As India hits 140,000 Covid-19 cases and Mr Modi’s apparently great stimulus package gets ramped into action, hopes of economic emancipation for the people are high. However, as economists have concluded, as the lower middle class and service sector workers shall agree, and as I will elaborate, the apparently prodigious stimulus packaged announced by the Modi regime is in fact but another hideous attempt to handle the pandemic as an image-issue as opposed to a health and economic crisis. To understand the frivolity of the package towards the sectors that need it most such as the informal, service, and labor force, it is first important to assess the existing economic state of our country, which can be used as a barometer to contemplate the inconsequentiality of this agenda.
The Indian service sector, the sector worst affected by this pandemic as well as the least attended to by the stimulus package, accounts for about 60% of India’s GDP. India’s services activity index has fallen to 5.4 as of April, the lowest in 14 years, in comparison to the 49.3 in March. Owing to the pandemic and blatant inaction on behalf of the government with respect to the actual workers of the service sector (the benefits of labour law relaxations for production owners will be discussed later), it should come across as no surprise that India’s GDP growth rate is looking to fall to 1-2% on the brighter side, and in negative figures as of worst case scenario.
To put the implications of the crashing of the service sector further in perspective, we can consider the city of Mumbai. Mumbai contributes to 6% of India’s GDP, and 70% of this contribution stems from the service sector of Mumbai. If we consider the repercussions of the corona-virus pandemic as to cut the service sector activity of Mumbai by half (which is lower than actual figures), that is 16000 crore of service sector income India’s economy would be losing per month from Mumbai only. As Maharashtra sees a 60% drop in state collected revenues in March 2020 to 17000 cr, as opposed to the 42000 cr of March 2019, it is clear that urgent economic aid is needed.
The first economic recession of India not born of monsoonal disasters, and the fourth in total, the pandemic’s economic insinuations have proved to be detrimental for the lower middle class, the self-employed, the seven crore shopkeepers, and the non-agriculturist-daily wagers. Coincidentally, and hopefully unintentionally, these aspects of the economy are pretty much exactly what the grand Modi stimulus package does not allocate sufficient funds to. 5.8 crore MSMEs have been left out as well, as money is hoarded onto the already thriving agriculture sector even as migrant labourers set out to walk towards their homes due to lack of basic resources.
Furthermore, and the most shocking aspect of this stimulus package to someone who would in other respects be impressed to see the efforts of an otherwise economically uneasy government to the tune of 280 billion dollars, is that the fiscal expenditure of this stimulus package is not 20 lakh crore in reality. Yet another let down from the Modi government. As P Chidambaram has described it, the fiscal stimulus package is “hopelessly inadequate.” To put this in simpler terms, the amount of money that is actually going into the hands of the people of our country is not 20 lakh crore which is 10% of our GDP, but rather only 1.86 lakh crore, amounting to 0.91% of our country’s GDP. The BJP has pulled off yet another one of its poncy, pretentious schemes, in hopes that perhaps people are too stupid to see through it.
As the Congress economists along with the former finance minister analysed the stimulus package, they found that apart from the 1.86 lakh crore of fiscal expenditure, all the other announcements of the package were already included in the budget expenditure, liquidity measures, and proposed reforms. The grandiose of a 20 lakh crore scheme must be reduced to superficiality as the BJP government has lied to us yet again.
The superiority of our government is well botched by the reality of this situation, it is a pity that the uneducated of our country actually expect a part of the apparent 20 lakh crore to go to them so that they can simply feed their families. But perhaps that is too much to ask, considering that even as migrant workers struggle to reach their homes, the BJP regime chooses not to help labourers, but rather to hand more power to the manufacturers and producers that could hire them. The relaxation of labour laws which includes a reduction in the minimum wage, extension of the working day to 12 hours, and the freedom to hire or fire labourers according to the wishes of manufacturers seems to do pretty much everything except help workers. Manufacturers no longer have to pay the already underpaid workers for working overtime.
The Indian government needs to choose where its priorities lie. Instead of coming up with ostentatious, hollow and deceiving apparent “relief packages,” if they could actually do what they were elected to, which is help the people, instead of throwing them into the hands of oppressive businesses, I suppose they would be successfully doing their duty. It’s time for the government to stop pretending like India is a first world nation with money to spare, instead they should actually bother to look at the state of their nation’s people, the people that still unfortunately do not see the downside of electing their government due to their shrewd scheme of announcing a stimulus package worth 10 times its actual value. As we saw previously with the demonetisation disaster, I don’t suppose India will be surprised to see the Modi regime fail economically yet again, but we will undoubtedly be displeased.