The Centre needs to announce a ₹10 lakh crore fiscal stimulus package providing universal food ration and cash transfers for 80% of households in order to revive the economy at this time, the Heterodox Economists Collective has urged. Employment guarantees must be expanded for both rural and urban workers at a time of soaring joblessness, the group of economists added during a webinar on Wednesday.
Funding such a package would require suspension of fiscal deficit targets, which could impact the country’s credit rating. “It does not help if you have a wonderful credit rating if your economy is going down the drain,” warned JNU professor and economist Jayati Ghosh. “If fear of credit rating agencies are what drives the government’s policies, they are doomed to failure,” she added.
Presenting an analysis of the government’s ₹20 lakh crore Atmanirbhar package on Wednesday, the Heterodox Economists Collective observed that the fiscal component amounted to only ₹3 lakh crore, which includes already announced budgetary measures. The measures announced for MSMEs would only benefit larger players within that segment, they said, adding that provisions for higher liquidity may not increase actual credit offtake. Minimum support prices for farmers had not kept pace with inflation, while real wages were being suppressed.
In order to mitigate the crisis, the public distribution system must be universalised, with free cereals, pulses and cooking oil provided to all for the next six months, said the economists’ group. It proposed cash payments of ₹15,000 to the bottom 80% of households as compensation for lost incomes during the 75 days lockdown. Employment guarantees needed to be expanded to urban areas, while agricultural work needed to be included under the existing rural scheme, with 200 days of guaranteed work, said the economists.
To fund the package, they suggested the issue of special bonds for low-interest public borrowing, increased central transfers to States and, if required, a monetisation of the central fiscal deficit.
