Lack of cash is where Govt is feeling the pinch: Modi and Cash Doles

Over the years, India has turned into a very large service economy with over two-thirds of its GDP coming from services. But the push for manufacturing through incentives for steel sector and reforms in agriculture could help India expand its export basket. On Saturday, Finance Minister announced major reforms strategies in defence production, mining and aviation sectors.

India's calling card could be boost to domestic economy though farm sector and push to manufacturing. 

But till that happens, may be the migrant worker on streets have to suffer few weeks more and than land in a village where he does not have a job which could give him two square meal.

Or he may have to get back again - where he belonged just a few months back -- the large cities
as migrant workers.

Finance Minister Nirmala Sitharaman has a tough task at hand along with her deputy Anurag Thakur. They have to virtually repackage the budget. Rahul Gandhi has his reasons to look for cash doles!

Should any Congress admirer wonder why it is so? Even communists want cash doles! NGO lobby has rightly taken over Indian polity's opposition space!

However, another reality is the Indian economy is in deep crisis with possible 1.2 to zero per cent growth in 2020.

Another BJP leader Jayant Sinha, a former Minister, says government's mechanism will prove effective

and good amount through multiple scheme would reach poor farmers and beneficiaries' bank accounts

through a "transparent" mechanism.

The government's problems are multi-pronged, despite lockdown since March 25, India has reported 

more than 85, 000 confirmed cases of COVID-19 among its 1.3 billion population, with over 2,500 deaths.

Though the government’s fiscal spending would not be impacted by the economic package and new reforms measures as most of it are to be implemented through banks and market borrowing by financial institutions, there is however an apprehension that the fiscal deficit is expected to touch six to 7 per cent of GDP in 2020-21, double of an earlier estimate of 3.5 per cent.

The possibility of sharp fall in revenue collection has irked government's financial managers

already and there are also chances -according to Center for Monitoring Indian Economy - that

the unemployment rates rose would rise to 23.5 per cent and above.

The agrarian reforms if brings expected results, tides would be changed. 

The Covid19 and the Lockdown enforced subsequently had offered an opportunity. May be some of the lapses in governance could have been corrected. 

But has the government wasted that window of opportunity? Or Prime Minister Modi is worried about poor revenue collection and thus is using the Covid19 as an excuse to unleash the much needed economic reforms especially in critical sectors like agriculture and labour?

Critics have now expressed doubts on whether Modi's hyped announcement of 226 billion US dollars package will help poor and especially the faceless migrant workers who were forced to flee cities and take to the streets. The general refrain is India’s Rs 20 lakh crore (226bn US dollar) package - much through banks and credit boost is paltry sum and short of the needs.

Last month British brokerage firm Barclays said a lockdown until May 3 may cause India an economic loss of US$234.4 billion.

India's unemployment rate had shot up to 26.2 percent by the third week of April, a sevenfold increase from last year. An extended lockdown could further damage the labor market.

Cash buffers have already dried up and India will be confronted with a sharp decline in government revenues and economic growth for at least the next six months, leaders say.

"In many offices, retrenchment policies are being explored, and some companies have already decided to cut salaries to employees," said opposition Congress party leader Adhir Chowdhury.

The tourism industry has crashed across India, as in other parts of the world. The industry engages millions of people in restaurants, travel and hospitality.

The tourism industry generated US$240 billion, more than 9 percent of India's national GDP, in 2018 and supported 42 million jobs, according to the World Travel and Tourism Council.

"The year is the worst for the tourism sector," said Vipin Saxena of the Indian Tour Operators Association.

The labor-intensive real estate sector has witnessed a plunge, industry experts say, and may need at least six years to return to normal.

"India is on the verge of an unprecedented economic catastrophe as the humanitarian disaster from the Covid-19 pandemic unfolds," wrote educationist Jayati Ghosh of Jawaharlal Nehru University in a column.

BJP leaders are saying PM Modi is pragmatic as he does not want to risk people's lives for the economy. He especially wants to keep the mortality rate of Covid-19 under check, they say.

However, India Ratings and Research, a credit rating company, predicted that growth expectations for the economy would be around 1.9 percent down, from 3.6 percent in March.

This will be the lowest GDP growth in the last 29 years and is based on the assumption that the partial lockdown may be extended until mid-May.

Ajoy Kumar, spokesman for Janata Dal (United), which is part of the ruling coalition, said the prime minister has rightly emphasised protecting people's lives and health, "the central source of wealth" for the country.

He also stressed stricter compliance with lockdown rules as about 60 percent of positive coronavirus cases in India have come without showing any symptoms.

In dealing with economic challenges as a direct fallout of Covid-19, there are micro-level issues revolving around morality.

In India, liquor consumption is traditionally seen as a taboo. Alcohol sales were banned as part of the lockdown, and the federal government has rejected a plea to allow the sale of alcohol in Congress party-ruled Punjab state.

Similar requests from the states of Assam, Meghalaya  and Kerala also faced stiff resistance. States are seeking the green light to sell liquor to make up for the loss of revenues.

The government justifies restrictions on liquor by saying the priority is on health care and the supply of essential food for ordinary people, migrants and marginalized workers.

The revenue-starved government has announced a US$24 million relief package to take care of the poor and those who need immediate help. However, state administrations are asking for more financial support. Rajasthan Chief Minister Ashok Gehlot has demanded a federal government grant of some US$14 billion to states as revenue has drastically nosedived.

The lack of cash is where the Modi government is feeling the pinch.