The government is in the process of applying its mind on whether it should extend or lift in phases the 21-day lockdown that ends next week. The choice for Prime Minister Narendra Modi now, as when he decided to impose the lockdown on March 24, is the same — between saving lives and ensuring livelihoods. He rightly privileged the former over the latter then. But as India nears the end of the lockdown period, the serious damage to the economy and livelihoods is beginning to make itself apparent. There is tremendous pressure from industry bodies to opt for a nuanced policy that will help economic activity to restart as they fear a collapse if activity is stopped for another fortnight. Lives could be lost to hunger and livelihoods sacrificed in the lockdown. One way to sidestep this existential dilemma is by bringing on a second round of an economic relief package that goes well beyond the first both in terms of the financial commitment and the spread. Out-of-the-box ideas for delivering support and also for raising the required funds might be required. For starters, it is clear that the government should consign fiscal conservatism to the cupboard for now and go all out to spend and support the economy. Economists are unanimous that there is little option now but to print money and spend. That is exactly what the developed countries are doing.
The ₹1.7-lakh crore package announced by Finance Minister Nirmala Sitharaman on March 26 was a good start but barely accounted for 1% of GDP. India should spend at least 5% of GDP for now — about ₹10-lakh crore. The cash transfers to the poor should be hiked to at least ₹3,000 a month for the next three months. This should be in addition to free rations and cooking gas, as was announced earlier. In the harvest season, farmers need logistical support for moving their produce to markets. Lenders, including NBFCs, should be granted freedom to reschedule their loan accounts so that borrowers are not under pressure to repay for fear of turning delinquent. A credit guarantee fund that will support non-delinquent borrowers for the next six months will be a good option. Such a fund can be financed through a domestic bond offering. The bankruptcy code should be suspended for the next six months, at least for MSMEs. And why not a GST holiday for the next three months? The loss of revenue will be ₹3-lakh crore at worst, but in reality will be much lower than that because economic activity is at a standstill now. Such a move will ease cash flows for business and also obviate the need for statutory compliances at a time when the focus will have to be on getting businesses back on track. The crisis now is without precedent and the solutions cannot be conservative. Generous support from the government, and quickly delivered, is the need of the hour.
