May , 2020
Big economic fix required in Punjab
19:22 pm

Rajiv Khosla

Punjab was the first state in the country that imposed curfew to stop the spread of coronavirus. But according to commentators, economic ramifications of the extension of the lockdown can be severe. At the national level, it is reckoned that a third of the country’s labour force including daily wagers, the self-employed and workers in the unorganised sector – around 40 crore in total - may lose their livelihoods. The cascading effects of a decrease in employment may multiply to fall upon purchasing power - subsequently affecting production, thereby bringing additional distress to the already paralysed cycle of production, consumption, and investment. All Indian states are likely to be affected by this predicament. According to Manpreet Badal, the Finance Minister of Punjab, one day of the lockdown is taking a toll of around Rs. 1700 crore on the state’s GSDP.

Relief packages by different states

The Punjab government has announced several relief packages to combat this challenging and unforeseen situation. According to government sources, an amount of Rs. 20 crore has been sanctioned out of the CM’s relief fund to provide free food, shelter and medicines to the disadvantaged. The state government has also deferred the payment (up to Rs. 10000) of electricity, sewerage and water bills in the state. The Punjab government has announced a waiver of two months (March- April, 2020) for penal interest for those farmers who have availed loans from the central cooperative banks and primary agriculture cooperative societies. Similarly, stage and contract vehicles have been given 100% exemption from the motor vehicle tax for the period for which they would be off the roads. Lastly, a sum of Rs. 96 crore has been announced for the financial assistance of 3,18,000 registered construction workers. The government plans to pay them Rs. 3000 each, through the direct benefit transfer system. However, this move was already sanctioned in the state’s recent budget and cannot be termed as a contingency policy initiative. There is need for more focus on unregistered construction workers, daily wage earners, self-employed sections and workers in the unorganised sector.

Similar relief packages offered by some other states indicate towards the seriousness of the situation. Kerala strategically offered a sizeable package of Rs. 20000 crore to be disbursed towards ensuring an advance two months welfare pension to 50 lakh underprivileged individuals. It has also sanctioned Rs. 1000 aid for unregistered destitute individuals in addition to ensuring 35 kg of additional rice for Below Poverty Line (BPL) families and 15 kg free rice for others in addition to allocating 50 crore for ensuring Rs. 20 meals for all. Rs. 2000 crore has been set aside to create more rural jobs under the employment guarantee programme.

Arvind Kejriwal’s Delhi government has earmarked Rs. 16 crore for disbursing Rs. 5000 each to registered construction workers. This scheme has taken into account around 9000 workers who have applied but are yet to be registered. All beneficiaries (the figure is around 18 lakh) under PDS are being provided free and additional quantities of ration. The Delhi government has also made provisions for free food to 10 lakh persons availing Delhi’s various night shelters.

The Odisha government has announced a Rs. 2200 crore package to benefit 1.64 crore poor people by handing out `1000 each to around 94 lakh poor families and Rs. 1500 each to the state’s 22 lakh construction workers along with provisioning Rs. 3000 each to 65000 street vendors. The state government has also rolled out three months advance social security pension with a provision to provide food to the destitute in every gram panchayat.

What the Punjab government should do?

The cash starved state government needs to tactfully juggle its accounts. At the outset, the fiscal deficit should be permitted to escalate by 0.1% to make it reach 3% of the GSDP (Rs. 644326 crore as per budget 2020-21 estimates) thereby offering an additional sum of Rs. 644 crore to the government. This amount is justifiably within the Fiscal Responsibility and Budget Management Act (FRBMA) limits. The state government has provisioned Rs. 810 crore for smart cities, Rs. 700 crore for AMRUT and Rs. 249 crore for the PM Awas Yojana in the 2020- 21 budget. This needs to be halved – giving an additional Rs. 850 crore to the government. The 8275 crore which has been allocated towards ensuring free power for the agriculture sector needs to be scaled down to Rs. 5000 crore. This may be done by excluding the wealthy farmers. Through these measures, the state government can manage to accumulate nearly Rs. 4500 crore which can be used for increasing the allocations for health and family welfare (Rs. 221 crore to Rs. 1200 crore), MNREGA (Rs. 320 crore to Rs. 1000 crore), social welfare (Rs. 1087 crore to Rs. 2000 crore), industry and minerals (Rs. 2267 crore to Rs. 3000 crore) and another Rs. 1000 crore for distributing free ration and free food to the BPL families and destitute respectively.

The priority for the government should be establishment of maximum testing centres during the lockdown period and preparing for the impeding economic shock through planned employment guarantee programmes and by ensuring special incentives for MSMEs.

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