Editorial: No bang, but also no whimper

First, and this is the most urgent question, how much will it help to mitigate the condition of the poor and disadvantaged who have suffered the most under the impact of COVID-19? Second, how much of a stimulus is it? In other words, how does it stack up in terms of being a booster shot to revive an economy, left in rack and ruin, by the virus? And finally, has the Centre seized the moment, turned a crisis into an opportunity, and rolled out a bold set of reforms that will hold the long-term health of the economy in good stead?

At the end of the Finance Minister’s presentation, the overwhelming feeling is that the answer to each of these questions is mixed. For those who had hoped for a larger cash outgo – specifically, for measures that put more money in the hands of the needy – the package is somewhat disappointing. Even if one disregarded the impractical and naive view that cash outgo is the only way to evaluate a stimulus like this – championed by people who have little understanding of the economy and how packages have been devised in other countries – there is a case for stating that the overall stimulus suite could have been strengthened with more direct ameliorative measures. The announcement to increase the outlay for MGNREGS by an additional Rs 40,000 crore made in the last tranche is a good one; this has the potential of offsetting a small part of the shock suffered by migrant labourers who have returned home to unemployment.

As for the booster shot question, the truth is only time will tell. The devil in such issues doesn’t lie merely in the detail but also in the implementation. The impact of some measures on the monetary side will depend on – including that of underwriting loans to MSMEs, arguably the single biggest measure in the package – how the loans will be refinanced and, in the longer term, on how it impacts credit culture – the last thing one needs is laxity and excess leniency in loan assessments.

Finally, does this all add up to a massive reform moment? Or, as some optimists were hoping for, the next milestone after 1991? The truth is that the prickly issues of land and labour have been left relatively untouched barring a few minor changes. Also, while there were some important decisions – for instance, the increase in permissible FDI in defence manufacturing from 49 to 74 per cent and measures to boost the aviation sector – they don’t quite amount to a big bang. All in all, the Centre could have done more; the silver lining perhaps is that it has taken some bold steps and could have also done much less.