Pandemic Induced Multiple Crises and Government’s Response

Courting the Corporates and Abandoning the Poor

K.B. Saxena

Impact of Pandemic

The devastating Covid-19 pandemic in the two waves and hardships caused to the people resulting from lockdowns to control it have resulted in unprecedented loss of lives and increase in the scale of morbidity. The crippling impact on the economy has led to the loss of livelihoods, increase in hunger and malnutrition, declining incomes, pushing millions into poverty and destitution and deprivation of access to education and health. A Pew Research Centre report brought out that even before the second wave lockdown the Indian middle class had shrunk by 32 million people in 2020 (Mehta, 2021). As per the report of the Azim Premji University (APU) on the ‘State of working in India’, the pandemic would push 230 million (23 cr) people into poverty. (APU, 2021) This has reversed the 27 crore people lifted above poverty line between 2005-15 (World Bank cited by Chidambaram 2021)1. While the pain and misery was felt across different sections of population, its distribution was not equal. The suffering was disproportionately shared by poor in general and socially and economically disadvantaged segments in particular. This inevitably exacerbated existing social and economic inequalities. The deficits in human development have existed for a long time caused by low levels of resource allocation for the social sector which is primarily due to the Government’s pursuit of fiscal conservatism with its reluctance to tax the rich and better off to raise adequate resources (CBGA, 2021). The pandemic has increased these deficits. This has caused multiple crisis requiring comprehensive interventions by the Government.

The first dimension of this crisis is reflected in the battered economy characterised by two negative features. One is its worst contraction. The economy shrank by a record 7.3% in 2021 which was greater than the 3.3% contraction of world economy. The second is nearly 13 quarters of continuous decline in real GDP growth on account of several policy shocks such as demonetisation in 2016 and the ill prepared rolling out of Goods and Services Tax preceding this contraction. This is compounded by external factors. These include 1) rising inflation in advanced economies which may lead to tightening of monetary policies and rising interest rates which will make foreign capital more expensive 2) public debt levels in advanced economics have increased sharply due to debt financed relief measures to their people which is likely to soften demand. 3) increase in global oil prices. 4) stagnating global trade and growing protection (Lahiri, 2021) Domestic constraints have also contributed to it. These include 1) NPAs in banking sector and poor credit growth which is (-) 0.4% (July end) indicating negative off take (Lahiri, 2021) 2) India INC’s dwindling investment Plan (Mathew, 2021) with no sign of picking up despite tax concessions due to high inventory, less than 75% capacity utilisation due to loss of sales 3) lack of private consumer demand due to increase in medical expenses, loss of employment and income 4) slow rate of vaccination. Private demand the biggest engine of growth, in Q1 of 2021-22, stagnates at the level of 2017-18 which inhibits investment. Inflation is high and is further eroding consumer demand 5) exports though improved lately is to be seen against fall of around 17% last year and GST collections are volatile though have recovered slightly in the last Qr. (Sabnavis, 2021). (6) government spending has also fallen even below last year’s level ostensibly due to lack of fiscal space but continues to falter despite buoyant revenue collection lately. This has led IMF to cut India’s GDP growth forecast for 2021-22 by as much as 3 percentage points from 12.5% to 9.5% this is attributed to 1) inadequate levels of vaccination 2) below the line direct government spending which instead of a direct immediate out go from its coffers gives more loans and credit guarantees (U. Misra, 2021). In the circumstances, over the two year period (2220-22) the growth may turn out to be zero per cent or negative. (Dev, 2021). Assuming zero percent growth at constant prices, it has been estimated, that in quantitative terms there would be a potential loss of output of Rs 20 lakh cr in three years 2019-20- 2021-22, (Chidambaram, 2021)1. This will result in loss of jobs, income, wages and investment and worsening of social indicators in education, health etc.

Livelihood Crisis

Besides with a battered economy, the pandemic has produced multiple crises (Lahoti and Kesar, 2021). The most severe of them is the livelihood crisis which is reflected in the scale of job loss. This job loss during lockdown (April and May 2020) estimated by various surveys was experienced by 60-80% of workers (self-employed, casual as well as salaried workers without job security) (Basole, 2021). Nearly one crore of salaried jobs were lost in 2020-21. (Chidambaram, 2021)'Unemployment rate shot up to 13.3% in July-September, 2020 from 8.47% a year ago and urban employment was 27.7% in age group of 15-29 years. (ENS, 2021)3. As per Centre for Monitoring of Indian Economy (CMIE) 43% of the work force was affected by lockdown in 2020 and 20% of those unemployed could not get back their jobs even after six months. (Basole, 2021); Women experienced double job loss (78%) compared to men (35%) during lockdown and faced much slower recovery. (Lahoti and Kesar, 2021) Precarity of employment also increased with increasing informality of even the previously employed salaried workers. Post lockdown by December 2020 only 39 percent continued in salaried work, 44% joined informal work. (Lahoti and Kesar, 2021) In the second wave that spread in rural areas, the number of jobs in small towns and villages were also hit. The second wave cost an additional job loss of 18.3% million (Vyas, 2021)1. Unemployment rate in 2021(August) was 8.3% higher than 7% in July. Labour Force participation is 40% as against a global average of 60%. India provides 9.2 million jobs less than it provided before the Pandemic. (Vyas)2 Urban distress has led to reverse migration from urban to rural areas indicating a sign of distress in the urban labour market.

Loss of jobs and informal nature of employment implied loss of income and wages. The loss of earnings during the first six months experienced by average households was around 17% relative to same months during 2019. But in respect of the bottom of income distribution it was near total in lockdown months. Overall 10% of household lost three months income from March to August 2020 (Basole, 2021). 80% of workers suffered falling income between December 2019 and August 2020 with median reduction in earnings of 20% (Lahoti & Kesar - 2021). As per Mahesh Vyas of CMIE, however, 90% of families experienced income reduction during the last 13 months. (Chidambaram, 2021)1. In the week ending May 16, 2021, 56% households reported a loss of income compared to a year ago. (Dev, 2021) This led to borrowing and sale of assets and high amount of debt relative to their income among the affected persons to survive. (APU, 2021)

Nutritional Crisis and Food Insecurity

The second major crisis is related to food insecurity and nutritional deficiency. The pandemic has resulted in the deterioration in nutritional status of adults and children and an increase in food insecurity. The nutritional deficiencies even before the pandemic were among the worst in the world. The pandemic aggravated them. Findings from National Health and Planning Survey – 5 (2019-20) bring out that in seven out of ten major states, the proportion of underweight children has increased in 16 out of 22 states, stunting has increased in 13 states and wasting increased in 12 states. (MoHFW, 2020) The deterioration of at least one anthropometric indicator for children was observed in 20 out of 22 states. Similar stagnation / reversal was also seen in other health indicators such as infant mortality rate (Himanshu, 2021) The closure of ICDS and Mid-Day Meal and Anganwadi Services which provide critical nutritional inputs to children and pregnant mothers, and loss of income of very poor households would most certainly have worsened the nutritional status of these families.

The loss of livelihood and resultant loss/ reduction in earnings is reflected in persistent food insecurity. The Hunger Watch Survey carried out by Right to Food Campaign of about 4000 individuals across 11 states observed decline in food intake, compromised nutritional quality of the food consumed for 2/3 of the respondents when compared to pre pandemic level. (Lahoti & Kesar, 2021; Himanshu 2021) with one third respondents having to skip meals ‘sometimes’ or ‘often’ (Sinha and Narayana, 2020) APU survey indicated that 20% respondents reported no improvement in food intake since the lockdown (APU, 2021).

As per the latest edition of State of Food Security and Nutrition in the world (SOFI) report, the prevalence of moderate to severe food insecurity in India rose by about 6.8% percentage points in 2018-2020. In absolute terms, the number of persons facing moderate to severe food insecurity has increased by about 9.7% crore since the outbreak of Covid-19 despite unprecedented 100 million tonnes of food grains in its godowns. As per Prevalence of Moderate and Severe Food Insecurity Index (PMS- FI), there were about 43 crore moderate to server food insecure people in India in 2019. As a result of pandemic related disruptions, this increased to 52 crore. In terms of prevalence rate, the increase was from 31.6% in 2019 to 38.4% in 2021. (Bansal, 2021)

Health Crisis

The fourth major crisis caused by pandemic which was also the most glaring in public view was manifested in virtual collapse of public health system faced with overwhelming pressure of critical Covid cases. Public sector health has suffered from increasing deterioration for a long time due to low public investment, inadequate and crumbling infrastructure, deficient number of Sub-Centres (18%). Primary Health Centres (22%) Community Health Centres, (30%) shortage of manpower, high out of pocket expenditure among many problems. Pandemic sharply exposed these inadequacies. Over the years, experts have been recommending enhanced allocation for strengthening the public health system, particularly the rural primary health care and provision of human resources. Parliamentary Standing Committee, the Economic Survey 2020-21 and the 15th Finance Commission have also recommended it (CBGA, 2021). National Health Policy 2017 had recommended spending by States on health to be 8% of their respective state budgets. Health is a major goal in UN’s Sustainable Development Goals. Universal Health Coverage is an important component of SDGs. India’s position is low in respect many health indicators compared even to small countries in the neighbourhood. Besides, during the pandemic the available human and material resources were deployed to deal with Covid cases, not leaving space for other diseases to be handled. Measures to control Covid-19 created a situation where non-Covid disease burden is enhanced and strategies to contain serious cases are inadequate.

Crisis of Learning

Fourth major crisis is the crisis of learning. This has two dimensions 1) learning that has not happened due to closure of schools 2) forgetting what has been learnt. (Khandpur and Rishikesh, 2021) The pandemic has caused a severe blow to educational expansion due to closure of schools and other educational institutions and shift to digital platforms. This is not only worsening the already low learning outcomes but also increasing inequalities. A joint statement of UNESCO and UNICEF brings out the geographical dimension of this inequality. Only 6% of rural households and 25% of urban households have computers, only 17% of rural areas and 42% of urban areas have internet facilities and vast majority of families do not have smart phones (Khera, cited in Chidambaram, 2021).3 A UNICEF study between August and October, 2020, across 6 states, found that in Madhya Pradesh 60% of government schools students did not use any remote learning materials, 40% of parents struggled to pay internet recharge amount, 28% found it difficult to buy a device while only 24% reported net connectivity (Siddiqui, 2020). The digital divide is pushing a large number of children belonging to marginalised groups and low income groups out of school. It is also leading to deterioration in learning levels. ASER (Annual Status of Education Report) findings from 584 districts in September 2020 bring out that about 2/3 of student did not receive any learning activities or resources during closure of schools. (Chidambaram, 2021)5 Education levels of parents determined whether such children received any help at home. As per the Azim Premji Foundation Survey of January 2021 of in respect of 16067 primary school children in 1137 schools across 44 districts in five States. 92% and 82% lost one or more of abilities that constitute language and mathematical learning respectively (K.S. Rao, 2021). As per the same study, nearly ¾ of children in class II have lost the ability to identify a word in print and there is similar regression in children of class IV and VI. (Khandpur and Rishikesh, 2021) A Karnataka school survey of 24 rural districts also found that there was marked decline in foundational skills between 2018 and 2020 (Chidambaram)5 Another school survey across 15 states points brought out that 42% of children in urban areas and 48% in rural areas are unable to read a few words and that most children across primary grades have lost basic ability to continue their learning journeys (Khandpur and Rishikesh, 2021). As per yet another survey of 1400 households of under privileged children coordinated by Dreze, the reach of online education was restricted to 8% in rural and 24% in urban areas. In respect of off line education, nearly ½ of children were not studying at all and 80% parents testified to declining ability to read and write during the lockout (Dreze, 2021) These learning losses would have damaging effect on the productivity when these children participate in the labour market. (Lahoti and Kesar, 2021) The situation created by closure of schools has also led to children joining the labour market and suffering from poor mental health. Adolescent girls are being married off and there is increase in child abuse. Deprived of mid-day meals, many poor children are facing hunger and nutritional deficiencies (K. S. Rao, 2021) Pandemic has not only affected students’ access to education but also extension of low budget schools which are either closed or at the breaking point. (Siddiqui, 2021; Baruah, 2021)

Increasing Inequalities

The pandemic has also exacerbated existing inequalities which are already quite pronounced. (Dev, 2021) India is considered as the second most unequal country globally after South Africa (Bandura and Sword, 2018). As per world Inequality Data Base, top 10% of India corner 56% of national income (Lahoti et al, 2020). Inequality exists between wage earning and salaried non-agricultural workers with a very large number of them without any written job contract, paid leave or social security. Due to lockdown and social distancing norms, a large number of urban informal workers and daily wage earners are unable to perform their duties and cannot earn a salary or wage income. Pandemic had differential impact on loss of employment and income of households with lower income groups suffering decline disproportionately. The Periodic Labour Force Survey 2019-20 has brought that in rural areas, percentage of persons with no work among self-employed was highest among Muslims, followed by SC/STs. Similar was the case in urban areas. Muslims had the highest rate of unemployment. The fall in earnings follows a similar pattern. In urban areas the fall in earnings was the highest (27%) among SC/STs followed by Muslims (20%). The deficits are higher in respect of women (Kundu, 2021) One study has estimated increase in income inequality as a result of COVID-19 to be between 3-21% as against a rise of inequality approximately of 10% over six years since early 1990s. (Dasgupta and Murli (2020) cited in Nag and Geast, 2020) In respect of income loss, one study has estimated that the bottom decile lost 54% of their income between March-August, 2019-2020 while the richest decile experienced loss of only 16% in rural areas. It was 39% and 21% respectively in urban areas. In absolute terms, the bottom decile lost 3 months income. (Lahoti et al, 2020) The relative loss of income of bottom 10% of households was 2.7 times larger compared to overall average loss. The ratio of mean incomes of the richest 10% to the poorest 10% increased from 11 to 17 (cited in Lahoti and Kesar, 2021). The stress caused by income loss led to rising debt-levels which as per one survey of 47,000 low-income households across 15 states was 2/3 of its pre-pandemic monthly income levels and 22% households had to sell or pawn their assets to survive during lockdown (cited in Lahoti and Kesar, 2021). The Oxfam report, titled ‘The Inequality Virus’ brings out that while millions of informal sector workers suffered, the wealth of Indian billionaires increased by 35% during the lockdown and by 90%, since 2009.

India already had sharp disparities in consumption with the top 20% of population accounting for 47% of consumption share while the bottom 20% accounted for only 6% in 2012. (cited in Nag and Geast 2020) The pandemic is likely to enlarge this gap due to the shut down of economy and the rise in health expenditure.

Agrarian Crisis

Even agriculture was not spared of the adverse impact of Covid- 19. During the pandemic, while almost all economic activities experienced slower growth and unprecedented constraints, agriculture was the only sector which managed to generate a ‘robust’ growth rate of 3.4% in 2020-21 though lower than 4% in 2019-20, largely due the favourable weather condition. But this did not lead to higher returns for farmers of their crops as reflected in lower market arrivals in 2020 compared to 2019. (Ram Kumar, 2021) This implied that quantities of crops that were not brought to the market may have been sold at lower prices in the informal market. Even in the formal market, the average farm gate prices were lower in 2020 compared to prices in 2019. On the other hand, farmers had to bear higher input costs. In the dairy, subsector, the demand for milk declined by 20.25% during lockdown leading to decline in milk sales and prices. Similarly, in the meat subsector, the demand and prices declined by around 50% during lockdown. Many slaughter houses and abattoirs were shut down. In poultry, broiler birds piled up in farms and to cut down cost, livestock breeders had to cull lakhs of them. The industry estimated a loss of Rs. 35000 crore (Ram Kumar, 2021). While agriculture was spared of lockdown restrictions, its products suffered from demand destruction and forced consumption reduction due to closure of hotels, eateries, hostels, canteens, sweetmeat shops etc. (Damodaran and Krishnamurthy, 2021)

Expectations from the Government

Given the enormity of suffering of the poor, the multiplicity of crisis faced and the battered economy, there were a lot of expectations from the Government by different stakeholders, more particularly the vulnerable households. It was expected to tackle unprecedented contraction in the economy and put it on a growth path, address loss of livelihoods, falling incomes, deteriorating nutrition levels and poor health facilities. The most important of all, it was necessary that the Government increased expenditure significantly in sectors that benefit the disadvantaged groups and to check rising social and economic inequalities. (CBGA, 2021) But the immediate priority was to extend at the very least, a package of measures introduced last year 2020-21, though inadequate, consisting free ration for six months under the Pradhan Mantri Garib Kalyan Yojna, increased allocation for MGNREGS (Mahatma Gandhi Rural Employment Guarantee Scheme), Jan Dhan cash transfer of Rs. 1500/- to the poorest 10% of households and National Social Assistance payments. The other fiscal supports to be continued consisted of the Employees Provident Fund Organisation based subsidies, PM- Kisan Cash Transfer, PM Garib Kalyan Rozgar Abhiyan and Building and Construction Workers funds and monetary measures such as Emergency Credit Line Guarantee Scheme for micro-medium and small enterprises. (MSMEs) Of the above the actual fiscal support directly benefiting the vulnerable households last year (and would be so if continued this year) was only around Rs 3 lakh crore i.e., 1.5% of GDP which was much lower than what other comparable developing countries have provided (Basole, 2020) as also lower than Rs. 2 lakh crore tax subsidy given to the corporate sector to revive the economy (Himanshu, 2021).

Government Response

Government response to these expectations is essentially measured through its fiscal and monetary policies which play a critical role in managing the country’s economy. Fiscal policy is the instrument through which Government indicates how money would be mobilised (taxation) and spent by the centre. Monetary policy, administered by Reserve Bank of India, deals with besides money and currency, interest rates at which it lends to commercial banks and the latter lend to the borrowers. Economic growth is also facilitated by deregulatory measures (generally labelled as structural reforms) and non-monetary incentives for undertaking economic activities. The action required to deal with the multiple crisis outlined above involves public expenditure and largely falls in the domain of fiscal policy which is spelt out in the annual budget. This year’s budget chose to pursue a conservative fiscal path with targeted sharp reduction in fiscal deficit. Fiscal deficit can be reduced either by increasing revenue or by reducing expenditure. Revenue collections have not increased partly due to slowing down of economy, but more importantly due to sharp reduction in corporate taxes in September 2019. This is compounded by inflated projection of tax collection and failure to achieve the non-tax receipt target. The pandemic has worsened this situation. To compensate the short fall in tax collection target, Government has resorted to indirect tax such as a steep increase in taxes levied on fuel (Petrol, diesel etc) which increase inflation and levy of surcharges and cesses which affect the poor the most. Since Government is unwilling to increase direct tax- GDP ratio so as to maintain investor confidence and for the same reason also resorts to corporate tax concessions, and indirect taxes cannot be raised beyond a threshold value, the axe has fallen on public expenditure. This is what has happened in the Budget 2021-22 which indicated that the total revenue receipts in FY 2020-21 was 8.15% of GDP, down from 8.48% in 2019-20. But the total expenditure was 17.7% in 2020-21 up from 13.14% in 2019-20. The excess expenditure over receipts was mainly on account additional spending on food and fertilizer subsidy, rural employment and direct benefit to Jan Dhan accounts. But the total expenditure in 2021-22 (BE) is 15.63% of GDP even though the total revenue receipts were 8.81% of GDP up from 8.15% in 2020-21. This is mainly due to lower allocation for revenue expenditure from the preceding year. (M.G. Rao, 2021) This results in severely curtailed expenditure of various departments particularly affecting implementation of social sector programmes which have a large component of revenue expenditure. As the fiscal deficit increased to 9.49% of GDP in 2020-21 up from 4.5% in 2019-20, Government disregarded fiscal stimulus to vulnerable poor even on last year’s pattern ostensibly to reduce fiscal deficit to 6.76% of GDP in 2021-22. The budget, however, makes a substantial additional allocation for capital expenditure of Rs. 1.15 lakh crore or 2.5% of the GDP signalling that it has chosen to revive the economy through infrastructure development rather than boosting consumer demand by fiscal support to the vulnerable households. However, even of this infrastructure provision, Rs. 20,00 cr is meant for creation of a Development Finance Institution, Rs. 3250 cr for recapitalisation of the National Bank for Agriculture and Rural Development (NABARD) and Rs. 39,000 is for water supply. Thus, much reduced allocation would go towards infrastructure which would create livelihoods. (M.G. Rao, 2021)

Reduced Resources for Employment Generation

Coming to the multiple crises, the first priority was to tackle the loss of livelihood. India’s record of providing employment is ‘abysmally poor’. The employment of working population has in fact declined from 47.8% in 2016-17 to 41.7% in 2017-18, further to 40.2% in 2018-19 and then to 39% in 2019-20. In the year of pandemic, it fell to 36.5% and has not recovered from that (Vyas- 2021)3 This required as an immediate measure to further increase allocation for expanding MGNREGS (Mahatma Gandhi National Rural Employment Guarantee Scheme) which has acted as a vital safety net in the rural areas but also creates infrastructure to boost rural economy. Far from increasing the allocation further, the allocation has been reduced to Rs. 73,000 cr. down from 1,11,500 cr (RE) in 2020-21 despite the huge unmet demand as only 55% (as against official claim of 13%) of those who demanded work were able to get it (Nath et al, 2021). With last year’s increase of 11% in daily wages under MNREGS from Rs. 182 to Rs. 202 per day and pending liabilities of Rs. 11,352 cr the reduced allocation this year would not only limit the scope of employment creation further and increase the unmet need but also cause delay in wage payment. (Himanshu, 2021)

Pandemic also hit the urban employment hard (Vyas, 2021)2 with no programme like MGNREGS to rely upon to stave off starvation. There was, therefore, an urgent need to have an urban version of MGNREGS as suggested by several economists (Dev 2021; Basole, 2021). This would not only contribute to effective implementation of government programmes in the social sector which are starved of man-power support, but would also improve quality of urban infrastructure and services. (Lahoti and Kesar, 2021). Jharkhand and Kerala have introduced such a programme on a small scale but it requires a national programme to make a dent on the problem. It has been estimated that to provide 20 million casual workers 100 days of work at Rs. 300/- a day as wage would cost only Rs. 1 lac crore, less than 0.6% of the GDP. (Lahoti & Kesar, 2021) But the Government has completely ignored it. Rather, it has laid emphasis on self-employment through credit based schemes like Pradhan Mantri Mudra Yojna (PMMY)and accordingly increased budget allocation for a collateral free credit guarantee fund to support loan allocations to MSMEs and Prime Minster Employment Generation Programme. But every vulnerable person cannot become an entrepreneur and with a negative growth rate, private agents may not borrow to avoid investment risks. These programmes, have also a high degree of failure for several reasons.

The lack of seriousness towards creating employment is also evident from reduced financial allocation for various skill development programmes which are essential for creating employability of unskilled labour. The Ministry for Skill Development and Entrepreneurship has also been subjected to a cut from Rs. 3,002 cr in 2020-21 (BE) to Rs. 2,785 cr in 2021-22 (BE) in its allocation. Similarly, reduction of allocation has been made in the Pradhan Mantri Kaushal Vikas Yojna in respect of Rs. 221 cr compared to 2020-21 (BE) and from Rs. 2,646 cr in 2020-21 (BE) to 977 cr in 2021-22 (BE) in the programmes of the Ministry of Labour and Employment.(CBGA, 2021)

Squeeze in Resource Commitment to Nutritional Programmes

Government has also failed to address the nutritional crisis. Four schemes under the umbrella programme Integrated Child Development Services (ICDS) have been merged and named as Saksham Anganwa- di or Mission POSHAN 2.0. The allocation for this scheme in 2021-22 (BE) has been reduced by 18.5% compared to the combined allocation for four merged schemes in 2020-21.(CBGA, 2021) According the Jean Dreze, the real expenditure on ICDS decreased by about 36% between 2014-15 and 2021-22 and Mid-Day Meals by about 38% (Lahoti and Ke- sar, 2021). Revised estimates for small schemes like scheme for adolescent girls and National Creche’ Scheme in 2020-21was sharply reduced Rs. 17,917 cr from Rs. 24,557 cr (BE) to (BE) implying disruption in services during the pandemic. (CBGA, 2021) The closure of Anganwa- di Centres was responsible for this disruption. Nutritional Programmes have also shown poor performance during the last few years. As per National Family Health Survey (NFHS-4), in 2015-16 only around 48% of eligible children and 51% of pregnant women received the services in Anganwadis. In urban areas, these numbers were lower - 40% and 36% respectively. The numbers of beneficiaries of the supplementary nutrition programme have also reduced from Rs. 10.2 crore in 2016 to 8.6 cr, in 2020. The allocations for the programme have been insufficient to expand coverage. (CBGA, 2021) While the Government has introduced an ‘intensified strategy’ to improve nutritional outcomes in 112 aspira- tional districts, the reversal of several child malnutrition parameters in NFHS-5 would demand that coverage of the strategy be not confined to aspirational districts only. Besides direct nutritional intervention, it should also improve public services across sectors which have an impact on nutrition. Nutritional Programmes also suffer from ineffective implementation as many sanctioned posts remaining vacant due to reduced central financial commitment towards cost sharing of salaries from 60:40 to 25:75 (CBGA, 2021).

The maternity benefit scheme restricts its benefit to only the first live birth which excludes a large number of women. Some State governments - Odisha, Telangana, Tamilnadu have expanded coverage and quantum of benefits. But Central government has failed to emulate their example and strengthen the scheme with wider coverage and quantum of benefits (CBGA- 2021). Mid-Day Meal Programme, another nutritional scheme, has also faced 11% reduced allocation in 2021-22 compared to 2020-21.

As for the high level of food insecurity, the Government has tried to hoodwink people by showing an increase in food security (subsidy) from Rs. 75,0000 cr in 2019-20 to over 2 lakh crore for 2021-22. But this is not on account of an expanding PDS (Public Distribution System) to address the high level of hunger due to lack of purchasing power but to make debt payment to FCI to do away with the off budget practice of transferring a large part of food subsidy to FCI (Food Corporation of India) as loan from National Savings Fund to show a lower fiscal deficit.

Continued Low Investment in Health

Government’s deceptive budgeting to mislead people is also evident in addressing health crisis. The budget of 2021 made an overall allocation of Rs. 2,23846 cr, a massive increase of 137% over the BE provision in 2020-21. But this high figure is on account of estimates of expenditure from different heads being brought under health such as Rs. 35000 cr for one time cost of Covid 19 vaccination, allocation of Rs. 60,000 cr pertaining to the Department of Sanitation and Drinking Water and Finance Commission grants for water and sanitation and health of Rs. 49,000 cr. The actual budget allocation for health is only about Rs. 70000 crore, a mere increase of 10% over BE of the last year but lower than RE of last year by more than 10% (Narayana, 2021, Himanshu, 2021). In the health sector budget, the allocation for Department of Health & Family Welfare, the core agency for health expenditure, is about 9.6% in BE of 2021-22 over that of BE of 2020-21. But the bulk of this expenditure is revenue expenditure which goes towards the payment of salaries and only Rs. 800 cr is for capital spending. There is nothing for strengthening primary health care infrastructure and addressing other problems afflicting it despite the massive weaknesses exposed by pandemic. However, Finance Commission’s grant to local bodies specifically for strengthening primary healthcare may, hopefully, lead to some improvement. Finance Commission’s recommended Rs. 31,755 cr sector specific grant for health was not accepted by the Government. But its components have been picked up and incorporated in a centrally sponsored scheme called Atma Nirbhar Swasth Bharat with an outlay of 64,180 cr over six years. But it is not included in the budget and the amount is too small to make any impact.

Over the years, Public Health System has been undermined by neglect in the allocation of resources while private sector health care has been promoted through various concessions and incentives. The National Health Policy opts for the purchase of health care services from the private sector rather than strengthening public healthcare. Yet, when the Pandemic struck, the pressure of providing healthcare services was overwhelmingly handled by the public health system. Strengthening the public health system is also crucial for minimising inequity in access to healthcare services. The National Health Mission (NHM), an important programme for this purpose, received an increase of around 20% allocation in 2021-22 compared to BE of 2020-21. But a major portion is allocated to Covid-19 vaccination of the frontline health care workers. Excluding this item, the allocation for NHM actually decreased in BE of 2021-22 by 15.37% from the RE of 2020-21. A substantial part of the health budget Rs. 6400 cr. is consumed by Pradhan Mantri Jan Arogya Bima Yojna, (Health Insurance) which has not received an increase in 2021-22 (BE) from that of BE in 2020-2021. Similarly, for operationalizing 1.5 lakh health wellness centres, an increase of Rs. 300 cr. in 2021-22 (BE) over the 2020-21 provision is too inadequate. Overall, even devastating pandemic has not moved the Government to increase health budget for 2021-22 and strengthen public health system.

Denial of Educational Crisis

There is no indication that the Government is seriously engaged in effectively dealing with the Pandemic induced challenge of learning crisis. This is evident from the poor resource provisioning for education in the budget in 2021-22 of Rs. 93,224 cr which is lower by 6.13% from the BE of 2020-21. This decrease is largely due to 8.3% reduction in the budget of school education. For a large number of children who had no access to online education and may have, therefore, discontinued study, the budget has failed to provide any fiscal support for safe and sustained return of children to schools, WASH (Water and Sanitation Hygiene) facilities and teacher’s training for children’s emotional wellbeing. Rather, the provision for key centrally sponsored scheme of Samagra Shiksha Abiyaan (SMSA) has declined from Rs. 38,751 cr in BE of 2020-21 to Rs 31,050 cr in BE of 2021-22. The share of education in the union budget has also been declining. It has been reduced from 0.49% of GDP in 2015-6 (BE), to 0.42% of GDP in 2021-22 (BE). It is even lower than 0.44% of GDP in RE of 2020-21. The more unfortunate part is that the Rs 800 cr of budget provision for the scheme in 2020-21 could not be utilised. (CBGA, 2021) Overall, far from reducing inequalities in access to education, the budget provisioning reinforces it by increasing allocation for better resourced Kendra Vidyalyas and Narvodaya Vidyalayas admission to which are restricted to selected children, from RE of

2020-    21 to 2021-22 (BE). While there is lack of seriousness in dealing with learning crisis as indicated in inadequate provision of resources, Government has shown great enthusiasm for handing over management of 1100 Sainik Schools to public private partnership institutional arrangement. (Wire, 2021)

Ignoring Inequalities Altogether

On increasing inequalities, the Budget 2021-22 failed to take any notice. The least Government could have done was to provide package of stimulus to the vulnerable households for a few months on the pattern of last year and direct public spending to sectors which benefit the poor. On ground of equity, Government was also required to increase tax collection from large companies and wealthy individuals which raked in high profits during the last two years. But this has not happened. In fact, tax collections from corporates have declined by about 1% of GDP during the current government’s tenure and for the first time collection from corporations are lower than income tax collection. (Sridhar, 2021; Dasgupta,2021) Despite this, concessions to the corporates have not translated into higher corporate investment.

Faulty Strategy to Tackle Agrarian Crisis

With respect to agrarian crisis far from increasing allocation, to boost growth, the BE allocation for agriculture was cut by 13% in 2021. The most substantial of this cut was Rs. 10,000 in respect of the PM Kisan scheme which is a cash transfer to farmers to compensate them for high cost of farming. An overall cut of around 25% was made in various centrally sponsored schemes. Agricultural sector’s share in the union budget was also reduced from 0.7% of GDP in 2020-21 to 0.6% of GDP in 2021-22. The total expenditure on agriculture and allied sectors declined from Rs. 146876 cr. in 2020-21 to Rs. 135854 cr in 202122 (BE). An important facet of crisis in agriculture is lower income for farmers and rising input costs. To address this distress, experts have suggested diversification to animal husbandry (dairy, poultry, fishery etc) to supplement income. But this subsector has been neglected over the years despite being organised into a separate Ministry as the crop sector gets a lion’s share of allocation. Besides, the agrarian crisis is also due to distorted direction of budgetary expenditure which has overwhelmingly (79%) tilted towards cash based schemes to the neglect of the infrastructure based programmes which can lead to sector wide improvement. The cash based schemes exclude women, tenants and landless farmers while programmes for community led infrastructure are more inclusive (CBGA, 2021). The Budgetary support for infrastructure based programmes has reduced sharply from 46% of sector’s budget in 2018-19 (A) to 29% in 2021-22 (BE). Though, on the face of it, the protest against the three farm laws is unrelated to pandemic, it is actually not so as food inflation remained high during the pre-harvest period and relatively lower after harvest and the farmers were losers in both. Besides, liberalising agricultural markets and creation of market infrastructure would affect procurement operations and community led infrastructure over the long run (CBGA, 2021). Also, minimum support price is pegged at 1.5 times of cost norm which leave out other possible costs and also determines scale of finance admissible for short term crop loan. The solution lies in sustainable agriculture which found no thrust in the budget (S. Mishra, 2021).

Strategy for Promoting Growth

The principal strategy in fiscal policy for spurring growth is to increase capital expenditure which would create infrastructure and also generate employment. This was evident from the 34.5% increase in allocation for it a large part of which goes to the road sector and the water infrastructure. But not all infrastructure generates direct public employment. Infrastructure at a local level such as roads, water works, power, sanitation, buildings is more labour intensive and can create direct public employment. It is also usually executed by states and therefore leads to devolution of funds on local units of administration and creates local employment. But large infrastructure such as metro-rail, airports, highways, technology parks etc. are more capital intensive, create fewer direct jobs and benefit large business and higher income groups. Improvement in local assets and social infrastructure has the potential to improve productivity of small enterprises, generate private employment and is instrumental in providing better services. But capital outlay on rural roads has not increased and allocation for rural electrification has been slashed. There is a general reluctance to increase revenue expenditure as the latter goes towards salaries of employees / wages of labour. But this expenditure is crucial for delivering services without which capital infrastructure would be of little use (Basole, 2021).

Monetary Policy

Monetary policy is determined by two considerations, a) to facilitate growth process by having enough liquidity b) to keep inflation under check. Between the two concerns, the latter is a priority as the Reserve Bank of India is legally mandated to keep inflation between 2% and 6%. For GDP growth, there is no such mandate. If inflation is within desired range, it tries to boost economic growth by reducing the interest rates that the RBI charges to lend money to commercial banks which makes it easier for businesses to borrow. When inflation is too high, it increases interest rates to promote savings and making it costlier for businesses to take new loans. Currently, GDP growth is not picking up while inflation both food and fuel has increased. The latter hits the poor the hardest. The RBI tends to overestimate growth and under estimate inflation (Chidambaram, 2021)3. But so far RBI has favoured boosting economic growth over containing inflation in the hope that an increase in prices would subside. But it has not happened. Therefore the RBI would have to increase interest rates sooner or later which may affect growth. This dilemma could have been resolved by Government by increasing public expenditure to create demand and boost growth. But the Government has favoured more loans, credit guarantees, production linked incentives or liquidity support which have not been effective in stemming the decline of manufacturing (Vyas, 2021)2. MSMES faces acute cash crunch and 23% of them could slip into default in loan payment. They need cash flow to generate demand (Verma, 2021). This is contrary to suggestion of most economists and even the confederation of Indian industry (CII) that Indian economy is in dire need of increased direct spending by the Government to raise consumption demand (U. Misra, 2021)2. But the Government has not yielded to this pressure. As a result, it hurts GDP growth besides failing to alleviate the distress of the poor and vulnerable. Thus both fiscal and monetary policies are anti-poor.

Structural Reforms

Given its ideological orientation, Government overwhelmingly banks on the private investment to accelerate economic growth, (U. Misra, 2021).2 For this purpose, its efforts have been premised on whetting the appetite of the corporates to invest, expand and accumulate profit by aggressive structural reforms and deregulation of economy since mid-2019. This is indicated by several policy measures. These include the sharp cut in corporate taxes, production and marketing of coal by corporates, further liberalisation of the mining sector, proposed privatisation of ordinance factories, higher FDI limits in the defence and space sector, large scale privatisation of airports and also of power distribution companies, suspension of the implementation of Insolvency and Bankruptcy code to protect corporates from loan recovery drive, deregulation of agricultural markets, virtual dismantling of labour laws by enactment of three labour codes. The budget of 2021 took this further by proposed- privatisation of PSUs including banks and insurance companies, monetisation of public assets to be handed over to private sector and promised 1.97 lakh crore to manufacturing companies in 13 sectors over the next five years as production linked incentive schemes (EPW, 2021). The latest in this incentives bonanza is repeal of retroactive taxation and readiness to go in for Free Trade Agreements which it rejected earlier. But still there is no sign of a animal spirit of private sector on the horizon, hugely disappointing the policy makers (Chidambaram, 2021)4. This investment is unlikely to be realised because of a lack of consumer demand (Basole, 2021; Misra, 2021)2. Increase in public spending even by borrowing could create such a demand (IE, 2021)2 as it would give money in the hands of the poor and lower middle class. (Chidambaram, 2021)2 But the Government refuses to yield even with higher tax collection (IE, 2021)2. It has merely extended 5 kg of good grains free of cost till November on the pattern of last year but excluded one kilogramme of pulses and stranded migrants from its benefit (ENS – 2021)2. The Government has pursued ‘fiscal fundamentalism with a vengeance’ (Sridhar, 2021) and stuck to the neo-liberal orthodoxy. It has evidently made the political choice that the poor and vulnerable would have to bear the burden of recovery.

In view of the foregoing, what is needed is a new social contract which reflects Government’s commitment to the poor by expansion of fiscal space to invest in creation of jobs, education and health infrastructure and provision of income support along with resolve to reduce inequalities. This should be achieved by widening the tax base and taxing the super-rich a bit more particularly those who have made extra-ordinary gains over last two years. (Mehta 2021; Dev 2020). It would require a high degree of People’s mobilisation to exert pressure on the Government for such a change. There is little prospect of that happening.


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