of GST returns, no late fee, penalty or interest will be charged for companies with turnover of up to Rs 5 crore. For companies with more than Rs 5 crore turnover, no late fee and penalty will be charged on GST return filed by 15 days. A reduced interest rate of 9 per cent will be charged.
- Clear all government dues:The Kerala government has announced a relief package of ₹20,000 crore. The biggest entry in the package is that of the government clearing all its dues. This amounts to ₹14,000 crore. This can be implemented at the national level.
- Increase in allocation to Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS): With many daily-wage workers in cities heading back home, work needs to be created in the villages. However, in 2020-21, the allocation to MGNREGS has been cut to ₹61,500 crore against ₹71,002 crore in 2019-20. This is primarily because as the government moves towards UBI-based payments, it is trying to cut down on allocations to other social sector schemes, without withdrawing them.
- Change the definition of bad loans: The slowdown in economic activity will end up impacting small businessmen from infrastructure contractors to road transport operators to taxi aggregators to traders. These businessmen along with other micro, small and medium enterprises, have taken on loans from non-banking finance companies (NBFCs) and banks. Some of these businessmen, with excellent track records up until now, are likely to default in the days to come, as business dries up. Hence, the NBFCs and banks need to be lenient on them and defer the payment of EMIs.
What are the challenges?
- Impact of falling household savings rate: In 2018-19, household savings stood at 6.39% of the gross national disposable income way low from 10.54% in 2008-09. In this scenario, the government borrowing more is likely to push up interest rates for the private sector. Many companies are already stretched when it comes to repaying debt. So, the government needs to tread carefully.
- Increasing Fiscal-Deficit: While an increase in fiscal deficit may be inevitable, given that the social distancing will end up impacting government taxes as well.
- Side-effects of Direct Payments to be made in Jan Dhan Accounts: If pension payments are made in advance or payments are made into Jan Dhan accounts, this will increase the number of people turning up at banks to withdraw money.
Along similar lines, if more work or more money is offered under MGNREGS, more people are likely to turn up at the worksite. This will go against the entire idea of social distancing that needs to be currently practised.
Covid-19 put forth challenging times to humanity and to break the chain of its transmission, a serious social distancing needs to be practiced. Government needs to ensure that the people are supplied with essentials on time to prevent panic situations. This is not the time for the best solutions but the most optimal ones. There is need for a greater flexibility of decision making at local level.