- 18 Oct 2020
In short, the government wants the banks to lend more and keep less and signals public to stop worrying about EMIs during the lockdown. It is the high time, when government must use the existing social sector schemes to support the poor as the concept of work from home hardly exist for such poor people or those who work in the informal sector.
The outbreak of the COVID-19 virus has not only created health crisis but also an economic crisis in the nation and it is the poor who have been hit the hardest. According to the estimates, the economic impact of the lockdown alone due to COVID-19 is around Rs. 9 lakh crores, which is nearly 4% of the India’s GDP.
How big is the problem?
The economic crisis caused due to closure of all economic activities has thrown millions of poor out of their jobs and those people who are in the informal sector of the economy such as migrant workers, street vendors etc. The migrant labourers in the construction sector are among the worst affected due to the loss of daily wages. However, the number of states including Maharashtra, Punjab and Delhi have extended various relief packages to the construction workers. Many states have also extended free food supplies for the vulnerable class. For instance, Delhi government has increased the number of night shelters and is providing food to around 4 lakh people on a daily basis.
The outbreak of Covid-19 has put the financial markets under severe stress and there is huge decline in the production of goods and services. The health crisis has led to the greater uncertainty in the economy and there is a huge decline in the consumption expenditure and demand in the market. All of these have weakened the economic growth and will hurt the future investments, which has led to the fear of economic recession in India.
Impact of Covid-19 has nearly shut down the economic activities at both the domestic and global level. It has led to the supply chain disruption, fall in exports and cancellation of global events. India largely depends on China for the supply of components and raw materials in automobiles, pesticides and pharmaceutical industries and for exports, it is highly dependent on western countries. Outbreak of COVID-19 has led to the fall in global trade and global economy is now slipping from the situation of a health pandemic to an economic pandemic.
What are the steps taken by the government?
1. Recently, finance minister has announced Rs. 1.7 lakh crores of social security measures. However, this package will not be sufficient, as with each passing day of lockdown, the ability to purchase food will diminish among the poor and needy section of the society and this will further the hunger and under-nourishment in the country.
2. Central Government has announced the PM Garib Kalyan Ann Yojana , under which government will provide the food grains to two-third of the population due to disruption in the next three months, which will be double of their current entitlement. However, doubling of food grains is only for the priority households and not to all households. It is to be noted that only half of the ration will be provided free of cost and rest half will be provided at the subsidized price under the food security act. Hence, there is a need to universally provide rations to every rural and urban poor household as the system of identification of priority households has some errors, which will lead to the exclusion of poor from the ambit of rationing.
3. RBI has also unleashed the measures to revive the economic growth. It has taken measures to inject liquidity by around Rs. 3.74 lakh crores in the financial system. Apart from that RBI has also reduced the repo rate to 4.4%, the reverse repo rate to 4 %, CRR by 1 % and rescheduled the payment of term loans and working capital loans by permitting the banks to allow a moratorium of 3 months to preserve the financial stability. In short, the government wants the banks to lend more and keep less and signals public to stop worrying about EMIs during the lockdown.
It is the high time, when government must use the existing social sector schemes to support the poor as the concept of work from home hardly exist for such poor people or those who work in the informal sector. Presently, the government is implementing large number of social sector schemes such as National Social Assistance Programme (NSAP), Atal Pension Yojana, PM Shram Yogi Mandhan Yojana etc. Government must increase the social security benefits provided under these schemes. For effective implementation of these relief measures, there is a need of centre-state and state-state cooperation to provide necessary finances and support.
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