Mere ‘Package’ won’t work….
WE NEED A
WHOLE ‘NEW DEAL’
-by Ajit Abhynakar
It appears from the unofficial
newspaper reports that the various governments have declared packages ranging
between 9 %of GDP(US) to less than one percent
of GDP (India).There would be debates on the quantum and composition of these
packages and rightly to be so.
However, such a package at this
critical juncture wherein decades are happening in weeks, needs a multi
dimensional consideration. Here is an attempt to bring forth such missing
dimensions without which the package would
become illusory. An attempt is also made to present rough quantitative
picture of the components of package and its sourcing. This is for the Central Government
as it is the principal taxation authority collecting 11% of GDP as its net tax
collection.
Package has to be anorganic
integration of multi sided plans, financial provisions and actions. It can’t
merely be an altered order of financial allocations by the government. The
rubric and fabric of thinking has to be qualitatively different in the days of
a survival disaster such as Corona.
In the capitalist world
hit by the Great Depression 1929-34, New Deal of 1933 showed the end of tunnel.
New deal became historical milestone of not only for US capitalism, but for the
economic policy of the world capitalist system. It was not merely a “package
for salvage” since it humbly changed the lens of the policy making. The quotes
by Franklin Roosevelt created shudders in the whole capitalist world. Deviating
from the sacred principle of laissez faire he had said “The
test of our progress is not whether we add more to the abundance of those who have
much; It is whether we provide enough for those who have too little.
Even if a calamity is
generatednaturally, how various groups in society face the same, is conditioned
socially as well as politically. The Covid19 pandemic has exposed many
fractures and fissures of the system. Looking at the aftermath of Covid19 it
needs to be examined whether systemic
collapse is really an effect or is itself a cause for such a pandemic. This multiple organ collapse appears to be a
déjà vu of the world in 1930s through1940s although reasons are different. Thus
the time today is more than overdue for a Global New Deal.
Quantum of the Package
It is on this backdrop that
package needs to be discussed.
How much is enough ?
This is more of a political economic question;
and can be examined within the range of what is necessary and possible. As for
the total quantum it may be said that for India about6% of GDP has to be the
package in the coming period of 12 months. The figure is arrived at by taking a
realistic view of necessity of funds for various heads , Tax-GDP ratio,the
viable limits of Fiscal Deficit, and the borrowing potential by the Government.
Thus taking India’s GDP at 216 lakh Crores the package must be of 12 lakh
crores. See the table below. These are exclusive of the provisions already made
in the budget 2020- 21 for the relevant
heads.
The package amount can be sourced
as follows.
Table 1-Sources of Funds for the Corona Relief Package
SR. No.
|
Source of Funds
|
Amount
Rs. Lakh Crores
|
1
|
FromIncreased Collection of Direct Taxes
35% increase in the Budget Estimates 20-21 to be sourced from-
-Roll back of Corporate Tax Concessions In 2019,
-Re-imposition and -Re enforcement of Wealth tax
-Increasing the Security Transaction Tax
-Taking Action against tax evasion from tax havens
|
4.00
|
2
|
Drawing on Reserves from Reserve Bank of India
|
2.00
|
3
|
Additional Borrowings by Government of India( 75% Higher than
budgeted for 2020-21.) Taking FiscalDeficit to 6%
|
6.00
|
Total
|
12.00
|
Table
-2 Components of Central Package With
Indicative Financial Burden
Sr.No.
|
Component
|
Amount
In Lakh Crs.
|
1
|
Immediate Medical Intervention and Stock pile for the future
Epidemics, Community health systems
Cost of testing & treatment to Covid 19 victims tested at government, and
Vaccine, Suits, Ventilators,
|
2.00
|
2
|
Financial Rescue for the casual and informal workers
(Food, Shelter, Transport, Medicine etc. for 9.3 million Casual
Workers located in urban areas i.e. 5 crores @ Rs.11,000 per person (@
Rs.3,000/- for rescue And 8000 as direct financial support )
|
1.00
|
3
|
Farmers Cash Package for 14 Crores Farmers with a Cash subsidy
of Rs.7,000/-each (other than given presently under KisanSanmanyojana
|
1.00
|
4
|
Loan Waiver Schemes for Farmers and Small Producers
|
2.00
|
4
|
Enhanced MNREGA (Covering Urban and Rural Area)
|
3.00
|
5
|
Support To Small Employers (Interest Holiday Subsidy to Banks
@20 % of Interest income of Commercial Banks. )
|
3.00
|
Total –- This is approx. 6.0% of GDP at current Prices for
2018-19
|
12.00
|
New Modeling Elements
The package has to be a
guide to think and not just an accountant’s statement .It has to be based upon modeling
elements as given below.
1. Priority
of saving lives and livelihoods-
a) Rescue
and Medical Care-Priority must be to provide the medical rescue, wide
spread testing, purchase of equipment, recruiting staff at all levels and care without any economic deterrents differentiation
whatsoever. The needy and the poor must be provided with sufficient food and
shelter free or nominal cost without any bureaucratic hassles.
b) Supporting Small
Employers - The livelihoods (i.e. employment and means of earning income)
should be the next priority. As soon as the lock down is over there would be
mass closures and layoffs. The State has to take measures to ensure that the
financial viability of the employing establishments is maintained even though
only at the break even points. The State would have to promulgate interest
holidays for certain periods (say 6months) and/or moratorium on loan
recovery. The State would have to subsidize the commercial banks
partially to maintain their solvency and liquidity.
c) Massive
Rural –Urban Employment Guarantee-There has to be a wide spread massive
plan of employment guarantee throughout the country. MNREGA is potentially good
but effectively provides employment only 47 days in a year. It has to be
widened qualitatively to cover all the urban areas and covering various
educated skilled and unskilled manpower. Through such a scheme, a tremendous
boost can be given to make our villages-cities healthier, cleaner and safer to
live, to promote civic-hygienic sense in our population, and also to a massive
plan for clearing the polluted rivers and water sources, forestation etc. It may be roughly estimated
that about 5crores of people would need such as an employment support in the
coming year.
d) Supporting Farmers and
the UnorganizedWorkers- The farmers have lost
almost all their income due to the lock down. Farmers as well as unorganized
workers , street vendors, thelawalas,
rickshaw drivers, must be paid through direct payments in their
respective bank accounts. The state will
have to declare one more loan waiver for all the farmers except the super rich
section of them.
2. Relying
on Social Fabric
a)Expanding the Public and
Community Health care system- The
Government will have to overhaul the health sector by enhancing community
preventive health care expenditure, expanding the network of public hospitals
and recruiting the staff at all levels,
free primary public health care in and
outside the hospitals(Mohalla clinics), Nationalizing the big corporate private
hospitals and pathological testing units etc., regulating the drug prices and
pricing by the private hospitals.
b)The community spirit based on
voluntarism- Wars can be
fought on the strength of social fabric rather than market rubric. The logic
based on private accumulations can be counter productive in the situations of
emergency. Just as the world is learning an extremely hard lesson that an
individual’s health (even) is not a private good as it can’t be separated from
the community health as well as community medical care. The same truth has to
be replicated in all socio economic spheres.The community spirit based on
voluntarism with strong financial -power support of the State can work best in
the times of war as the normal economic or power logic is simply
unworkable.Community spirit and sense of public ethic has to be aroused even in
the matters of commodity production and distribution.
c) Community –local
supply chains-Price Regulation- Practically it would mean the
voluntary price regulation in key commodities/ services, creating community
supply chains, creating local livelihoods beyond the financial maximization
logic. Community health care must be made a part of thinking
3. Principle
of Moral / Social Consensus
Unity of Purpose and Perceptions- The
package is an exceptional and all round rescue and rehabilitation plan.This is
where the psychology and morale of the people will produce the best results.
Perceptions play a key role in such a situation. People should have almost
unanimity in their perceptions about
a.
That ‘the Package' plan
stands on a higher scale of ethics than normal market logic,
b.
That there is total social
consensus on the measures being taken,
c.
That the sacrifices, if
any, are fair and based upon the principles of common good rather than
sectional one.
In order to put these
ideas into reality the Government would have to spend substantially devising
appropriate targeted schemes. The Government would have to enter into a
facilitator’s role, with necessary financial muscle so as to make the society
work on community lines.
-Ajit
Abhyankar
94
223 03828
82 754
24773(Whats app)
(Writer
is a Visiting Faculty at Symbiosis School of Liberal Arts, Pune, and a Social Activist )
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