Coronavirus: India announces S$32 billion financial package for the poor

A photo taken on March 26, 2020 shows people in a market during a 21-day nationwide lockdown in the old quarters of New Delhi.
A photo taken on March 26, 2020 shows people in a market during a 21-day nationwide lockdown in the old quarters of New Delhi.PHOTO: REUTERS

NEW DELHI - India on Thursday (March 26) announced a 1.7 trillion rupee (S$32.3 billion) financial package, comprising of direct cash transfers and free food, to help the nation’s poor weather the downturn amid the global Covid-19 pandemic.

While the government’s focus on the poor found support, economists and right-to-food activists assessed that it would not be enough in a country where more than half the population of 1.35 billion are poor.

Many said the government would need to follow up with further relief. 

The package worked out to a little less than one per cent of gross domestic product (GDP), far less than what many other countries had announced,  including Singapore which outlined a package amounting to almost 11 per cent of GDP on Thursday.

“A package is ready for the poor who need immediate help like migrant workers and urban and rural poor. No one will go hungry,” said Nirmala Sitharaman, India’s Finance Minister.

Among other things, she announced that 800 million people would be eligible for five kgs of free wheat or rice and one kg of free pulses per month for three months. Poor farmers will also  receive 2,000 rupees, other beneficiaries will get free gas cylinders and  health care workers will enjoy medical insurance of up to 5 million rupees. 

India went into lockdown from Tuesday midnight to prevent the further spread of Covid-19. The populous South Asian country has witnessed a spike in patients with over 649 cases and 13 deaths.

The government is hoping to break the chain of transmission by keeping people indoors although there is widespread concern that not enough testing is being done.

The complete cessation of economic activity is hitting the poor the hardest. Daily wage labourers have lost their jobs with thousands trekking across different parts of the country in a desperate bid to reach home. Some have been left stranded after train and inter-state bus services were suspended. 

“The good thing is the free food. It is a very important and necessary measure,” Prof Jayati Ghosh, a development economist and professor at the Jawaharlal Nehru University, said in response to the government’s financial package.

“This is the biggest attack on livelihood that I have seen coming from the demand and supply side. Over 50 per cent of the population have no means of earning an income for the foreseeable future. How are they to survive?”

Thursday’s package supplements handouts by different state governments. The northern state of Uttar Pradesh has announced cash handouts of 1,000 rupees per month for  daily wage earners while Punjab is giving 3,000 rupees to every registered construction worker in the northern state.

“It’s very uncharted territory. To be fair to the government anything it would have announced would have not been enough. Unless they went the developed country route of allotting 10 per cent of GDP,” said Prof Amit Basole, Associate Professor at Azim Premji University.

“The question is how is the money going to get to the beneficiaries. One of the things to consider is you don't want crowds in the banks.”

The announcement of the financial package raised demands for an economic stimulus package for industry and this is expected in the coming days.

“The entire package is expected to alleviate the difficulties currently being faced by the poor and the distressed. However, the government could be more aggressive in its spending with an overall fiscal stimulus at 2.5 to 3 per cent of GDP if the disruptions continue for the next 3 months,” said Mr Chandrajit Banerjee, Director General, Confederation of Indian Industry.

A stimulus package of that magnitude would amount to about 4.2 trillion rupees.