A do-little economic policy

While there is a clamour for fiscal stimulus and generous cash handouts to the poor to get over the Covid-19-induced economic disruption, the Modi government has been following its own tight-fisted plan, which in milder language can be called fiscal conservatism, of dealing with the medico-economic emergency. The Ministry of Finance had issued details on October 1 to show what the government has done to implement the Rs 20 lakh crore special economic package that Prime Minister Narendra Modi had announced under the Atmanirbhar Bharat programme.

In the four months since May, Covid-19 positive cases have risen from about 100,000 to more than 6 million, and deaths from 5,000 to over a 100,000, even as there have been a series of measures to lift lockdown restrictions. In the same period, the ministry shows that loans have been given to the tune of Rs 4 lakh crore. For example, out of the Rs 3 lakh crore scheme of collateral-free, ‘automatic’ loans for MSMEs, Rs 1,86,469 crore have been sanctioned, of which Rs 1,32,246 crore has been disbursed to about 2.7 million borrowers.

Under the Partial Credit Guarantee Scheme of Rs 45,000 crore, banks have approved the purchase of Rs 25,505 crore portfolio. Of this, Rs 16,401 crore of portfolio had been purchased as on September 25. Farmers have been provided Rs 30,000 crore Additional Emergency Working Capital Funding through the National Bank for Agriculture and Rural Development (NABARD), of which Rs 25,000 crore has been disbursed.

Add to all this the continuing boast that the government has provided free rations to about 800 million people during these months from its buffer stocks and provided partial employment for migrant labourers who returned from the big cities to the villages through the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). But the migrant labourers, many of whom trekked hundreds of miles in the scorching summer months, are now headed back to the cities because the free rations and the limited employment do not offer much hope.

Prime Minister Modi and Finance Minister Nirmala Sitharaman are sure to cite with pride and satisfaction these figures and say that the government has been doing more than its bit to salvage the economy. They sincerely believe that they are building the sinews of the economy by providing credit lines through banks while keeping the government from dirtying its hands in doling out money to the people.

There has also been the desperate attempt to show that the government itself is not in troubled waters by showing the Rs 95 lakh crore Goods and Service Tax (GST) collection for the month of September, the revival of exports in September compared to the figures for the same period last year, and Rs 1,18,324 crore tax refunds in the current financial year. Of course, every government has the right to clutch at straws and believe that things are looking up and they are not as bad as they seem to be. The curious thing is Modi and Sitharaman’s strong belief that it is the special economic package that is keeping the economy afloat.

So, what did the government really do? It facilitated loans for businesses and farmers. The number of borrowers is a measly 2.7 million and the amount disbursed is less than a quarter of the special package of Rs 20 lakh crore. The accelerated fall of the economy because of the pandemic is unlikely to end anytime soon. It will take longer for the economy to get back to the growth trajectory, though the low base created by the pandemic will give a false glimmer of revival because the growth figures for the next year will look better than they really are.

Basically, the government’s economic package helped a minuscule class of businesses and farmers, and this will not help revive the economy. Using the proxy of the banks and others to give out loans and saving itself the trouble of giving out money and incentives to the millions of people at the end of the tether, the Prime Minister hopes to stand tall as the man who averted an economic meltdown. It is as much an illusion as the holographic images of Modi that were used in the 2014 Lok Sabha election campaign.

The government then has pulled off a veritable trick of making it appear that it has saved the ship of the economy from sinking. And the regular government press releases, which include the figures cited above, create the impression that a lot has been done when what has really been done is too little to make a difference. And there is reason to be skeptical about even the modest figures that are showcased in terms of loans approved and disbursed. Most of the businesses which have borrowed may not have generated any jobs or even increased output of any kind. And the granular detail needed to test the real activity taking place in the economy is not easily captured even through anecdotal evidence. The big picture of the economy remains elusive as well.

At the end of the day, workers, businesses and farmers will have to struggle to get back onto their feet while a cynical government will wait and watch the agonies of a pandemic-hit economy. The Prime Minister has an escape clause: Covid-19. He can plead that he cannot be faulted for the economic havoc wrought by the coronavirus. That he did not do much seems to be of little consequence as people get busy finding their way through the economic debris.

(The writer is a New Delhi-based political commentator)