A blueprint to revive the economy (Specific suggestions for government)

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 A blueprint to revive the economy (Specific suggestions for government)

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• The scale of migrant problem: There are 40 crore workers in India who depend on daily wages for survival. Lockdown has snatched their source of livelihood completely. India seemed to have made a choice between saving lives and protecting livelihoods (that was avoidable). Smart lockdowns can help achieve both.
• Greater Depression: Economists use this term today to indicate the humanitarian crisis before us.

1. All nations are standing still today
2. Non-partisan solutions are needed for all countries

• Demand and Supply: Try assessing the scale of the problem first.

1. Commercial activities stopped, so daily workers lost their jobs. So govt. has to ensure activities restart (and jobs restart)
2. Crises like these need both a demand-side and a supply-side response - so both cash and food needs to be given
3. 13 cr out of 26 crore families in India (bottom half) must get Rs.5000 in their bank accounts urgently
4. Beneficiaries can be easily found through PMJAY and MGNREGA databsases, and state level BPL lists.
5. Total cost - Rs.65000 crore. Add another Rs.39000 cr in May by giving Rs.3000 to each
6. Jean Dreze say that food is needed right now, and Indian buffer stocks are overflowing. Despite govt. announcements, ration shops either don't have food, or identity verification is a problem
7. Just remove all these requirements and universalise food distribution
8. MGNREGA work can recommence (April 15 guideline) with social distancing - give 10 days' wages if work cannot be given
9. Restart economic activities by carefully restricting action in COVID-19 hotspots and containment zones

• What from May 4, 2020: Permit all activities in all non-hotspot areas. Economic activity will need both labour and capital. Regular testing will be a must.

1. 75% of the 8 crore establishments in India operate in local areas. Let them restart. Ensure social distancing.
2. Rabi harvesting is allowed now. Good. But labour availability needs opening up of transport, which is the riskiest part.
3. Rail and bus services may be opened up with proper checks and social distancing norms. Run at half-capacity. Tweak as needed.

• Working capital access: Most of the MSMEs have run out of cash, and lost most of their revenues. Banks won't lend. So credit guarantee from government (for MSMEs) is needed. The 3 month loan moratorium may be extended by another 3 months.
• Formal sector: The US launched the Paycheque Protection Programme, to help formal companies not retrench employees.

1. In India, theare are 4 crore formal employees making less than Rs.15000 per month (regd. under GST system)
2. The GoI should fund their employers for a month or two, to protect their jobs
3. Exports - this will be hit the most. Time to strategically use India's forex reserves and give a big boost to exports over next few years. Jobs too will be generated.
4. Fiscal + Monetary - the fiscal stimulus must go alongwith RBI's monetary support (regulatory forbearance, revised NPA norms, pushing the credit flow cycle)

• Where is the money: The total stimulus needed is Rs.5 to 6 trillion. The 2020-21 expenditure budget of states and centre is Rs.70 trillion. Centre can simply dump its Rs.4 trillion capital expenditure plans, and move that money to what's needed now. If need be, borrow more from the markets. Worst, go ahead and print money (monetise the deficit).
• Live with it: The virus is here, and here to stay. It's us who has to learn to live with it now.
• Summary : Through a set of urgent measures involving cash and food handouts to the millions of daily wage earners, the govt can get the economy moving again.

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