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Modi's Covid stimulus package and migrants

Questions are being asked about whether measures to help the vulnerable are creating a vicious cycle

Nirendra Dev, New Delhi

Nirendra Dev, New Delhi

Updated: May 19, 2020 10:40 AM GMT
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Modi's Covid stimulus package and migrants

A migrant carrying his belongings walks to board a bus to go to his home village at Jubilee Bus Station in Secunderabad, India, on May 19. (Photo: Noah Seelam/AFP)

Tens of thousands of migrants have fled Indian cities for their home villages. Many were informal workers who feared starvation during Covid-19 lockdowns.

The exodus was soon followed by news of a huge economic package from Prime Minister Narendra Modi, but there has been no immediate succor for them — at least in the form of cash.

Critics have expressed doubts over whether Modi's hyped US$226 billion package will help the poor, especially the many migrant workers forced to flee the cities, saying the amount is small and falls short of what is needed.

The government, however, says the measures will reassure markets and boost domestic consumption.

Observers say the government can give more and that a slew of new economic packages and administrative measures would have a limited impact on the federal budget.

"A large chunk of funding is being planned cleverly and through banks and other state-run financial institutions., However, the amount is paltry and no one is sure whether the money will really reach migrant workers, farmers and those who work in small business units," Ahmedabad-based Congress leader Ilyas Qureshi has said.

The cash, as made clear by Finance Minister Nirmala Sitharaman, is limited to government boosting Provident Fund accounts of workers and providing free food grain.

Similar aid was given in 2019, prompting the opposition to say there is nothing new in the package.

On May 16, Congress leader Rahul Gandhi met a group of migrant workers for their views on the pandemic and the measures adopted. Many migrant workers have been rendered jobless due to the lockdown as most were employed as daily wage earners. The fear of starvation is gripping millions of them, he was told.

Sitharaman has announced that the government will help provide free food for migrants for two months as part of the improved US$266 billion economic plan.

The plan also involved a stimulus package for MSMEs (micro, small and medium enterprises) and some key industries such as steel.

Grain supplies worth US$463 million are expected to benefit at least 80 million migrant workers, the finance minister said.

“The government is concerned about migrant workers,” Sitharaman said, adding the government has spent 100 billion rupees (US$1.3 billion) on providing work for nearly 23 million unemployed people in rural areas under an ongoing rural job guarantee program.

Meanwhile, street vendors and farmers will get "new subsidized bank loans".

The Communist Party of India (Marxist) dismissed the entire initiative. "Not a single paisa [cent] is being transferred from the government to any of the worst-affected sections of our people, specifically migrant workers, street vendors, domestic workers and fishing workers. This package is mainly the provision of loans," it said.

The Congress party was equally scathing and said the government has left farmers and farm workers “frustrated and disappointed."

Such reactions from opposition parties are not surprising given the nature of Indian politics, but the measures have been backed by many industrialists.

Hamid Rashid, chief of the Global Economic Monitoring Branch, called the stimulus package “a very welcome development.”

Agriculture marketing reforms

The government on May 15 announced that it will bring in new laws to implement "agriculture marketing reforms" to provide marketing choices for farmers.

"The new measure will provide adequate choices to farmers to sell their produce at attractive price anywhere in the country through e-marketing mechanism," the ruling Bharatiya Janata Party leader Zafar Alam said.

The Modi government has taken the right steps with policy matters on the agricultural front, whereas in the past farmers faced restrictions regarding customers and could not get the buyers of their choice, unlike in mainstream industry.

Up until now farmers have depended on middlemen and a licensee system under an agricultural produce marketing committee (APMC).

At present farmers can only sell only to those who have APMC licenses. This automatically puts them at the mercy of middlemen, who are the real winners in this arrangement.

The Modi government’s approach has been clear, his supporters say — do away with the corruption encouraged by the APMC system, which often gave a free hand to local political leaders and mafia.

The shutdown of industry as a result of the pandemic has deeply affected migrant workers and certainly damaged the economy.

Migrant workers in most cases are landless people from rural areas, essentially from agrarian-based states. Thus, the debate comes back to immediate questions — what does the Modi government plan to do or what has it done for these poor helpless Indians?

To start with, the government does not have any record of them as workers and no system to ensure their welfare either.

An estimated 30 percent of Indians, or about 400 million, are internal migrants and form the backbone of the Indian economy.

Congress leaders have their reasons when they say banks or loans may not work well for thousands of migrant workers who are on the streets. They say farmers and laborers are facing extreme hardship. They accuse the government of hurting farmers and laborers — instead of providing help, it is pushing them into the debt trap.

Congress leader Rahul Gandhi has said migrant workers left on the streets deserve cash handouts. The ruling BJP says no cash relief will be offered as this will only encourage corruption by middlemen and power brokers.

Communist leaders also explained the debt trap could force any farmers and rural people with any land to sell up and move to big cities to eke out a living doing menial jobs.

"At a time when the single-minded focus of the country and the people must be in combating this pandemic and ensuring a healthy life and livelihood for the people, this government, in the most callous manner, sees the pandemic as an opportunity to carry forward its agenda of economic reforms that enrich the rich and further impoverish the poor," said the Communist Party of India (Marxist) in a statement.

Experts like Vidyarthi Kumar say Modi cannot give out cash so easily as very few state governments can afford to do so at this juncture.

Another BJP leader, Jayant Sinha, says government measures will prove effective and a reasonable amount would reach poor farmers and beneficiaries' bank accounts through a "transparent" mechanism.

The government's problems are multi-pronged and despite the lockdown imposed on March 25, India has reported more than 85,000 confirmed Covid-19 cases with over 2,500 deaths.

Though the government’s fiscal spending will not be impacted by the economic package and new reform measures as most of it is to be implemented through banks and market borrowing, there is concern the fiscal deficit could touch 6-7 percent of GDP in 2020-21, double an earlier estimate of 3.5 percent.

The possibility of a sharp fall in revenue collection has irked the government's financial managers, and there is the chance, according to the Center for Monitoring the Indian Economy, that unemployment could rise to 23.5 percent or more.

If they bring the expected results, the agrarian reforms could change the tide.

Over the years, India has turned into a very large service economy with over two-thirds of its GDP coming from services. But the push for manufacturing through incentives in the steel sector and reforms in agriculture could help boost exports.

On May 16, the finance minister announced major reform strategies in defense production, mining and aviation. But until all this happens, migrant workers will have to suffer for a while longer in villages where they do not have a job and little food. The alternative is to return — where they were just a few months back — to the large cities as migrant workers.

It’s all one vicious cycle.

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