Let’s hope FM announces measures for migrants soon: they are crucial for revival of the economy

At the time of this issue going to print, the details of as much as 70 % of the total ₹20-lakh-crore stimulus package have come out in the open. Since the nationwide lockdown began on March 24, the RBI and the government have announced roughly ₹ 7.1 lakh crore of stimulus, if one were to treat fiscal and monetary stimuli on par.

The government’s support came in the form of ₹1.7 lakh crore as cash transfer and provision of foodgrains, etc for the poor. In addition, ₹15,000 crore was allotted for ramping up healthcare infrastructure. According to a UBS report, the RBI’s liquidity support since the last week of March to date works out to a little over ₹ 5.2 lakh crore. The measures announced by Union Finance Minister Nirmala Sitharaman on May 13 chiefly included loan components and guarantees for medium and small enterprises (MSMEs) and the power sector.

And funnily, Income Tax refunds worth ₹18,000 crore have been included in the stimulus package. Was the government planning to forfeit that? Anyway, a look at the government’s allocation basket shows that Prime Minister Narendra Modi’s government’s intervention to help stimulate an economy and help people beat the COVID-19 effect suffers from a fundamental fault. The lion’s share of the allocations are supply-side interventions. Why would entrepreneurs take loans from banks and non-banking financial companies (NBFCs) when not only there is no visible uptick in demand but there has been a drastic fall?

More than 30 million migrant workers, out of work since the last two months, have no money to afford anything. With them back in the villages, pressure on their rural households to sustain them and their families will increase manifold, thus leading to massive demand contraction in the rural market. In such a situation, if entrepreneurs even take loans, they are likely to face business failures and the loans will be added to the already mountain-high NPAs sitting with the banks. In short, without creating demand in the rural market, such a prescription is a recipe for disaster as any economist worth his salt will concur.

Prime Minister Narendra Modi’s address to the nation in the evening of May 12 was on the expected lines. Again, he spelt out how India needed to become self-reliant without uttering a word about the roadmap. Just like when he had said India was on its way to become a $5-trillion economy but not how. Modi did not have a word about migrant workers and their plight.

This was totally unexpected from the Prime Minister of a country whose millions of poor people are right now marching on their foot to get home, many of whom are collapsing and dying on the road, on train tracks. This kind of lack of empathy for the misery of the poor is unprecedented in the annals of independent India’s governance. If the Prime Minister is blinded by arrogance of his landslide victory in 2019, he will make a big mistake. In the Indian democracy, arrogance and apathy for the poor do not pay in the long run. The sooner he rectifies himself, the better it will be for him and the Indian poor.