Modi govt relief package only beginning; more nuanced approach needed in next stage of corona battle

The announcement about income support scheme by the union finance minister, Nirmala Sitharaman, has come in timely. In the prolonged lock-down, it would be the casual low income workers who could be the worst hit. Therefore, it is this group of people who needed urgent succour.

The finance minister has made several more announcements like contributions into the employees provident funds for smaller units employing fewer than 100 workers and those earning upto Rs15,000 per month. This will help the smaller units and at least give them incentive to retain their workers. Prime minister has already made an appeal to employers not to lay off their workers in his national broadcast announcing 21-day lock-down.

There are two aspects of the support needed. First, is physical —that is, supply of say food and fuel— to the distressed families. These shortages would be faced by all, irrespective of income and wealth in times like this when there is society wide lock down. Maybe, those in better income groups would be in a better position to order these from suppliers.

The government will have to work out detailed and practical strategies for physical supplies of these essential items to all. Food grains are in ample reserve and in fact these stocks could be liquidated in offering the supplies. One existing advantage is that the extensive public distribution system could be revived to deliver these essential items to the needy.

If this is not done quickly lock down could provoke adverse public reaction. Already, there are early signs of that public antipathy. Besides, if this is not properly done, the entire advantage from the lock down could be negated in harried and crowded marketplaces where people seek to meet their daily needs in haste.

The second aspect is the financial. That is, people must have money in hand. If there is a prolonged lock-down this would become the most scarce commodity. For the daily rated casual worker, he earns really his daily bread. Even his purchases are tuned to his daily earning cycles. They will not buy a full provision for a week, let alone a month. They retuned to purchasing the wheat or rice requirements for a day or two maximum.

Then they do not buy in the normal purchase timing. They will rather buy in the evening after their daily chores and employment. These days when lock-down is in force, they would face difficulty in meeting their requirements of food and essentials in the absence of employment.

One way would be to directly transfer their entitlements into their Jan Dhan bank accounts and they could be issued debit cards along with the transfers of the money. The PDS outlets could also be urgently empowered with digital facilities and point of sales instruments to let the DBT beneficiaries to directly purchase their requirements. Such facilities will ensure there is no big crowds in the banks and thus defeat the basic objective of a quarantines.

The income support scheme, running into Rs 1,70,000crore looks substantial but in the absence of further details it looks that it is blanket scheme without much variations in support to be provided. A income support scheme was in order even without a corona onslaught on the country. There was a pre-existing condition of demand recession in the economy which had brought down the level of activity and growth.

The income support scheme is principally in anticipation of loss of employment and income consequent upon the forced lock down. Once having announced this scheme, it might be timely to attempt a detailed study of the loss of income and employment.

However, it is not easy to maintain the level of employment in such times. When there is no activity for over three weeks, it will be the smaller and even medium scale units which will be hardest hit. They will be hard put to maintain their employee strength. We have to remember that the tiny and small units are the mainstay for employment in our country.

The toughest job will be to manage the aftermath of the corona virus fight. It now looks like this will not be a short and intense one. It might have to stretched out a bit longer. Hence, the armoury will have to be full. The lock-down may have varying intensity in varied areas to minimise economic impact.

Obviously, the impact of the protracted lock-down would be more severe in the urban areas than in the rural. The urban areas are more thickly inhabited and their exposure to the imported virus would be maximum. It might be in order to put some restrictions on travels between urban centres, smaller towns and other areas like industrial clusters and the rural hinterlands.

The supply chains between these two parts could be more closely monitored to minimise impact on supplies of essential supplies and thus the economic impact of the lock-down. The continued movements of such supplies from the less affected rural areas into the urban conglomerations could help create income stream in the rural areas and keep the supply lines full for the more affected urban areas.

In the rural areas, in open spaces the work in the fields could continue unhampered. More intensive approaches for creating off-farm but value-added agro-progressing activities in the rural areas could help create more jobs in the rural areas. Incomes could also rise in these areas, taking off the pressures for income support schemes.

Many of these are by their very nature long term and cannot be really operational in a short time frame. But whatever little we achieve in these directions could be helpful.

These are difficult and trying times. We have to stretch to the maximum to achieve ambitious goals. In difficult times we give our best accounts.