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Resource centre on India's rural distress
 
 

A plan to revive a broken economy -Harsh Mander, Jayati Ghosh and Prabhat Patnaik

-The Hindu

There are clear, implementable steps the Centre can take in fiscal terms to revive the economy and support livelihoods

The Prime Minister has just announced Lockdown 4.0. Despite some resulting increase in economic activity, vast numbers of working people will remain without their regular incomes. He also announced a package of 20 lakh crore, but this includes already allocated money of 6-lakh crore and monetary policy directives to banks and non-banking financial companies. The announcements by the Finance Minister thus far involve no additional public spending, even though this is urgently required to revive the economy and prevent further contraction. Here we discuss what the government should do immediately in fiscal terms for reviving the economy and supporting livelihoods.

Food and cash transfers first

The immediate need is to provide free food and cash transfers to those rendered incomeless. Providing every household with 7,000 per month for a period of three months and every individual with 10 kg of free foodgrains per month for a period of six months is likely to cost around 3% of our GDP (assuming 20% voluntary dropout). This could be financed immediately through larger borrowing by the Centre from the Reserve Bank of India. The required cash and food have to be handed over to State governments to make the actual transfers, along with outstanding Goods and Services Tax compensation.

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