Preaching ‘self-reliance’ to those in crisis

Over the course of the last week, the Narendra Modi government unveiled its economic package. The Prime Minister kicked off the proceedings with the impressive sounding but clearly unrealistic announcement that the package would be worth Rs 20 lakh crore. Of interest then was to ascertain just how unrealistic the Prime Minister’s announcement was. Union Finance Minister Nirmala Sitharaman took upon herself the job of introducing the package in the form of daily briefings.

Over the next five days, the details were presented – and it was possible to arrive at two central conclusions: (1) Indians were not going to get the ‘cash in hand’ stimulus they so badly need to prop up consumption and revive demand; and (2) The Centre cannot resist the lure of grandiose announcements even in the face of such a crisis. In short, the vast majority of Indian citizens are effectively now on their own, or as the buzzword of the day goes, atma-nirbhar.

Allow me to unpack these points further.

Only a fraction of the stimulus package (worth about Rs 2 lakh crore, or 1% of India’s GDP) represents incremental expenditure by the government. Yet every day now, Union ministers are forced to parade themselves to announce existing budget provisions while pretending what they say is path-breaking reform, or an unprecedented allocation. While one must applaud the reforms announced, particularly in the agriculture sector, it remains to be seen whether these announcements translate into practical steps. Be that as it may, the need of the hour was to address the economic and humanitarian distress unfolding in the country after eight weeks of lockdown.

The stream of migrant workers on the roads stands out starkly as a symbol of how badly this lockdown has been botched up. Their attempts to get back home using their own means when governments failed to help them, and the resulting distress and deaths, should have shaken our collective conscience. The Centre has chosen to take unilateral decisions in this matter, with disastrous consequences. Little was done to reassure migrant workers that they would receive support in the places where they were currently located. Once the workers hit the roads, it took the government an inordinate amount of time to decide that they should operate long-distance trains to bring them home. Last week, the Finance Minister tried to make amends by announcing food aid to 80 million migrant workers. This will cost Rs 3,500 crore, and forms one of the only direct relief measures aimed at addressing the widespread economic distress.

COVID-19 has blown a hole through India’s economy. The Centre’s finances are in shambles. If tax revenue estimates looked difficult when the FY 2020-21 budget was read out, they are now clearly a distant dream. State government finances are in worse shape, having not only lost revenues from liquor and petroleum, but also with the Centre running up large GST arrears with them. Given this backdrop, a bright spot was the Centre relaxing borrowing rules for states. However, the conditions being imposed on the states of effecting administrative and governance reforms, are ill-timed and reveal a mindset that is disdainful of the states’ rightful position in a federal structure. After all, it is the states that are facing the epidemic and it is their workers who are at the frontline doing what they can with the limited resources available. It wouldn’t be surprising if state governments decide to exercise caution, lest the Centre use this as a tool to expand its control over states.

The messaging around the Centre’s guiding philosophy in designing the stimulus is also muddled. On the one hand, the government has continued to pour funds into MGNREGA – a scheme that Prime Minister Modi had repeatedly denounced as a monument to the Congress party’s failures. On the other hand, it failed to do enough to put cash in the hands of people as a form of immediate relief, by choosing to rely on credit to enterprises, rather than direct cash transfers. Indeed, the dominant theme of India’s economic package announced last week was a variety of refinancing schemes and credit lines to private enterprises. Such provisions, while welcome, will do little to provide an immediate stimulus to an economy suffering from a collapse in purchasing power. It also appears particularly insensitive to the immediate distress of millions of our citizens when the Centre introduces reforms that supposedly will build a self-reliant India.

A pandemic needs a coordinated response, and in India, it requires cooperation between the Centre and states. Prime Minister Modi’s politics, however, is opaque and hurts the national effort when transparency and trust is key. This so-called stimulus package is yet another exercise that completely misses the point. These follies are compounded by the chronic need to maintain a ‘strongman’ image. This government is so caught up in its rhetoric that it is unable to even acknowledge the problem, let alone accept any responsibility for its callousness. What we get instead are half-baked ideas and pompous announcements.

The New India might want to boast about its ‘strong’ government, but clearly, the supposed strengths have only detracted from our ability to formulate an effective response to COVID-19. For now, those in crisis have got just platitudes and lectures of 'self-reliance', when concrete meaningful government assistance was the need of the hour.

(The writer works on governance projects in South Asia and East Africa)