ACT OF GOVERNMENT NEEDED

Finance Minister Nirmala Sitharaman is correct in her view that the Covid-19 pandemic was an event that was outside the control of the Government of India. The delay by the WHO in alerting the world about the seriousness of the situation led to countries welcoming flights from Wuhan long after it was not safe to do so. As a consequence of travel between the affected parts of China and the rest of the world what ought to have been locally controlled the way Nipah was in India became a global health emergency. The WHO recommended a full lockdown of activity in order to contain the spread of the novel coronavirus and this view was endorsed by the Gates Foundation. Once such stellar players made a recommendation it was reasonable for the Government of India to implement the suggestion for a complete lockdown. India has had the longest and most comprehensive lockdown ever witnessed in the recorded history of the planet and the effects on the economy and on society have been equally consequential and momentous. No country in the world has implemented a lockdown as thoroughly as India with rail and road transport being stopped in their tracks for months on end and not just flights. As a consequence, the hospitality and travel industry has been hit hard and will need effort and time to recover. Small and medium enterprises were the first to feel the effects of the Great Indian Lockdown and the fact that till now no relief has been given on account of electricity, rent and interest has resulted in hundreds of thousands of enterprises facing extreme financial difficulties at the very time when lakhs of crores of rupees have been written off the books of commercial banks. Had the moneys that flowed to the banks gone in the form of forgiving of the interest burden during the period of the pandemic of small and medium borrowers there would not be the danger of mass defaults once the moratorium on repayment of loans ends, as is expected to happen soon. Such defaults would weaken not just the banking system but several industries as well, besides placing a damper on consumer spending and consequently investment. Since 2011, there has been a slowing down of fresh investment in plant and machinery across several sectors, many of which are facing a situation of overcapacity as a consequence of the spread of Covid-19 and its effects on the economy. Overall there may be justification in declaring an Economic Emergency or holding a special session of Parliament in order to discuss and pass legislation intended to provide relief to job givers as well as job seekers. The government of a country with hundreds of millions of young people needs to devise ways of giving them gainful employment if social stability is to be maintained.

Repayment by the exchequer of interest due to the banks by small and medium businesses needs to be taken up on a priority basis. The development of Digital India under Prime Minister Narendra Modi has ensured that it is possible to make payments directly to the accounts of those working in distressed segments of the economy and a portion of their salaries could be paid by the exchequer in order to prevent large-scale layoffs, a trend already visible. Several of the enterprises that have been shut cannot reopen unless help given by the authorities. What is needed is act after act of government to meet the situation created by the pandemic. This is what is expected of the Finance Minister and every citizen is looking towards her for measures as would bring back jobs and prevent waves of unemployment. At the same time, there is need to look into why food prices are rising in several cities despite bumper crops and reduced incomes. Is it the farmer or the middleman who is taking the extra cash? If the latter, it is distressing as this means that there are obstacles in the way of the chain between producers and consumers of food items. There are reports that a few unscrupulous individuals have connived to speculate on higher prices and are facilitating the stockpiling of food items so as to raise prices for their profit. This is reminiscent of the manner in which a few unscrupulous elements made huge profits out of situations of scarcity in the past. There is no logic for higher food prices at this time. As for fuel prices, a reduction in petrol and diesel prices would lead to an increase in economic activity and consequently more off-take. This would ensure that revenue remains unaffected by lower taxes leading to lower prices at the pump. A policy of squeezing out the highest price that the consumer can bear in every product is not advisable as the loss through knockdown effects on growth would be far higher than any gain in revenue. Such matters need the attention of the Finance Minister as the portfolio handled by Ms Sitharaman is vitally important in the growth of the economy.