Expectations of an economic relief package in the wake of Covid-19 were really high. And these sky-high expectations were perhaps largely responsible for the disappointment that greeted the announcement of the Rs 1.7-trillion economic relief package by Finance Minister Nirmala Sitharaman on Thursday.
In itself, the announcement is welcome and a much-needed first step that should help ameliorate the economic hardships being faced by millions of poor Indians after the country was locked down from Wednesday to prevent the spread of the flu. But there is no denying that more needs to be done and a few more rounds of such assistance would be necessary in the coming weeks as the impact of the lockdown and the disease on the economy becomes more evident.
Make no mistake about what gave rise to those high expectations. It was none other than Prime Minister Narendra Modi who raised hopes when he addressed the nation last week, on Thursday, March 19, and announced that a task force, headed by Sitharaman, would draw up measures to combat the economic effects of the pandemic. Soon thereafter, everyone began calculating what the scope and size of the economic package would be like.
Four days went by without any further announcement on the package.
On Tuesday, March 23, Sitharaman held a news conference to announce a few relaxations in the norms for compliance of a set of economic laws, but on the economic package her only comment was that it was being readied and would be announced sooner than later. Modi addressed the nation the same evening, but there was no mention of the economic relief package, barring a provision of Rs 15,000 crore for strengthening healthcare measures. But on the same day, a country-wide lockdown was announced. The economic consequences of the lockdown were known to all when that decision was rightly taken. Why the economic package was not announced simultaneously along with the lockdown reflects poorly on the way the crisis has been handled.
Meanwhile, former finance minister P Chidambaram began talking about the need for providing at least Rs 5 trillion by way of an economic relief package to combat the effects of Covid-19. This would have been a little over 2 per cent of India’s total gross domestic product (GDP).
Meanwhile, the United States announced a financial assistance package of $2 trillion, which was as large as 10 per cent of its GDP. Quick comparisons were being made about what the Indian government’s amount would look like if something similar were to be done by New Delhi. A little over Rs 20 trillion? But then the US is in a far deeper mess than India is at present and a comparison with that country may not be apt. But the total package that was announced on Thursday is less than 1 per cent of India’s GDP. This was nowhere near the US amount or the figure that Chidambaram had been talking about a few days earlier.
Such comparisons and the seven days that the government took to arrive at a package have been responsible for the underwhelming response from most people who are now perhaps asking for more and waiting for the next round of the package.
Two additional points about the package should be reiterated. One, the package announced so far addresses the needs of only the poor people, including migrant workers, organised workers in small firms and the construction sector, women, farmers and health workers. The impact of the lockdown on other segments of the economy, including the manufacturing sector and a host of service-providing companies, would be huge. There is an urgent need for an economic package for these sectors as well.
Two, the economic package cannot remain silent about the need for building or strengthening the health care infrastructure sector to make sure more testing can take place quickly and flu-afflicted patients could be given necessary treatment, if and when the virus spreads. Clearly, there is need for a couple of more economic relief packages. What was rolled out on Thursday will not be enough.