Coronavirus continues to wreak havoc in India. The Government’s response continues to be neither here nor there. Half-baked lockdown continues to yield half-baked results. As the days of lockdown continue to rise, the pitch for a stimulus package for Indian Economy becomes louder by the day.
With each passing day, the Industry bodies keep releasing statements about their dire straits. Out of favour economists keep giving calculations of the size of the stimulus package required. Business media keeps quoting about the stimulus package required as the % of the GDP to revive the Indian economy. So far, so good. It is business as usual for them.
Nobody would question the need for the stimulus package. That is not the question on hand. The correct question would be – Where the heck is the money for any kind of economic stimulus in India? Nobody raises this question. Everybody takes it for granted that the Government coffers are full of money and just the tap needs to be turned on.
Economists opine to spend the money, not to earn the money
Raghuram Rajan and Abhijit Banerjee have interacted with Rahul Gandhi on this subject. Both the gentlemen, of impeccable pedigree, have noted that the poor of the country need to be given the money. Both the guys have said that India needs a larger stimulus package to help revive the economy. I suppose, even the stray cat, my daughters are feeding daily, would have the same opinion; if asked.
These noted economists are giving their valued opinion that money needs to be spent. However, the same noted economists go silent; rather they are never asked as to whether the Government has the money in the first place to spend. Though, if asked, in all probability, they would answer that the Government should go ahead and print the money, whatever required. Even though, they know that India cannot afford to devalue own currency.
These economists would give no ideas to responsibly earn the money to spend. Leave aside these two economists; take any economist of any hue – Amartya Sen or Arvind Panagariya or anyone else. Have you ever heard anyone of them making any sensible suggestion to earn the money for the Government?
All of them would write epics, rather have already written, on how to spend the money. However, to earn money, they have no ideas to offer. What kind of economists are these?
Pradhan Mantri Garib Kalyan Yojana and RBI Measures
The Government of India did have one shot at the coronavirus stimulus package. It was unimaginatively titled – Pradhan Mantri Garib Kalyan Yojana. The measures were even more unimaginative.
- Increasing the wages under the MGNREGA, which were already due, and then running the schemes in fits and starts, to ensure that nobody gets the increased wages.
- Increasing the ration distribution in PDS to reduce the rotting stocks of FCI. However, the reluctance to extend the one nation, one ration card scheme to all states ensured that FCI continues to hold onto their dear rice and wheat.
- The funniest part was the Government paying PF of some weirdly defined criteria of employees to EPFO. These employees may end up losing their jobs or might have already lost. Yet, their PF corpus would increase, as the Government would pay another arm of the Government, but not the people.
RBI knows just one thing irrespective of the situation – reduce interest rates. Shaktikanta Das dutifully obliged. This time, he did one more thing though. He put a moratorium on EMI payments for three months, with a condition that the interest would keep getting accumulated. What a relief!!
If at all, these measures should make it clear that the Government of India has no money for anything, leave aside a stimulus package. Actions speak louder than words, and actions, till now of the Government, is shouting from the roof-tops that it does not have any money.
The Government just keeps paying itself and the employees
Everybody is aware of the elephant in the room – the Government’s establishment and employee expenses. Apart from corruption, this is the single largest head that covers almost entire of the Government’s earnings.
The Government has taken over MPLADS and frozen dearness allowance. However, these are kneejerk reactions and do not strike at the root cause of the ill. Till the time, the Government bites the bullet and rationalizes its expenses; it is not going to have any money for any kind of the stimulus package, leave aside the coronavirus stimulus package.
Whom to give the stimulus package
This is the last of the trouble. The Government does not have any worth-while data for anyone, for any industry. Everybody wants the stimulus package to be a % of the GDP, but that GDP data is also circumspect.
The migrant workers are the worst affected and the Government, Centre and the States, is blissfully unaware of their existence. The MSME sector needs help, but the majority of them fly below the radar. The data is available for the organized sector, but they are decadent enough to wash their non-coronavirus sins in the stimulus package.
In nutshell, the Government has no money and whatever pittance it does have, it does not know whom to give. Till the time, the bloated Government trims down, the situation is not going to improve.
So, what has to be done? The Indian solution – Kick the can down the road (figuratively and literally).