India needs direct money transfer to cope with economic pain of Covid-19 – Quartz India

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Even as the Covid-19 pandemic continues to affect livelihoods across India, the country’s government, led by Prime Minister Narendra Modi, has hesitated to expand its direct cash transfer program to rescue people in the need.

This reluctance is despite the fact that many large economies have benefited from putting money directly into people’s hands, and several prominent economists, including former Reserve Bank of India Governor Raghuram Rajan, have asked the Indian government to initiate similar measures to transfer direct money. .

“I think both cash and in-kind transfers are needed right now,” said Reetika Khera, development economist and associate professor at the Indian Institute of Technology-Delhi. She adds that like last year, doubling food rations for six months is also possible because India has enough grain stocks. “This needs to be complemented by cash transfers (employment and pension schemes). The two have worked together in the past and urgently need to be deployed again, ”Khera said.

The US government recently passed a $ 1.9 trillion (Rs 138 lakh crore) stimulus package, which includes handing out $ 1,400 in checks to American families and $ 300 a week for unemployment insurance. Similar measures could have great benefits in India as thousands of people who have been affected by lockdowns linked to the pandemic are daily bets who work in unorganized sectors and live hand to mouth.

“In the absence of fallback options like insurance or savings, it is not impossible to imagine that even basic necessities such as food and rent would soon become a challenge for people in the area. unorganized if they haven’t already, ”said John Paul, director of The / Nudge Rural Development Center.

Besides being ineffective in execution, India’s relief measures are also quite insufficient compared to what other governments are doing for their citizens.

India’s recovery plan against Covid-19

India’s Covid-19 stimulus package as a percentage of its GDP is currently around 10%, which is far lower than that of several other major economies.

In comparison, the United States spends around 27% of its GDP on economic aid, and in Japan, the stimulus now accounts for 55% of the country’s GDP.

The Indian government announced a stimulus package worth Rs 20 crore lakh in May 2020. Of this amount, Rs 1.7 crore lakh was directly intended for farmers, women and construction workers. In addition, the funds the government promised to transfer directly to the needy were just a reallocation from regular annual plans that provide cash benefits.

Adding to the woes of the poor, the implementation of direct transfers has been fraught with errors and limitations. “Much of the migrant worker was left to fend for itself in the first wave because it was not covered by any direct benefit transfer regime in the states of origin or destination. Many of those who might have been in the beneficiary database did not have the right Aadhaar connections, ”said Paul.

The reasons the government might hesitate to expand the scope of direct cash transfers could be its growing budget deficit. Indian government revenues have declined drastically, leading the country to spend more than it earns.

But this may not be the time to focus on fiscal prudence. In fact, direct monetary relief could also boost India’s economic downturn by boosting consumption.

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