‘Centre should allow States to devise their own economic strategies’

Former Finance Secretary advocates bottom-up approach

Published - May 08, 2020 12:06 am IST

de08 man

de08 man

Former Union Finance Secretary Arvind Mayaram , who is now Economic Advisor to the Rajasthan Chief Minister, heads a task force for suggesting appropriate measures on restarting the economy in the State to mitigate the COVID-19 aftermath. In a written interview to The Hindu, Dr. Mayaram says the Centre should not issue detailed guidelines for the entire country. Edited excerpts:

How do you view the lockdown as a strategy to control the COVID-19 pandemic? Will it succeed in “flattening the curve”? Would you also correlate it with demonetisation of currency notes in 2016?

I do not believe there was any other option but to lock down to contain the contagion and flatten the curve. However, it could have been planned better and with better consultation between the Centre and the States. Lockdown with a four-hour notice heaped misery on the people, especially the poor. Lockdown has resulted in close to 65% of the economy grinding to a halt with manufacturing and the services sector severely hit. The economy would take a long while in recovering and in that sense the shock is even more severe than the one inflicted by demonetisation.

The task force headed by you has submitted its report with a comprehensive road map for restarting economic activities in Rajasthan. Has it dealt with the impact of unprecedented decline in the States revenue collection?

The task force had a limited remit to suggest the manner in which the State’s economy can be restarted. This would require massive efforts by both the Centre and the State and that would require huge resources. Unfortunately, with the economic activities down to zero, tax collections have plummeted. By closure of liquor shops alone, Rajasthan was losing ₹30 crore each day. Therefore, the report also recommends certain measures that the Central government should take to shore up State’s resources.

How will the most vulnerable sections of the society be able to get back their livelihood?

The first step has already been taken by the State government by ramping up the Mahatma Gandhi National Rural Employment Guarantee Scheme. Works have started all over the State and the number of persons reporting for work is touching 12 lakh per day. These are returning migrants, landless labourers, small and marginal farmers, artisans and even small shopkeepers. Rajasthan has been the perhaps the first State to ramp up MGNREGA works so quickly. Work at MGNREGA sites puts money in the hands of the poor and it is expected that the consumption cycle would slowly start from the bottom of the pyramid. Resumption of manufacturing and services would also provide employment. The process would be slow but hopefully steady. However, areas under the red and the orange categories would be much slower.

Your report has also laid emphasis on synergising efforts of the Centre and the State government in meeting the economic challenge? Will that be possible?

As most of the fiscal and monetary instruments are within the mandate of the Central government, resource mobilisation would have to be done by them. On the other hand, the actual measures for mitigation and protection of life and livelihoods would have to be taken by the State governments. Unfortunately, we are not seeing the type of response one would have from the Centre in such a crisis. The States are starved for funds and finding it difficult even to pay the salaries.

The division of districts in red, orange and green categories on the basis of spread of contagion, as recommended by you, has been accepted by the Centre as well. What should be an effective strategy to contain the virus within the hotspots without completely stopping the wheels of the economy?

The need is to intensify testing and isolate contagion in small but tight circles as it erupts. The norms for social distancing, wearing masks, use of sanitisers, etc., has to be strictly enforced. However, economic activities including retail must start, not just for sale of essential items but for things of general use. Supply chains should be aggressively restored, right down to the retail level. For quick start, it is very important to keep the instructions simple and easily understandable. The manner in which guidelines are issued with innumerable addendums and clarifications, even the most adroit administrator would find it difficult to follow.

I have consistently said that the Central government should not issue detailed guidelines for the entire country but allow the State governments to devise and implement economic strategy which reflects the State’s reality. Within the State too, the local administration must have enough autonomy to act according to the ground realities within an overall framework. The country would pay a very heavy economic price if we continue to work without an overall comprehensive strategy for restarting the economy or continue with an over-centralised control system.

Your recommendation that there should be no mandi operations in the red and orange category districts may create difficulties for farmers during the ongoing rabi crop harvesting season...

The red and orange zones in the task force report are basically hotspots of varying kinds. For instance, there could be a mandi abutting the Walled City in Jaipur, which is a containment area or a hotspot. It wouldn’t be prudent to start such mandis . But this should not preclude Bagru mandi in Jaipur district from functioning.

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