FM's relief package is essentially very small – PART 2

Updated: Jan 21

Landless agricultural labour

For them FM has announced an immediate release of 2000 rupees to each farmer out of 6000 rupees which they get on annual basis under Pradhan Mantri Kisan Yojna.

How will this help? 

This is a harvest season and farmers were very happy before lockdown as they were expecting bumper crop this year, this sudden lockdown has impacted them as the mandis are shut due to transportation problem. The 2000 rupees that the FM announced will help them in this situation but what about their crop. Remember farmers earn only when they sell there harvest. They depend on there savings that they earn on this harvest until their next harvest.

FM also announced an increase in wages under MNREGA from 182 rupees to 202 rupees. I think reacting to this increase is useless because the timeline in which shall be paid. When I said 500 rupees given to daily wage earners is a small amount. This increase in amount is negligible. Inflation (CPI) will be more than the increase in wage if this lockdown continues for a long time. State governments are paying more under schemes which are similar to MNREGA. The view of FM is not specific enough to calm down the disturbed poor.

MNREGA by definition need at least 15 people to work. This size of lockdown never permits it. Prime minister himself has addressed nation saying no one to come out.

This mindless step speaks two things about the government, especially the finance ministry. They do not assess well or do not believe in themselves to handle the situation well. These two things do not lead to proper planning, which is evident during demonetization, the slowdown of the economy and now after the lockdown.

To read PART 1, click here

Common package given to all these people

As per FM’s numbers there are 80 crore people who are under this category in government records. In a country whose population is approximately 135 crores, 60% are poor. You can understand the seriousness of the situation now. For these 80 crore people FM has announced an additional supply of rice, wheat and pulses. Additional 5 kg of rice and wheat pee quarter and 1 kg of pulses (daal) per quarter would be given to all these people under public distribution system (PDS)/ ration. One must know that pulses were never part of PDS. For first time it has been included in this category.

1 kg pulses per head per quarter, you may think whether this would be sufficient enough to a whole family for three months? Yes, when they add 3-4 cups of water to one cup of daal. FM’s view of poor people is not precise enough as it would reflect in the PDS distribution as announced.

Pranob Sen, economist and former principle advisor for planning commission has said,

There is no system in place to identify and assess the the need for food that they (poor people) require. They are mostly dependent on road side eateries. Closing them down and giving them money to buy will not work, instead give it to states.  

For instance Telangana has a scheme where needy people will get a plate meals for just 5 rupees. The government provides everything they need including plates to water glasses. A family including grand parents to their grand children can get food at a less cost. Now just imagine the situation of present day, there is no work, government gives you 1500 rupees (Telangana government announced 1500 rupees per month for each family along with 12 kg rice for white card holders) for three months and asks you to buy your essentials. Would the whole family whom I have mentioned above will survive? That’s what Pranob Sen has said.

He also mentioned the need of state governments. The function of the central government is to manage the state governments. State government is the one which can work effectively in this type of situation. These situations need governments to get in contact with ground people. That’s only possible to State governments through MLA, MLC etc. The central government will also determine the state’s debt ceiling. The budget of states are also stringent. Under these circumstances it’s the center which has to relax certain norms.

Solution for this

The finance minister could have increased the state government’s borrowing limits so that they can borrow more funds because economy now needs fiscal stimulus (i.e. pumping money into the economy) or she could have allocated the funds under the announced public distribution system to all states as required. She could have requested Food Corporation of India (FCI), to give the same benefits announced under PDS but through state government accounts. This would have worked more effectively. The central government has to make use of state governments reach to people in this type of situations. She should also monitor the accounts of such funds given so that there would be no leakages.

A sign on paper would have been far more effective than a speech on TV.

– ANJAN KUMAR (Opinion expressed by the author is his personal. The Generalist Insights take no responsibility of the opinion expressed.)