Solutions to Central and State governments in and post lockdown.

Updated: Jan 21

We are observing a lot of people who work as daily wage workers, registered site workers, unorganized sector employees, agricultural laborer struggling to live in this lockdown. They now started migrating back to their houses in villages. If even some carry the virus with them then it would be virtually impossible to govt to contain the disease in those rural areas. We in our previous article (click to read it: FM’s relief package is essentially very small) have expected this situation. So now, we have tried to find a solution for this problem. We have made a framework which helps government in reducing the migration of such people and precisely benefits them in this lockdown.

Solutions to State governments.

Solution No 1: Open the existing food schemes like Rs 5 meals.

In the above said article we have mentioned why giving money and ration are not useful to these migrant people. The most prominent solution would be opening existing food schemes. For instance: Some states like Orissa, Telangana have Rs 5 meals schemes. It is in interest of the above mentioned people. The indefinite suspension of such schemes is causing these people to worry about their hunger(because they have no money in hand). Also give them enough cash in hand by cutting down the additional PDS which government has announced. PDS is not the solution which will work now. These people are searching for the readily available food as most of them are dependent on road side eateries. Government should take appropriate measures to build temporary infrastructure for such schemes or shall avail home delivery facilities. For instance if an area had 1 stall of Rs 5 meals, government now should set up 10-20 stalls now so that the social distancing norm shall be adhered.

Solution No 2: Give work for at least three days a week (alternate days).

Government should ensure people getting work for at least three days in a week so that their hardships for living reduces. As we have mentioned in the above point government, if proposed to build temporary infrastructure then these people will also get some employment opportunity. Government should also take appropriate measures to adhere to social distancing. For instance government can employ people from the locality in which they are building the infrastructure. Like if stalls are being set up in an area, workers from the same area shall be employed and same shall be continued in other areas also. Note: Also government should maintain records of such employment so that the government shall know who are eligible under food schemes.

Solution no 3: Hire Zomato, Swiggy, Domino’s etc for delivery food.

This will reduce burden of logistics as these companies are already into this business. With lockdown in effect, these companies business is also dull. Government should encash this opportunity in distributing the food to poor. As per these companies Wikipedia pages, Zomato has around 5000 employees and Swiggy has around 218000 employees in India. Government should also take appropriate steps in increasing the deliveries in rural villages as these companies presence are mostly in Urban cities and towns.

Note: All the above mentioned points are based on an assumption that the government shall maintain records of the individuals mentioned. If not, then government should first take appropriate steps in recording their details so that identifying them would be easier for availing the food at this period.

Solutions to Central government.

Solution No 4: Borrowing limits and funds to states should be increased.

The funds which the Central government is allocating to states is not sufficient and the packages which it is announcing in piece meal will not reduce the problems at all. Central government should give states the job of containing the virus and it should go all out to ensure the needs of states are satisfied. Presently states can borrow up to 3% of the Gross State Domestic Product (GSDP). Government should increase it to at least 5% so that states can work more effectively.

Solution No 5: Divert the money of MPLADS, MLALADS and any other similar schemes.

Central and state government shall take adequate steps to divert the money of MPLADS, MLALADS and other schemes so that the funds are readily available. Central government has already diverted MPLADS to PM CARES but distribution of income should also be at rapid pace.

Solution no 6: Mid day meals to children delivered to their houses.

Central government should immediately allocate funds to this scheme. Malnutrition in India is a big problem, answering them is also the need of the hour. Central government should take steps in delivering the food to children by the means as mentioned in solution no 2.

Solution No 7:

An article written by Mohan Guruswamy, a political analyst says that there are about $480 billion meeting abroad with low interest in return. As per his view government could spend at least 10% of it i.e. 3.2 lakh crore. He also mentions the RBI having 9.7 lakh crore reserves. He estimates a third of it would do the job. Also top corporates have liquid cash reserves of about 10lakh crores. By this we can observe that money can be brought into economy by many ways but prioritizing it is the need right now.

Solution 8: Waive interest on EMI’s upto next 6-9 months or give GST credit of 50% of workers wage bill of six months availed over next 15-24 months.

Moratorium given by RBI doesn’t include waiving of interest but just postponing them for three months. RBI also announced rate cuts in repo and reverse repo and recently it has reduced reverse repo rate again to 3.75% directing banks to lend more to MSME’s post lockdown. But will this benefit reach them is our question. Banks give majority portion of loans to top corporates which have a good credit rating. So RBI’s reduction in rates have been not so useful when it comes to real sense. For this, RBI have to create a window where loans are given directly to MSME’s which are in need without interference of intermediaries. Also RBI have to waive of the interest accruing for next 6-9months (including moratorium period) for these MSME’s as burden on them may increase in long run.

Government may consider giving GST credit of 50% of workers wage bill of six months availed over next 15-24 months. This will help MSME’s in reducing their operational cost and focusing on how to increase their revenues again. Remember the cash flows MSME’s have are atleast for 7-10 days. Post lockdown they will have no cash in hand to run the business. They solely depend on the orders they get. In this period, government taking the burden of paying wages would definitely give a moral boost to the sector and the economy.

– ANJAN KUMAR, VISHAL SV, VAMSHI KRISHNA (Authors are students pursuing the Chartered Accountancy with The Institute of Chartered Accountants of India(ICAI). They are nowhere the industry experts.)

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