These are not normal times for any country in this world. In one swoop COVID-19 virus has proved how fast it can globalize and integrate all countries and people but in a disastrous way.
While the western countries are paying a very high price for their initial lackadaisical attitude, one shudders to think what price India will have to pay should the situation assume the pace and proportions of those in western countries.
Hand-to-mouth
India, with two-thirds of its 1.34 billion people having to make do with a hand-to-mouth existence the COVID-19 induced health crisis could easily transform itself into a hunger crisis for this vast unimaginably large mass of people. With 90 per cent of its workforce without employment or social security worth the salt, a lockdown means no work and hence no wages and thus no means to support the family unless the state steps indecisively and in full measure.
A rough calculation of no-work-no wages for the 90 per cent of the workforce translates itself into a wage (and earnings for the self-employed) loss of at least Rs 3.5 lakh crores per month for these insecure, or what is called, informal workers. We are already witnessing this with the current lockdown that is set to go beyond one month. That is also a sudden demand compression adding to the other dimensions of demand compression.
A lockdown in economic terms means a simultaneous demand and supply compression that has already halted this large economy consisting of a very large number of very small units of production and services.
Strangely enough, the expenditure for keeping the health system in an overworking mode and the attendant support system and minimal exchange of food and medicine are the ones that are contributing to the maintenance of a part, albeit small, of the national income.
The biggest crisis India is now facing is: How to avert mass deaths and probable social unrest due to starvation and fear of death in its quest for halting the COVID-19 spread and the resultant few deaths?
The need for extraordinary measures
Extraordinary times call for extraordinary measures. Despite the neoliberal rhetoric of minimal government and the blatant sale of the ‘family silver’ to the ever avaricious big private corporate sector, it is the state – both its national and regional manifestations – that are called upon to save the people, their livelihood, the economy and, in sum, the country at large.
While the state governments are the ones that struggle to respond to both the health and livelihood crises, the initiatives from the national government are minimal, at best, and scandalous, at worst. An economic relief package equivalent to less than one per cent of the national income has now been revealed to be a mere 0.5 per cent or so if one were to adjust for existing budgetary allocations.
The financial allocation of a mere Rs.15 thousand crore for fighting the spread of COVID-19 sounds like a cruel joke given the enormity of the battle that is slowly but surely emerging in one state after another.
Despite having a President known for his open and extreme bias towards business interests, the state-system in the United States has managed to announce an economic relief package close to 10 per cent of its national income.
A similar conservative political populist regime in the United Kingdom did not prevent it in announcing a relief package of 375 million British Pounds that is equal to around 17 per cent of its national income. Similar responses have already emerged from a number of countries.
The Indian government’s timid respond is nothing but a political tragedy that the Indian people – ever-patient and willing to wait – don’t deserve. Is this because there are no options for the Indian government to mobilize the required resources?
Budget allocation in the national crisis
A sovereign national government has an enormous number of options to raise resources including creating new money and spending it in such a way as to maintain the effective demand of the working people that will be least import intensive given the fact that it would be mostly spent on wage goods that would support the local economy from collapsing. It also has the option to cut down on non-essential expenditure.
Budget reallocation would be a much-needed exercise in times of national crisis. Let me put forward a few examples to provoke a discussion. An amount close to at least ten per cent of national income should be treated as the target for fighting the twin crises of COVID-19 and the loss of livelihood that constitutes the effective demand for the economy. That gives a target of 20.1 lakh crores. If the fiscal deficit is doubled it should give an additional amount of 10.9 lakh crore (another 2.2% of national income for the Government of India and another 3% for the stats). This will be new money.
To this, the Government of India should add the Rs.1.44 lakh crore that was gifted to the private corporate sector by rescinding the decision. That would be a small acknowledgement of its primary obligation of protecting the lives of the vast masses of working poor and their families.
As for budget reallocation, there should be a closer re-examination to reduce non-essential expenditure as well as the reallocation of priorities. Do we realise that it is the Ministry of Home Affairs with its large and several contingents of para-military forces get the second-highest priority in the Union budget?
The budget allocation of Rs.1.39 lakh crore n 2019-20 was hiked by 41 per cent to give Rs.1.67 lakh crore in 2020-21. This hike can, and should, be rescinded and given over to the Ministry of Health and Family Welfare that gets a sum equal to a mere 41% of the budget allocation of the Ministry of Home Affairs.
Policing the people trumps over health security, no doubt. Similarly, the luxury of re-building the central vista in and around the Indian Parliament can wait and the allocation of Rs.20,000 crore can easily be added to the economic package. And so is the frequent travel of the Council of Ministers and bureaucrats.
Shaving off 15% from the budget allocation of all Ministries, especially when no worthwhile expenditure is incurred in times of lockdown, should not be a pain at all. A sum of Rs.4.5 lakh could thus be diverted to protect the lives of people and the demand and supply systems in the economy at the same time.
An amount of 16.84 lakh thus mobilised will be equal to only 8 per cent of the national income with 2.1% coming out of budget reallocation. This would set an example, hopefully, for the big private sector to pitch in with contributions in money and/or in-kind that will ultimately turn out to be in their self-interest.
The civil society organisations, numerous as they are across the breadth and length of this country, have already come in with their meagre resources but enormous empathy and labour to provide some succour to the suffering people. That needs more encouragement, recognition and elevation to a higher order of politics of humanism in these troubling times, in more sense than one.
