The nation has to end the lockdown having high human cost. Any more extension would be disastrous for all including education, farmers, transport sector – train, flights, trucks, buses to taxis and small vendors. 200 migrants also corona heroes.
Pay or allowances cut exacerbates a crisis. It hits the purchasing power and recoils back on the economy. The crisis has been brewing and instead of sending a grim signal, centre could have deferred payment or as in the past credit it to provident fund instead of freezing it.
The actual deferment due to DA freeze would be Rs 38000 for 48 lakh central employees and 82,000 crore for 1.6 lakh crore state staff – Rs1.20 lakh crore. As it is not deferred payment it would hit all future payments, calculations and retirement benefits. It will be a major loss to the economy. It signals contraction as the corporate also either cuts salaries or reduces number of employees hitting about 10 crore workers – 40 crore people. In reality the government would get about Rs 40,000 crore back as income tax and at least Rs 25,000 crore as indirect taxes if the DA is paid. The unorganized has already thrown out at least 5 crore people out of job leading to the largest exodus of migrant workers since 1947 partition. It is straining MGNREGS. It is the beginning of severe downturn. It is to last years, says Sanjeev Sanyal, principal economic adviser. About 5 percent of companies are hopeful of revival in 12 to 24 months, reveals a study by Wills Towers Watson. The optimistic 57 percent expect moderate to large negative business impact in the next six months due to corona lockdown (LD). While 46 percent organisations expect the gloomy phase to be over in 12 months, 19 percent expect it to last for two years.
He is silent on prices. These are rising everyday as production and supplies are hit. A major concern of many organisations is labour shortage post lockdown as migrant workers are walking back in extreme weather conditions for survival and food. Some were buried under snow, many died a few miles away from their homes after walking for1000s of km, and some committed suicide.
Over 200 of them lost their lives. They are not in the list of corona heroes. They remind of the harshest treatment that girmitia or indentured labour was meted out from Fiji, Mauritius to West Indies. The deaths due to corona till April 23 are 686. Official doles for 80 crore expose that the country’s claim for number of people below poverty line at 21.9 percent as per Asian Development Bank or 23.6 percent of World Bank – 28 crore – is not correct.
Sanyal is right. He says, “We are not going to solve poverty by giving Rs 500. We are just cushioning the hit”. So RBI with great fanfare announced that it has recapitalized banks and other financial institutions with Rs 1 lakh crore cash. It does not reveal that it is depleting its reserves once again. It also exposes the fragility of banking system. This money is not to be spent for the poor but for habitual defaulters, at least since 2008 financial crisis. The official Economic Surveys have recorded that 50 largest companies were the biggest defaulters leading to the collapse of the banking system and its huge NPAs since 2008-09. In reality, the large organisations do not need any support at this stage. If the government is expecting that these would create jobs, it is daydream. In 2008-09, they did not do and even they are not likely to do it now. Interest rate cut is to hit the savers and geriatric. The sudden LD has hurt severely. Instead of such strong steps, India had the option to look for selected measures as some countries have done. The corona toll is almost comparable but disruptions less.
It is virtually a second major blow since 2016 note-ban blow. The total loss might be more than presumed due to lingering effect of LD and the 23 percent fall – $ 20 billion – in NRI remittances. Oil price fall spells doom for Indian workers in the Gulf. If the lower oil price – below $ 20 – benefit is passed on to the consumers, it can help reduce costs and hardships. But falling rupee to Rs 79 to a dollar and high gold prices also have fallouts. The Rs 43,574 crore Facebook investments in Jio telecom wipes out its debt. Another Rs 7600 crore Abu Dhabi royal funding of LuLu groups of Kerala revives hope that India has still faith of foreign investors. So does Kotak Mahindra bid to $ 1 billion equity capital.
The challenge is how to win back confidence of migrant workers for their return. The rural and farm economy has to be strengthened. Post-corona a new model is needed. Villages have to sustain India – decentralized cash economy, as discussed by RSS in its revival of village clusters – gram sankul yojana – in April 2015. The system has to respect the human capital. It is they who make an economy. Through toil they earn and by spending they sustain. Their wage suppression and harassment has to be replaced by giving the real cost to honour dignity of labour and sustainable livelihood. The virus also reveals that 1991 economic model has failed. A new system has to be carved out. As Bill Gates hails prime minister Narendra Modi as world model, chances are bright. But the revival plan has to target the common man and his free movement instead of large houses. An essential is to reduce and removal of unnecessary costs like highway tolls, fast tag, many cess, fees, irrational charges, city entrance taxes and cut in GST. The nation would revive as people toil and move freely. Restricted access-controlled highways or facilities are the biggest revival hindrance.
The poor have to be empowered and banks have to honour their savings with higher interest payments. It would help the banking sector bolster its cash reserves. The nation has to end the LD. Any more extension would be disastrous for all including education, farmers, transport sector – train, flights, trucks, buses to taxis and small vendors. Diseases are not new to this country. Selective isolation of areas would solve that. But policing the entire country has led to many protests, unhappiness and lack of trust, unsafe roads and lynchings. Modi is capable of taking firm and bold decision. If he takes the plunge, the virus would be conquered and economy would be back on rails.
Shivaji Sarkar
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