Centre-State coordination, health infrastructure, transport system, emergency support system and ability to deal with crisis stands totally exposed today.
- Total failure of cooperative federalism, with States blaming Centre for not helping them with finances or even release of their share of GST.
- Centre and States competing with each other in increasing VAT/Central Excise on Petroleum Products, even when the international prices were at historic low.
- A desperate attempt to open liquor shops and levy of extra excise on it, just to garner some revenue at the cost of human lives.
- States failing to provide any protection of employment and food to migrant labourers.
- Some States even refusing to allow poor people to come back to their home town, simply because they don’t have resources to manage them.
- Lack of Centre-State coordination in handling migrant-labour crises, who are forced to walk several hundred kilometers.
- Centre and State clearly failing in managing migrant labourers and in providing them facilities to safely reach their home-towns. Every day we hear bad news of these labourers dying due to accidents and hunger.
- Centre and States forcing businesses to pay wages and retain employees, without any financial support.
- Unprecedented rise in unemployment with no insurance facility of any kind.
- Agriculturists unable to access local mandis and thereby unable to sell their produce.
- Collapse of MSME sector which accounts for 30% of GDP, 45% of manufacturing and 50% of exports.
- Even in the middle to crises, Govt announcing long-term plans instead of providing immediate succour to the needy ones.
- Failure of Public Distribution System. Admittedly, some 100 million poor people don’t even have ration-cards.
- Failure of delivery system as only 25% of promised food under PDS has actually been lifted from godown.
- Police openly misbehaving and beating poor people without any reason and just to create a fear in the minds of people.
- Govt and various PSUs owe MSMSE more than 5 Trillion Rupees, and instead of releasing their money, Govt has announced a Credit Guarantee of 3 Trillion Rupees.
All this happened because we imposed a lockdown without proper planning and without putting our systems in place.
Dear friends,
Coming months will tell us whether this lockdown due to Corona pandemic was justified or not and whether our Govt acted in the most appropriate manner and took decisions which were best under the given circumstances.
We are aware what all is going-on in our Country, as we face a self-imposed man-made crisis. Entire country is under lockdown for over 50 days now and no major business activity is happening except for essential services. Govt. has opened certain sectors partially only because it stopped getting revenue due to complete halt of business activities.
Is it right to compare India with Developed Economies?
We cannot and should not compare our country with developed economies like USA, China, Japan, France, Germany, UK etc where healthcare system is strong and population is not dense. We are World’s second largest populated country with highest density. About 400 million of Indian population is so poor that it cannot survive for more than a month if they do not earn daily wages. Therefore, we have a unique situation and our response to Corona scare should have been different, as our economic conditions are quite different.
The question is whether, under the circumstances, lock-down was the only solution to deal with the Corona Pandemic. Have we been really able to control Corona because of lockdown? Have we applied our own wisdom in dealing with this crisis or simply followed the foot-steps of developed economies of the World, where they are better equipped and managed in terms of healthcare and finances? Certainly, these developed economies don’t have problems like weak healthcare system, migrant labour, hunger, supply-chain issues, etc. Before announcing lockdown, its economic impact should have been assessed and alternate options could have been explored. However, like demonetization, we imposed lockdown from the mid-night without giving any opportunity to anyone to go back to his/her native place. Everyone got stranded out of compulsion and with limited resources in hand.
Economic Impact & its effect on poor migrants/labourers
If we weigh the economic impact of this lockdown, we find that we are pushed almost a decade back. Entire business cycle has come to a halt and it will take years to come back to pre-covid state. All the markets, malls, factories, hotels, restaurant, transport, inter-state movement etc stands closed and we ourselves have decided to close them down. The worst affected are daily wage earners and poor migrant population. They are stuck between Centre-State conflict, dirty politics and are left at the mercy of God. Most of these labourers are now unemployed and feel that they will be better-off in their home-town, where their families stay. Operation of trains and buses have been stopped by States under fear of Corona-threat and to prevent the spread of virus. Therefore, they were left with no option but to proceed to their home town by whatever means of transport available to them and majority of them having no option but to walk.
Our system is so insensitive to the plight of these migrant labourers that despite daily exposure in mainstream media, our Centre and State Govts are not coming forward with any concrete plan to address this issue. Instead of helping them, police beat them mercilessly and they are mistreated at State-borders as if they are infiltrators of some other country. Many of them have died in road and rail accidents.
But the key issue to address is that our Govt announced this lockdown without studying its Pros and Cons and without its own assessment of the threat. It has hit the economy so badly that it will take us along time to come back to pre-covid-19 state. When lockdown 1.0 and 2.0 was imposed, entire labour class was forcefully spending time in the Cities but now strangely, when the lockdown is being lifted slowly, arrangements are being made to send migrant labourers to their native places. Can’t the Govt convince them to stay back and assure them of employment by lifting restrictions on industries/businesses. Labourers are back-bone of our economy. If they go back to their home town, who will work in the factories, construction sites or in agricultural farms. Once they go back to their home town, it will be difficult to bring them back easily and that it will aggravate the problem manifold. Poverty will increase in rural areas and they may not be welcomed in their home-town as well. What would they do by sitting in villages without money and without work? If villages had employment opportunities, they would not have migrated to the cities. On the other hand, factories will also face problems in the absence of labour. Production will halt and it will make the goods more expensive. Ultimately, all this is going to disrupt business cycle and impact economic growth of the country. On the one side incomes will get reduced and on the other side things will become expensive because of under-utilisation of production capacity in absence of labour, and forget the capex for now.
The Economic Package
In order to minimise the impact of this prolonged lockdown and to reboot the economy, we were looking for an economic package from the Govt. Initially govt announced some moratorium period for the EMIs of the loans but if we really calculate the economics of that moratorium and choose to exercise that option, we will end up paying more to the banks towards interest cost. Govt gave relaxation in payment of GST but here also interest is not waived for the businesses whose turnover is above Five Crores. Govt has not provided any waiver in any statutory dues. Poor businessman has to pay salaries, EMI, interest, utility bills, rentals and what not and he is forced to sit at home.
The much-awaited economic package was announced by our PM on 12th May 2020 and later it was explained by our FM in four days. The entire “Economic-Package” was touted to be of Rs. 20 lakh crore, but later we came to know that a major part of it was towards loans, foregoing of tax deductions, long-term plans, reforms, creation of funds to be used in future etc and it also included earlier liquidity measures announced by RBI and PMGMP worth Rs. 9.94 Lakh Crores. Experts say, the total actual outlay under this economic package is not more than 2 lakh crores. This only proves that the our Govt itself is under stress and does have much to offer. We needed a package for economic revival and not just for economic survival.
What should we do now?
India has huge resources and a strong consumer base. Without further waste of time, we should allow economic activity to start. Data has proved beyond doubt that Corona is not as dangerous as it was touted to be by some medical experts earlier and even by WHO. Instead of blindly following WHO guidelines, India should have applied its own wisdom and instead of a complete lockdown we could have scaled down the operations.
Moreover, there is no logic or reason to create panic or fear in the minds of people and this economic/financial crisis should not be used to raise taxes which would only undermine the economic growth required to regain our strength. Indiscriminate increase in Taxes would further deteriorate business environment and may become a big hurdle in revival of businesses. Govt. should give more money in the hand of small businessmen, farmers and workers, so that they stand-up again and get ready to help economic revival.
It would be a great service by mainstream/social media if they stop hourly coverage of Corono-Pandemic and give such information once in 24 hours. After all we have hundreds of other fatal and contagious diseases to deal with.
Thank you
CA Kanta Sharma
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