Modi Govt has no sense of economic crisis or has plainly refused to address it: Congress

The Indian National Congress (INC) came down heavily on May 25, Monday, on the Narendra Modi-led BJP government at the Centre for the latter’s complete lack of sincerity and direction in its attempts to mitigate the economic crisis, that had already engulfed the country, but got aggravated by the lockdown aimed at flattening the COVID-19 curve.

In a strongly worded and detailed statement, INC general secretary and senior Congress leader Mallikarjun Kharge said, “It has been 60 days since the lockdown and every sector of the Indian economy faces a grave crisis. We needed a sector wise plan and the government had 60 days of lockdown to plan for this. Sectors like tourism, hospitality, airlines, transport, retail, restaurants, construction needed very specific measures, given they employ large numbers of people. But, it is clear from the measures announced last week that the government has either no sense of the crisis or has plainly refused to address it to revive the economy.”

Accusing the Modi government of having already pushing the economy into a slowdown before the COVID-19 crisis, Kharge also accused the Centre of misleading the country by announcing a so-called ₹ 20 lakh crore package (10% of GDP) which effectively, he said, translates into less than 1% of the GDP.

He said, “Sudden shock of the lockdown has pushed the economy from a slowdown to a complete shutdown. The government needed to revive the economy by reviving supply, demand and credit cycle with its financial package. Instead, the economic package doesn’t just prove the government is insincere but has failed on all fronts. Announcement made by the Prime Minister of the country should be made with a lot of deliberation and seriousness, especially during such an unprecedented crisis. The so called ₹ 20 lakh crore economic package has now been analysed by experts, and its total cost works out to less than 1% of the GDP. It has come as a rude shock for anyone who was expecting some respite.”

The veteran leader spoke specifically about the crisis engulfing the farm sector and the plight of the migrant workers and called out cash transfers under Pradhan Mantri Kisan Samman Yojana and MGNREGA allocations for being grossly inadequate. He also said while even corporates were asking cash transfers to the poor in the region of ₹ 5,000-7,500 a month to jumpstart demand, the government was not willing to do that as this would be a vindication of Rahul Gandhi’s proposed NYAY scheme.

“Even top industrialists have asked direct cash transfer of ₹ 5,000 to ₹ 7,500 per month to the poor to boost demand. This would also ensure economic freedom to the poor and prevent at least 20 crore people from falling back into poverty. The government simply does not want to provide any direct relief to the poor because it would mean endorsing the NYAY scheme that Shri Rahul Gandhi had proposed,” he said.

The full statement can be read here:

It has been 60 days since the lockdown and every sector of the Indian economy faces a grave crisis. We needed a sector wise plan and the government had 60 days of lockdown to plan for this. Sectors like tourism, hospitality, airlines, transport, retail, restaurants, construction needed very specific measures, given they employ large numbers of people. But, it is clear from the measures announced last week that the government has either no sense of the crisis or has plainly refused to address it to revive the economy.

India’s GDP growth has been declining for the last 6 years, the crisis was brewing even before the Corona pandemic. Sudden shock of the lockdown has pushed the economy from a slowdown to a complete shutdown. The government needed to revive the economy by reviving supply, demand and credit cycle with its financial package. Instead, the economic package doesn’t just prove the government is insincere but has failed on all fronts. Announcement made by the Prime Minister of the country should be made with a lot of deliberation and seriousness, especially during such an unprecedented crisis. The so called ₹20 lakh crore economic package has now been analysed by experts, and its total cost works out to less than 1% of the GDP. It has come as a rude shock for anyone who was expecting some respite.

The PM only intends to make grand headline news without taking his colleagues into confidence. That is perhaps why Finance Ministry was unprepared and put together such a shoddy package. On 5th May, the Chief Economic Advisor specifically warned against a stimulus measure as large as 20 lakh crores or 10% of the GDP saying India cannot afford it. Probably, he was not aware that the Prime Minister was announcing a ₹ 20 lakh crore package a week later. In any case, it turned out the package is worth less than 1% of the GDP but it shows how the government functions.

The economic package had no immediate relief for the agriculture sector except talking about reforms. Today, the agriculture sector is the only bright spot which is expected to grow at 3% when the GDP for the 2nd quarter is expected to fall by as much as 45%.

Farmers have already lost fruit and vegetable produce due to lockdown, have sold crops at below minimum support price because they could not transport their harvest. A sincere government would spend money to procure harvest.

The government is giving ₹ 2,000 every quarter to farmers, which comes to a measly ₹500 per month as Pradhan Mantri Kisan Samman Yojana. If the government can announce that no insolvency and bankruptcy proceedings will be initiated against businesses that are affected due to corona, then it should instruct banks to treat farmer loans the same way. Farmers should not get into the clutches of local moneylenders because banks are hesitating to give them fresh loans. In the name of agriculture reforms, the government is happier to allow private traders into APMCs. In the name of land reforms, it wants industrialists selling and buying farmers’ land.

The rural areas are expecting a huge influx of migrant workers going back to their villages. MGNREGA remains the only social security net for the rural poor. At ₹200 per day, the additional ₹ 40,000 crore funds for MGNREGA would translate to only 20 days of additional work for 10 crore workers. Would this be sufficient to take care of the additional 8 crore migrant workers who have gone back to their villages? Would this be sufficient to take care of 150 days of work under MGNREGA that the government should be providing?

The misery inflicted by the lockdown on the migrant workers is unmissable. There has been no relief provided to the migrant workers, in fact the government has openly mocked their plight in their press conferences. If the government had announced direct cash transfer to these migrant workers when the lockdown was first announced, probably they would not have felt the need to walk back hundreds of kilometres. The government says providing free ration from its overflowing godowns is part of the relief package and put a price of ₹ 30,500 crores to it. This ration was to be given to those entitled to it anyway. What is the special relief in giving the monthly ration due to the poor anyway?

Even top industrialists have asked direct cash transfer of ₹5,000 to ₹ 7,500 per month to the poor to boost demand. This would also ensure economic freedom to the poor and prevent at least 20 crore people from falling back into poverty. The government simply does not want to provide any direct relief to the poor because it would mean endorsing the NYAY scheme that Shri Rahul Gandhi had proposed.

The so called Rs 30,000 crores relief package for construction workers is an eyewash too. This money is coming from the Building and Construction Workers’ Cess that has already been collected by the government. The state governments have currently about ₹52,000 crores under this fund, there is no money being spent by the central government.

The government is erroneously claiming relief of ₹ 6750 crore with its announcement to reduce employer and employee contribution to PF from 12% to 10%. While this is a relief to the employer, there is no relief in this to the employee. The PF account is a social security for the employees after they retire. The government has no right to tinker with this. When the crisis began, instead of providing direct relief to workers, people were forced to use their own retirement savings.

All the steps taken for MSME sector will not help in creating demand for their products. Most MSMEs do ancillary and job works for larger industries. The large industries are reluctant to start functioning because they do not see any demand in the market today. The government has ignored putting money in the hands of the consumers.

The government has through the court ensured that industries need not pay salaries to workers if they are closed. The government could have given loans based on EPFO/ESI records to support businesses to pay the salaries for the next three months. Alternatively, the government could have rewarded honest tax paying businesses who provide relief to their employees by announcing a package for every business based on their tax returns.

The Finance Minister did not speak of any immediate disbursal of funds of even pending dues to the state governments who are at the forefront of fighting this pandemic. The central government still owes about Rs 30,000-34,000 crore to states as GST compensation for December and January. The revenues of the states are already hit due to the lockdown. The minister announced that states will be allowed to borrow an additional 2% of the state’s GSDP but with a lot of conditions about how these funds should be used. The union government does not have either moral authority or constitutional authority to impose such conditions. If the union government was sincere, it would have helped the states borrow from the open market through RBI at the same rate at which the central government can borrow.

The agenda of the government under the cover of Corona relief in the name of reforms seems to be selling PSUs when the markets are down, removing the protection of labour laws, and allowing the rich to freely buy the distressed farmer’s only asset – his land.

The government has lost a big opportunity to provide relief to the crores of migrant workers, the poor on one end and the industries on the other end. The relief package and the press conferences have not only exposed the apathy of the government towards the migrant workers but also its arrogance and hypocrisy.