Bharat Economy: Lockdown starting from March 21 will end on May 17, if not extended further. Prime Minister Narendra Modi and his team are facing a Herculean task to protect lives from the COVID-19 outbreak. International Monetary Fund (IMF) has slashed its FY21 growth projection for India to 1.9% from 5.8% projected in January. According to IMF, the world economy will experience its worst recession since the Great Depression in 1930s and thereafter the economic growth rate may fall to 1% may be zero as forecast by the International Monetary Fund. For China, growth rate is expected to be 1.2% in 2020, and Asia is set to experience zero growth in 2020. The U.S. economy is projected to shrink this year by 5.9% and the Euro area by 7.5%. The world economy is expected to shrink by 3% against a positive growth of 2.9% in 2019.
Bulging stock of grains but hunger: The nation is going to have a bumper harvest of these food grains. Millions of people do not have money to buy food today. Around 5 crore people have been estimated to lose their jobs in India in the first two weeks of the COVID-19 induced lockdown according to Centre of Monitoring Indian Economy (CMIE). Distribution of cooked food is not without problems as it may not reach the whole family including children, the old, and the sick who cannot stand in long queues and where, in times of desperation, there might be stampedes. It is not possible to keep social distancing as required. A few suggestions are:
(a) Supply grains adequately at 50% cheaper than the issue price to those who have marginal cash from the point of sale.
(b) Adequate quantity should be given free to migrated workers, unemployed and poor.
Agriculture: It is painstaking pity that farmers and their families who feed us remain hungry. Out of hunger and pain of poverty few at times commit suicide. There contribution to national wealth through the budding greenery of grains to the nation bringing out from the begging bowl is gratifying. The reason of their plight should be well understood by the political leaders and all who are at the helm of the policy decision and action thereto. They have to follow these actions for vegetables even onions. During the rainy season onion crop is affected. Prices go up between September-November.
However, to avail the onion at reduced price government imports in the end of October-November. By the time, the imported onions come, the prices fall as onion crops come to market. Government incurs heavy loss and so do the farmers. They have to throw the crops due to unremunerated prices. Farmers have to sustain heavy loss due to natural calamity like drought, flood, pest attack and bumper crops. Government needs to take drastic steps.
a) For rotational crop cultivation which enriches the soil also.
b) Building of the silos/storage.
c) To give the finance to farmers against the grains which they keep in the go downs with the option that they can sell at any time not necessarily at the harvest time when the prices are down. This system is in the USA.
d) Reduce the mandi charges.
e) Punitive action against the government staff who refuse to procure.
f) Allow farmers to sell produce directly to retail chains, bulk buyers, processing industries exporters and millers.
g) To ease the movement by rail to consumption centre. Bulk buyers do not get allotment of wagons for movement by rail. Road movement becomes costly.
h) System of digital sale of produce needs to be developed. This will save the cost of transportation. They will also get the right price.
i) Control of drought and flood by manifold measures.
j) Government needs to deepen its procurement operation effectively.
k) Government should also arrange to procure fruits and vegetables for storage and supply like the grains.
NBFC: RBI’s policies and rules without examination of consequential effects and COVID-19 induced lockdown have greatly impacted the functioning of NBFCs which happen to be the lifeline for the MSMEs, small businesses, start-ups and the entire entrepreneur class.
To boost the economy from present grave crisis, it is essential to pump in enough liquidity to economic growth. Big and medium NBFCs need direct liquidity line from RBI if banks remain risk averse. Banks are flush with funds. Our economy with large domestic consumption base can recoup the growth faster than any other country. Provide enough liquidity. It is needed to fuel demand at the base of the societal pyramid; otherwise the entire economy can collapse. Necessity is to restructure loan with moratorium of three years with simple rate of interest of 8% to 9% still leaving a margin of 2.5-3.5% with banks. Banks must bring down overhead cost in line with foreign banks. Banks may not even need to provide additional funds to give to NBFCs if one-time restructuring is allowed. RBI should allow such assets to retain the ‘standard’ classification during the restructuring process. Assets quality which has fallen due to several external factors will start improving.
RBI requires to do away with 15% regulatory minimum capital to risk assets ratio (CRAR) for NBFCs. Construction and housing activity have stopped due to falling economic growth and lockdown. Government and RBI should give immunity to bank officials for their taking commercial decisions on loan approvals.
Health: South Korea has controlled the spread of COVID-19 with better health facility, testing and treatment. Unfortunately, India has poor infrastructure in healthcare. To improve the health infrastructure, India must invest in the academic and training facilities of doctors, nurses, and other paramedical staff. Let these be free from political interference.
The healthcare sector, which is a social sector, requires massive support. The Nation has to save hospitals and healthcare facilities, those which are existing, as well as those which are going to be launched after passing through myriad hurdles and approvals, obstruction from political interests and locals, from going bankrupt or folding up. The Nation’s wealth in this sector needs to be saved. For centuries, hospital and healthcare infrastructure was built up by industrialists and entrepreneurs as part of their service to society.
It is essential to: (a) Restructure loans with moratorium with 9% of simple interest depending on future cash flows and values of assets while keeping assets classified as ‘standard’. (b) Classify loans as priority sector lending. (c) Provide additional working capital. (d) An investment or contribution made by corporates to hospitals and healthcare facilities should be treated as contribution under (CSR) Corporate Social Responsibility under Section 135 of Companies Act. (e) Corporate sector, PSUs, and banks may contribute CSR funds to hospitals and healthcare sector. (f) Allow banks, NBFCs and FIs to convert their loans into CSR contribution to hospitals and healthcare. (g) GST rate on medical equipment and supplies be reduced from 12% to 5% with immediate effect. (h) Remove import duty on medical equipment.
Thousands of Bharatwasi have been going overseas for medical treatment. This also implies draining of valuable foreign exchange. Many highly skilled Indian doctors have been working in the United States, Europe and other countries. It is pity that they cannot work in India.
History tells that rulers used to open the granaries for subjects during periods of drought and natural calamities. COVID-19 epidemic is a natural catastrophe. Several people and NGOs have been distributing packets of food grains, vegetables, soaps, washing powder, etc. to daily wage earners, migrants and the poor throughout India. It seems paradoxical that the government has not opened their granaries, which are brimming over, leading to wastages.
People and children are starving. Several are dying of hunger whereas as on March 31, Food Corporation of India (FCI) had a total of 56.75 million tonne (MT) of food grains - 30.7 MT of rice and 26.06 MT of wheat. We had imported pulses and onions at high prices. Now, domestic prices of these have fallen. The government is bearing the costs of interest and rents and loss of grains being damaged. Huge sums have been invested in these stocks. The country needs just 50% of the stock as buffer stocks to meet situation of shortages.
May Lord Almighty give Bharatwasi the strength to withstand this difficult time and may our leaders have the wisdom to reach out food and other necessities to the poorest and unemployed who are the most vulnerable at this juncture.