FM's Press Conference - 2
May 14, 2020

Here is the second instalment of the COVID measures aka Atma Nirbhar Bharat!

The Steps

  1. Free food grains for migrant workers for 2 months - 5 kgs of rice/wheat & 1 kg of pulses. Even if they do not have ration cards
  2. One nation one ration card scheme coverage to be made 100%.
  3. Interest subvention of 2% on Mudra loans (at the lowest level)
  4. Middle class housing scheme extended by another year.
  5. Rs. 30,000 Cr for rural banks to fund more farmers
  6. Kissan credit cards to be expanded.
  7. A Rs.5000 cr scheme to give loans to street vendors (details to be announced)
  8. Some super vague announcement-ware on rental housing for migrant workers. Not worth comment.

The comments!

Damp squib! If we can summarise in a phrase.

Why? Simple!

Firstly there is nothing on “quantum jump” or “reforms” that PM Modi talked about on 12th May! Yes, they will move something in the economy & benefit the targeted groups, but will not make a big difference to their lives. It may miss a lot of them entirely and still leave them vulnerable.

Secondly, almost all the schemes except the free grains are loans, not grants or cash transfer. Even that scheme is basically giving away massive stocks of food grains that are filling our granaries & are likely rotting and leaving not much room for new harvest to move in. Since they are already paid for, this is just an accounting adjustments. Having said that, let us nevertheless welcome it as it involves something given that need not be given back!

As to the rest, they are either too vague, schemes that already exist (as FM herself took pains to point out a few times) or too small to be of use.

Take the housing scheme - yes it may boost demand for properties, reduce unsold stock and help banks recover loans given to developers (that may go bad). But given job risk and salary cuts and what not, even those lucky to have a job will not risk buying property for a while. 2% discount on interest is not something that is going to make them rush to view properties. In any case, it is an existing scheme.

The same for more loans to farmers via NABARD re-financing of rural banking institutions. This is nice in theory but in practice, was there a fund constraint in the first place? We dont know.

The Kissan credit card extension etc are good but not ground breaking by any means.

As for the street vendor initiative, the amount set aside -Rs.5000 cr supposedly to benefit 5m vendors gives each Rs.10,000. That is too small to catapult them to the next level. It is even too small to make much difference anyway. Can they upgrade their carts or whatever? Probably not. I am happy to be proved wrong though. Anyway, this is not formalised yet, it is just announcement now.

What could have been done?

We dont want to just complain, here are some things that COULD have been done for the same target groups..

Migrant workers

For Migrant workers, the best way to help is to provide them stable, paying jobs where they are from. In other words, stop being “migrants”. Clearly these are not “expats” that go for high pay. They go because they have nothing better at home. The states they go from are the “BIMARU” ones. They go to so-called “rich” states, to live in squalor, earn pathetic salaries, work without much job or other protection. The save hardly anything. Clearly they could not survive even a few weeks of no income, or they would not have taken so much pains walking hundreds of miles back home to a equally hard, poor life. Or worse.

By doing this, that is, helping them stay back in their own home towns, a revolutionary change can be brought to these godforsaken places that shock anyone’s conscience if you see the pictures of squalid cities, towns and villages. It will even help workers in the richer states because now businesses, not having endless tap of cheap workers, will be forced to pay more for whoever remains.

Truly reforming Bihar and UP may take another 50 years, but at the very least, some scheme to encourage entice investors to create jobs in these states, could have been the option! We dont even have to run after Chinese factories. It can start with local businesses. Here is a sample:

  1. Investment subsidy for districts where these migrants have now returned to. Should be much more generous than elsewhere.
  2. Wage subsidy - any industrialist hiring these workers in their OWN districts/ towns / villages to get 50-100% of wages paid by Govt for a few months.
  3. If any of these migrants want to start small business, generous loans and capital subsidies.
  4. May be a subsidy or grant for businessman that wants to move his factory to where the workers come from! This makes a lot of sense for all - including overcrowded places like Mumbai and Bangalore or Tiruppur, Coimbatore.

Instead they are offered 10 kgs of grain!

Street vendors

Again, the real target should be streets free of vendors. In the long term. But steps can start. I am NOT suggesting cruel actions to rob them of their livelihood. But move them to the next higher level- may be permanent shops, may be move to other vocations. After all, they are not making much and human resources are wasted providing service that larger shops can provide with much more productivity.

In order to do that, innovative schemes that help such street vendors rent permanent shops or premises - may be even Government constructing them and renting them out, can be thought of. This investment booster shot keeps workers busy in construction as well. And create demand for other products like Cement, Steel etc. Old markets can be demolished and new modern ones created where these vendors can do business in a clean way, without getting beaten up or paying bribes to constables every day. If any fast action needs to be taken to acquire possession of these sites, where permanent facilities can be created, now is the time, COVID gives a perfect excuse!

By talking to these vendors with open mind I am sure ways can be found to help them in more ways. Far better than a Rs.10000 loan that doesn’t really make a difference to them or the society or the economy.

Small Farmers and farm workers

Similarly for small farmers this is the time to move them into the next orbit - give up on endless cycles of raising same crops that are completely unsuited to water availability, demand, fall into debt trap and what not. Several things can be done, at least to start with. The benefits should not just flow to farmers but to society at large and create a surplus for the future.

  1. Help small farmers moving to new crops (away from rice, sugarcane and wheat) - earnings protection, offtake guarantee, cash subsidy to cover initial lack of earnings etc. For example, a “salary” of Rs.10,000 each month for the next few months so they can spend time on new types of crops, herbs or others without worrying about feeding themselves and family.

  2. Grants or subsidies along with loans, to obtain farm equipment that reduces costs, increases productivity- perhaps they can acquire them and benefit from renting it out. Apart from using in their own small holdings. This creates demand for businesses. Simple example: A plantation worker that has his own backpack weed cutter can earn a lot more than someone that shows up with a simple machette! And it costs less than Rs. 50k to get that going.

  3. Get them to work on fallow state lands on contract farming basis, initial year salary or living costs born by state. Subsequently they get income share along with basic salary. This creates revenue for government in future and can even profit out of that! Government can procure equipment, rent gear and give a boost to rural economy!

Will the FM be more bold, more innovative and more reform oriented at least in coming days? We are not holding our breaths for sure!

Thanks!

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