Finance Minister Smt Nirmala Sitharaman, yesterday, announce second set of measures primarily focusing on poor, migrants and farmers, to tide through the economic impact of Covid-19 related lockdown.
As they did for the first set of measures announced on 13th May, 2020, yesterday too they released only a pdf file of the powerpoint presentation. The disclaimer which goes without saying is the detailed document, not released yet, of the relief measures will reveal the operational effectiveness of the measures announced at granular level.
Myself being someone who has tremendous faith in Indian Bureaucracy to mess up matters at details level creating confusion and followed by series of clarifications, I would like to wait out and reserve some of my views.
The presentation is hosted at this link: Atmanirbhar Presentation Part – 2: Poor, including Migrants and Farmers.
The page 2 to page 5 and page 9 of the presentation summarise the measures announced since March 2020 till 13th May 2020 by the Ministry of Finance and the RBI.
Labour Codes – Benefits for Workers
There has been sufficient debate for and against maintaining minimum wages to labour force given the unique crisis which economy is facing. The businesses have acute cashflow problems, the government does not seem to have resources or inclination to provide fiscal stimulus support by funding wage payment to industry and beyond a point business have inherent limitation of adding debt to their business. On the other hand, there is certain degree of inflationary pressure expected which makes case for minimum wage support. This clarification puts the debate to rest for good and removes all ambiguity at individual state level.
Appointment letter for all workers to formalise them is a good move in theory. It remains to be seen how they operationalise it. I hope some sort of universal code linking like Aadhaar is achieved backed by a national level portal system. Those who know business would understand that it is difficult to predict a particular labourer continuing for longer period. Appointment letters create a contractual framework and hence the need for relieving letter too. This seems far-fetched, yet it is the legal position. In absence of detailed document on this matter, I would appreciate this measure in theory.
Occupational safety and health is now non-negotiable irrespective of size of business unit.
Portability of welfare benefits for migrant workers is huge. This will permanently change the labour landscape in India.
I have never been a big fan of ESIC cover charge or the ESIC hospitals. I have rarely seen workers preferring ESIC hospital as their first choice for medical needs. Instead, it would have been a good idea to float a ‘Ayushman Bharat’ style insurance scheme for workers, valid at all government and private hospitals, without any medical premium subsidy ofcourse. Given the sheer size of our workforce, all insurance companies would practically vie for their share in the pie offering deep discount on premiums.
In absence of details for social security scheme for gig workers, platform workers, unorganised workers, it is impossible to comment. This is a shot in dark. The most efficient matter to implement this, if government is really considering this, would be to allow the states decide. Union government at best should fund it and nothing beyond.
Opening all occupations for women and permission to work night shifts is a very welcome move. The States with better law and order scenario would provide a safe work environment. This one will be on citizens living in the respective state. The day citizenry raise above everything and pressurise the state to better itself on law and order, that will be start of our exponential growth trajectory.
Socialism at its best. Earlier law mandated employers to compulsorily express gratitude in form of money payment if an employee has been in continuous service of atleast 5 years. Now the employers will be required by law to express gratitude after 1 year of completion of service and pay-up. The liability outflow on account of employee costs is going to shoot through roof, prohibitive for new businesses.
Free Food grain Supply to Migrants for 2 months
This is the moral center of India. Our culture. Our spiritual systems influence on our behaviour. We are a nation where most of us fold our hands and bow before food on our plate and eat it as blessing of Goddess Annapoorna Devi. The tallest Indian politician who worked hardest to provide food for every single poor was our very beloved Prime Minister Shri Atal Bihari Vajpayee who aggressively pushed for Antyodaya Anna Yojana along with his then ministerial colleague Shri Shanta Kumar. Our policies in this regard will forever be influenced by our spiritual systems.
Sadly, ofcourse, limited by delivery governance at individual state and district level – the indecisiveness and inefficiencies weighing down our on-ground response. I still have full confidence in all politicians across parties to work sincerely. Administrative inefficiencies apart, when it comes to food and water, we are culturally too compassionate. We eventually do it.
Technology Systems to be used enabling Migrants to access Public Distribution System (Ration) from any Fair Price Shop in India by March 2021 – One Nation One Ration Card
World will hold its breath to process this announcement by a nation of 1.3 billion people with highest working demography and highest migrant labour force.
If Jandhan-Aadhaar-Mobile (JAM) trinity impressed best of western nations, One Nation One Ration Card (ONORC) will take the stature of India to level never imagined by the world. There is no doubt we criminally wasted 67 years till 2014 by not upgrading our archaic systems. The Digital India, Financial Inclusion, Aadhaar and Mobile linkage push by our Prime Minister Narendra Modi will forever be recorded in proverbial “golden letters” because this comprehensive framework would most like be the foundation on which this scheme will operate.
Affordable Rental Housing Complexes (ARHC) for Migrant Workers / Urban Poor
Brilliant move. Yet I unequivocally oppose government’s participation in the scheme. Government should at best be a catalyst and incentivise the businesses who wish to build and operate such housing via interest subvention on working capital and/or tax breaks/lower tax for few years on such rental income. I see this as no-frills affordable equivalent of amenities-featured studio apartments preferred by middle-class nuclear families. Urban landscape needs this.
The potential for this is huge in urban centers. The Covid-19 crisis is a sincere wake-up call for all urban centers to recognise slums and ghettos as ticking time bombs. The slums also are part of a deeper criminal network involving underworld, politicians and bureaucracy nexus to let the slums spread like cancer, keep regularising them periodically and eventually make it a real estate game. This, if the states take this seriously, would definitely change the urban landscape permanently and make our cities safer.
Rs. 1500 crores Interest Subvention for MUDRA-Shishu Loans
This is a good nudge to incentivise borrowing repayment under MUDRA-Shishu loans. Works towards reducing delinquencies, improves individual credit ratings and in a way inculcates culture of bring responsible with regard to repayments.
Rs 5000 cr Special Credit Facility for Street Vendors
This is as huge a landmark scheme as JAM or One Nation One Ration Card.
A brief history into this. When government pushed financial inclusion through Pradhan Mantri Jan-Dhan Yojna (PMJDY), to bank the unbanked, there was one feature which remained under discussed. These PMJDY Accounts had a special feature – these were saving accounts with running overdraft facility. The account holder was eligible to take a overdraft (loan) of up to Rs. 5000. Just walk around your living area in distance of 500 meters, you will notice that these street vendors and very tiny shops do not hold a daily inventory of over Rs. 5000. If you ask them, they would reveal that earlier they would get finance from loan sharks who charged them anywhere between 1% to 3% per day; that is 365% to 1095% per annum exploitative interest rate..!! PMJYD changed this permanently.
Additional up to Rs. 10000 working capital is huge for them to not just get an institutional finance to navigate through the lockdown disruption, this will help them scale up their goods and service offerings, pushing the street economy up in a big way.
Rs 70,000 crore boost to housing sector and middle income group through extension of CLSS
Direct benefit of this scheme is to extend the window of opportunity to middle class in to own a house. The expected impact on the industry is boost in investment in housing construction sector and consequently the connected sectors. To my mind a window of just one year and that too in a cash-flow disruptive year is not a very bright thought through idea. I am not sure if industry is going to jump to pump in huge money which government expects when they are not confident of market willing to take additional loan bait even if interest part in incentivised. Business need clarity and a longer horizon of atleast 3 years would serve the purpose.
For information, the Credit Linked Subsidy Scheme offers interest subvention on home loans taken for acquisition, construction or enhancement of house. The highlight of the scheme is as follows:
Rs 6000 crore employment push using CAMPA funds
Any plan to enhance the green cover and improve natural environment is always a welcome plan. Linking it to employment opportunities in a structured fashion to generate measurable productive output has been the mantra of the BJP-led governments.
The case in point being: “The government is committed to providing wage and self-employment opportunities in rural areas. However, wage employment would be provided under MGNREGA through works that are more productive, asset creating and substantially linked to agriculture and allied activities,” then Finance minister Arun Jaitley said in his 2014 budget speech. This is also reflected in earlier Devendra Fadnavis led Maharashtra governments’ scheme of afforestation by including commercial crop like bamboo plantation recording highest growth in tree cover in non-forest areas and ensuring job opportunities.
Good initiative by the central government. The success of this scheme will depend on the priority and efficiency of the states. Any additional income to individuals in economy will only drive up demand. That’s the plan.
Rs 30,000 crores Additional Emergency Working Capital Funding for farmers through NABARD
Our farm sector is almost a permanent black-hole when it comes to fiscal support and cornering finance. It largely remains sub-prime. Hence, till we reform our agriculture sector, a political hyper-sensitive topic, nation will have to continue to finance and support the sector. This measure adds additional finance support and on-boards regional and local institutions for delivery.
Rs 2 lakh crore Concessional credit boost to 2.5 crore farmers through Kisan Credit Cards
Kisan Credit Card (KCC) is over a two decade old successful scheme, extending short term cash credit facility for crops and term credit facility for farm equipment’s and land development. The current announcement enhances the credit limit for card holders and expands scope of coverage to include fishermen and animal husbandry farmers.
Conclusion
Yesterdays announcement are a mix bag of policy decisions and extension of more financing facilities to targeted groups which continues from day prior.
Nothing significant on labour, land or agricultural reform yet which I hope may get announced eventually at a later point in time.
Some announcements like One Nation One Ration Card, opening all occupations for women which literally add a significant productive population to workforce and special credit facilities for street vendors, are landmark decisions.
A lot depends on the states now. The states really need to gather themselves and fast to kick-start these schemes. Only way I see is pressure of citizenry of respective states on their state governments to deliver.