Former finance ministerP. Chidambaram says the government should seize the moment and go for a lock-down in view of the coronavirus crisis , and suggests a roadmap to deal with the economic fallout. Edited excerpts of an interview with Sandeep Phukan .
You would have heard Prime Minister Narendra Modi’s speech carefully. What did you make of it?
I can understand the Prime Minister’s desire to not cause panic. At the same time, the Prime Minister should not give the impression that things are under control and will be under control by these symbolic measures. Coronavirus does not respect moral armaments.
You supported the Prime Minister's message last night and have changed your position now...?
I have not changed my position. As a citizen, I am bound to support the Prime Minister when he appeals to the nation in an emergency or a crisis. But immediately thereafter, I pointed out that the Prime Minister’s appeal does not go far enough. I have no doubt that he will be compelled to come back to the people in two or three days with tougher measures, including social and economic measures. I believe they [the Modi government] are borrowing the idea of NYAY [minimum income guarantee scheme], which was in our manifesto, and they are planning [to provide] a certain monthly allowance to the very poor people, whether it will cover 20% or 25%, I do not know. I am very happy about it.
Do you think that the government will have the fiscal space to do so?
The government has to create the fiscal space for itself. I think the shortfall in Budgeted revenues will be more or less made up by the savings in crude oil prices. So let’s assume that net-net there is no gain or loss there. The total government expenditure of the Central government in 2020-21 will be a little over ₹30 lakh crore and all State governments put together will spend between ₹40 lakh and ₹45 lakh crore. We are, therefore, talking about a scale of expenditure in the region of ₹70 lakh to ₹75 lakh crore for the whole country. To tide over the crisis, caused by a lock-down, and economic hardship, the government may have to mobilise about ₹5 lakh crore. I am sure we can find this amount.
You have been advocating a partial lock-down if not a complete lock-down. Many would argue that that's not feasible in India without better social security. Moreover, the Constitutional system doesn’t allow it.
You will be surprised how resilient people are. I am convinced, after reviewing developments in the rest of the world, that it is imperative to lock-down our towns and cities for two to four weeks. I agree it will be more difficult to implement a lock-down in rural India. We have done it in times of curfew. Therefore, the only way to ensure that we don’t move from stage two to stage three [in the coronavirus epidemic] is to seize the moment now. Every epidemiologist tells us that this moment will pass in 10 to 14 days .
We are suggesting a number of economic measures to be taken. The first thing the government should do is, by law, direct that all registered employers shall maintain current levels of employment and wages. The economic losses that they will suffer must be compensated by tax credits, deferred credits and outright grants in some cases. Once you ensure that all registered employers maintain current levels of employment and wages, the informal sector will also be partially compensated. There will be some in the informal sector who will not be compensated. For them, you will have to make a monthly payment on the lines of the NYAY programme.
Second, in agriculture, I think the PM KISAN [Pradhan Mantri Krishi Samman Nidhi] amount should be doubled straightaway, the other half amount should be paid straight away, and tenant farmers should be brought within its scope. The bulk of agricultural labour will also be partially protected. Those left out will have to be helped by a monthly payment.
I think the Prime Minister should have addressed a video conference with all Chief Ministers several days earlier, which he is doing today. I don’t think there are any Constitutional prohibitions. I think our Constitution is resilient enough and flexible enough to be interpreted to give such powers to the executive. Several State governments are, even as we speak, ahead of the Central government. Punjab has stopped all public transport, Maharashtra has declared Section 144 in many parts of Mumbai.
In terms of numbers, what do you think would be the impact of Covid19 on the Indian economy?
If the world economy slows down by 2%, our economy will also slow down by up to 2%. I have no knowledge about the length of the impact of COVID19, but let’s assume that the worst phase will be contained, say, in four to six months. So the economic package we are talking about is for four to six months.
