[Marxistindia] Economic Steps in the Current Period

[news from the cpi(m)]

Communist Party of India (Marxist)

May 2, 2020

Press Release

The nationwide lockdown has been extended by another two weeks. The  
problems that emerged since the beginning of the lockdown and the  
difficulties being faced by crores of Indian people particularly the  
migrant workers, the daily labourers and the poor who are unable to  
survive will continue to deepen.

In this context, the Communist Party of India (Marxist) is putting  
forward in public domain the economic steps that are needed to be  
taken by the government in the current period. These must be urgently  
attended to.

This economic roadmap needs to be initiated immediately by the Central  
Government.

The CPI(M) has sent this roadmap to the Hon’ble President of India and  
the Prime Minister.


For CPI(M) Central Committee Office

*******



THE ECONOMIC STEPS NEEDED IN THE CURRENT PERIOD


The Indian economy was already in the grip of a severe slowdown,  
bordering on recession, with largescale fall in production, job loss,  
agrarian distress and a steep rise in unemployment on the eve of the  
outbreak of the Covid pandemic. With this lockdown the situation has  
worsened and the misery of the people has grown exponentially.

Under these circumstances, the Communist Party of India (Marxist) is  
putting forward an economic plan that needs to be undertaken  
immediately by the government. The economic crisis and the associated  
people’s agony must be met by measures pertaining to the immediate  
tasks, medium term measures and the long term measures. These three  
however have to be initiated right now.

The CPI(M) is calling upon the central government to immediately  
consider these proposals that merit serious attention for our economy  
and the welfare of our people.


The CPI(M) appeals to all sections of our people, political parties  
and people’s movements to rally together to pressurize this BJP led  
Central government to implement the following:


IMMEDIATE MEASURES


1. The immediate problem relates to the fact that millions of working  
people at present are hungry, unemployed, and without any income; many  
are herded into quarantine camps. Even if the government’s claim that  
the lockdown has converted the exponential growth in the number of  
Covid-19 cases into a linear one is accepted, the end of the lockdown  
is likely to cause a resumption of exponential growth. Whether the  
lockdown itself is extended further or substituted by some other form  
of enforced physical distancing, the acute disruption in the lives of  
these millions will continue. Providing them with succour in the form  
of food and cash is of immediate priority; and amazingly the central  
government, after declaring its initial package of Rs.1.7 lakh crores  
which was minuscule and of which nearly half consisted of re-packaged  
old schemes anyway, has done literally nothing to help the distressed  
millions.


2. How long this distress will continue is not known; but to start  
with, the central government must make available to every non income  
tax paying household Rs.7,500 per month for a period of three months,  
and to every individual 10 kg. of free grains per month for a period  
of six months. There are 77 million tonnes of food grains with the FCI  
at present against the buffer-cum-operational stock “norm” of 24  
million tonnes; in addition, about 40 million tonnes of rabi harvest  
will be added to this amount. So, there are plenty of grains   
available for distribution, so much so that the government is planning  
to use rice stocks for producing ethanol. Giving food free to the  
distressed millions surely has priority over such use. In cases where  
the recipients have no cooking facility, cooked food can be given in  
lieu of grain. The nation wide network of mid-day meals scheme can be  
used for this purpose. Apart from cereals a certain amount of pulses,  
cooking oil and other necessities should also be provided free over  
this period.


3. The total sum required for such cash and food transfers for the  
respective periods is estimated to be about 3 per cent of the Gross  
Domestic Product, on the assumption of a 20 per cent voluntary  
“dropout” by the rich from the list of beneficiaries. Raising taxes  
for this purpose has to be explored later, when a supplementary budget  
will become necessary. In that budget wealth tax will have to play a  
crucial role: it will both raise resources and also keep the rapidly  
increasing wealth inequality in check. Additionally, a tax on the  
super rich should also be imposed. But, for the time being, this  
entire expenditure has to be financed by borrowing from the Reserve  
Bank of India. This in our view will not create any difficulties for  
the economy in the present circumstances when vast amounts of  
unutilized capacity and unsold food stocks exist in the country.


4. While the resources for such transfers have to be provided by the  
Centre, the actual transfers have to be carried out under the aegis of  
the state governments. The Centre therefore must make the grain  
transfers available to the states free, and the cash transfers in the  
form of grants; their inter se distribution across states is easy to  
work out since the universality of transfers makes population the only  
determining criterion. The states in turn would devolve appropriate  
amounts to the Local Self-Government Institutions whose help will be  
essential for disbursing the transfers.

5. The state governments would wish to undertake additional  
expenditure over and above the amount of such transfers. It is amazing  
that even their GST compensation amounts, solemnly promised by the  
Centre, have not been paid since August. This amount must be  
immediately paid. In addition, the borrowing limits of the state  
governments should be doubled. A pro rata doubling of the borrowing  
limit of each state should in fact be an immediate step, and they  
should be allowed to borrow from the central bank rather than the open  
market. The interest rates on open market auction of state bonds have  
spiked in recent times, placing a huge burden on the already fiscally  
beleaguered states. Instead of relying on this route, state bonds must  
be bought by the RBI at the prevailing repo rate. This is being done  
in different ways by the US Federal Reserve, the European Central Bank  
and the Bank of England, as well as several central banks in  
developing countries. All this must be in addition to the substantial  
assistance that the centre must give the state governments from the  
thousands of crores being collected in the private fund named after  
the PM for fighting the pandemic and for improving healthcare  
facilities, e.g. increasing the supplies of ventilators, masks,  
protective gear, testing equipment etc.


6. The Central Government must immediately guarantee that all the  
people suffering from serious illness are not deprived of the required  
medical assistance, while all the necessary measures must be  
undertaken for fighting the pandemic. Lifesaving vaccinations for our  
children and vaccinations for pregnant mothers must be ensured to  
continue along with our fight against the pandemic. Along with that  
shortage of drugs, blood etc also needs to be addressed on a war  
footing.


7. Notwithstanding the assistance that the Centre can give to the  
states, the state governments which directly face the pandemic will  
still fall short if they rely only on the public healthcare  
facilities. It is imperative therefore that private healthcare  
facilities should be commandeered for public purpose for at least as  
long as the pandemic lasts, as Spain has done, and people can be  
tested and treated free at these facilities. The government could also  
offer to use the services of doctors and staff at reasonable rates.  
The Supreme Court had made testing in private healthcare facilities  
free; its retreat from that position is baffling and makes executive  
intervention absolutely essential. If the Centre, whose unplanned and  
ill-conceived lockdown has caused acute distress to millions, does not  
commandeer private healthcare facilities during the crisis, then it  
would have displayed a shocking class bias, undermining the national  
solidarity that is badly needed for fighting the pandemic.


8. Immediate measures must be undertaken by the central government  
standing guarantee to ensure that there are no job losses and no wage  
cuts. Special attention must be made to ensure that the most  
vulnerable sections - women, particularly, Adivasis, contract and  
Dalit manual labour- are specially protected.  Many countries in the  
world have announced guarantees, some to the extent of 80 per cent, of  
the wage bill. This must be announced immediately by the central  
government.


9. The logistics of universal transfers will no doubt pose problems.  
No existing list of beneficiaries can suffice, just as no single  
existing chain of outlets such as ration shops can be used to reach  
all. The problem will be more serious in urban compared to rural  
areas. The distribution of grain may be done using verification with a  
combination of identity documents (Ration card, Aadhaar card, Bank  
passbook, NREGA job card, etc). In addition, a certain amount of  
discretion may be allowed to MLAs, heads of village panchayat and  
municipal ward members to ensure that assistance reaches those who may  
not have any of these cards. Different state governments are already  
innovating with different ways of ensuring cash transfers to reach all  
(with only some exclusion criteria) without necessarily relying on  
existing beneficiary lists or bank accounts. These have to be expanded.


10. These actions will have to be undertaken at a time when India is  
facing substantial headwinds from the global economy and our balance  
of payments is likely to come under pressure. The pandemic has clearly  
revealed the pitfalls of capitalist globalization. On the one hand, it  
has made the cross-border transmission of the virus almost as rapid as  
the cross-border movement of finance. On the other hand the  
cross-border movement of finance has frightened national governments,  
including especially the Indian government, into bowing before every  
caprice of finance, including mindlessly respecting fiscal deficit  
restrictions even in the midst of the pandemic, and not spending  
enough to alleviate the distress of millions of working people. But  
even now, despite the Indian government’s obeying the dictates of  
finance and being extremely stingy in the matter of alleviating  
distress, and even denying the payment of Dearness Allowance to  
central government employees, finance is still leaving the country,  
resulting in a downward slide of the rupee to unprecedented levels  
against the dollar. Such an exodus of finance is also occurring all  
over the third world, though India is somewhat better placed than many  
other third world countries in having about half a trillion dollars  
worth of foreign exchange reserves. If the measures suggested in this  
note are put in place, then this tendency of finance to flee the  
country will be greatly strengthened. To cope with this, two steps  
must immediately be taken. The first is to introduce some degree of  
direct control on the outflow of finance, since our reserves must not  
be frittered away in financing capital outflows. The second relates to  
the issue of a significant amount of fresh Special Drawing Rights  
(SDR) by the IMF. Instead of illogically opposing such an issue, as  
the government has done, India should actively support it.  Unlike all  
loans, including the Swap Lines of the US Federal Reserve Board, the  
SDRs are non-discriminatory, non-discretionary, interest-free,  
non-repayable, and do not entail either any “conditionalities” or any  
arm-twisting.


MEDIUM TERM MEASURES

MGNREGS


11. These immediate steps will have to be followed by medium term  
measures as the lockdown is slowly lifted. Of these measures, four are  
central. The first relates to the MGNREGS. In most states MGNREGS has  
come to a virtual halt. Work under MGNREGS has to be revived, so that  
when the cash transfers suggested above have run out, the labourers,  
including those immigrant workers who have returned to their villages  
because of the lockdown and are without any income at the moment, can  
find some means of livelihood. Four measures are crucial with regard  
to employment guarantee. First, the wage arrears that have got built  
up must be paid immediately. Second, to accommodate the returned  
migrants from the towns, anyone demanding work, not just those who  
have been registered with the scheme in the past, should be offered  
employment on demand. MGNREGS must be extended to wage and family  
labour used by small and medium farmers in the current crop season  
Third, the offer of 100 days of employment should not be limited to  
households but should be extended to every adult; and unemployment  
allowance must be paid, as provided in the Act, in cases where  
employment cannot be provided. And fourth, MGNREGS should be extended  
to the urban areas where employment under the urban scheme could  
include employment in small enterprises, especially those supplying  
essential goods and services. This would be a way of subsidizing small  
enterprises: the government in effect would be paying for a certain  
period the wage-bill of the small enterprises. This would be a way of  
slowly reviving these enterprises by both supplying labour to them and  
doing so without their having to pay for it.


MSMEs

12. The second medium-term measure relates specifically to the MSMEs  
and to agriculture. Supplying labour from an urban employment  
guarantee scheme to these enterprises will not be enough. They will  
require substantial additional support. The banks have to give them  
timely credit without demanding high collateral security, for which  
the government has to provide credit guarantee. Besides, the RBI’s  
moratorium on loans should be extended for such enterprises from the  
stipulated three-month period to one year. Since the sudden stop or  
steep fall in demand makes it difficult for many of these enterprises  
to survive till normalcy returns, there is also need for an extended  
grace period, as well as a subvention that covers all of the interest  
rate from the government. In the case of agriculture there has to be a  
debt waiver for the peasants and the provision of fresh credit at an  
interest rate covered by the government. In addition a subsidy of Rs.5  
per litre of milk to dairy co-operatives is essential to help dairy  
farmers and to revive the demand for milk.


Return of Migrant Workers


13.The third medium-term measure would be to encourage the migrants  
who have gone back to their villages (and their going back to their  
villages has to be immediately facilitated by running trains and  
buses, which India’s ruthless lockdown has prevented, unlike in almost  
every other country), to return to their places of work. This will  
take time and will not be easy, because the shadow of the disease and  
the scare of a repeat lockdown will haunt everyone for a very long  
time. The fears of the migrant workers have to be allayed; and the  
image of a humane government, as distinct from one like our present  
government that takes whimsical decisions and implements them using  
police batons, has to be established.
Arrangements must be made to facilitate the return of such migrants,  
who want to, from Foreign countries.


Supply of Essential Goods


14. The fourth medium term measure relates to ensuring stable,  
adequate and continuous supply of essential goods and other items of  
mass consumption at reasonable prices. The lockdown has already broken  
supply chains and disabled production of several essential goods and  
services in multiple ways. Reviving these will require specific and  
co-ordinated efforts of central and state governments, bearing in mind  
the input-output relations that govern such production. This therefore  
requires the effective reinstatement of some planning mechanism across  
the country.


Reviving Village Economy

15. The fifth medium term measure would be the starting of small  
panchayat-owned village-level enterprises in a number of fields, such  
as processing local products. Notwithstanding all efforts and  
assurances, many returned-migrant workers are going to stay on in  
rural areas and employment opportunities for them have to be found  
outside of and in addition to MGNREGS. Infrastructural facilities for  
cold storage preservation and marketing must be provided to boost  
agribusiness activities. This would be a way of reviving the village  
economy and giving an alternative thrust to the trajectory of  
development in an employment-intensive direction. Bank credit has to  
be made available for this purpose, together with expert technical and  
managerial advice which the state governments can arrange.


LONG TERM MEASURES

Hike Public Investments


16. We now come to the long term measures, though these too will have  
to be initiated now. It will be necessary to re-orient the economy’s  
growth strategy on the basis of the internal market and hence upon  
agricultural growth which ultimately determines the growth of this  
market. Agriculture has been neglected throughout the recent period,  
and yet, as the lockdown has demonstrated, for millions of people  
agriculture remains the last refuge. This neglect of agriculture must  
be reversed, through a host of steps, such as the provision of  
remunerative procurement prices, the extension of procurement  
operations to cash crops as used to be the case earlier, the use of  
tariffs to insulate domestic prices from world price fluctuations,  
research into new yield-raising practices, the development of less  
water-intensive varieties, and the distribution of ceiling surplus  
land to the landless, starting with plantations that have unused land.  
Raising per capita agricultural incomes of the peasants and  
agricultural labourers holds the key to breaking the stranglehold of  
poverty on India’s working masses.


In addition, non-agricultural activities must be promoted with a clear  
eye on their ecological sustainability and their capacity for  
employment generation. This means a much greater emphasis on “green”  
production and on expanding the provision of care services.


This fight against the pandemic has clearly shown the severe  
limitations of the healthcare system in the country. Urgent efforts  
must be made to establish a universal healthcare system by spending at  
least 3 per cent of our GDP by the central government. The state  
governments will have to add on to these amounts in creating this  
system. There rate of CGST on medicines must be reduced and public  
infrastructure for self-reliance in domestic production of medicines  
must be strengthened. Substantial investment in education,  
particularly, universalisation of school education, has also to be  
concurrently done. This should increase to at least 6 per cent of our  
GDP by the central government.



Physical Distancing - Social Solidarity

Shun Polarisation & Authoritarian Attacks


17. The pandemic is a time for all to come together. Forging a new  
national unity is the real ultimate panacea for the pandemic.  
Communalizing the pandemic with the implicit support of the  
government, using this very time to incarcerate those fighting for  
civil liberties and against measures like the CAA under draconian laws  
like the UAPA, attacking the freedom of the press by targeting  
journalists, who are critical of the government, are all part of an  
authoritarian agenda. They are precisely the opposite of what is  
needed at this or at any other time; and yet they are being pushed  
under the cover of the lockdown. Unless this is reversed, our country  
and people cannot fight the pandemic effectively.