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View from India: Economic relief during coronavirus pandemic

The Union Finance Minister (FM) Nirmala Sitharaman has announced an allocation of Rs 1.7 lakh crore as part of economic measures in response to the coronavirus outbreak.

Food security, cash transfers, and schemes for supporting needy people were among the highlights of Sitharaman's announcement. Direct cash transfers of Rs 2,000, covered under the food scheme Pradhan Mantri Garib Kalyan Yojana, will be given to 87 million farmers in the first week of April. 

Women Jan Dhan account holders will be given financial support to run their households to the tune of Rs 500 per month for the next three months. Approximately 200 million women are expected to be covered through direct benefit transfer (DBT). Supportive schemes have been extended to include women of self-help groups (SHGs), through which 70 million households have become beneficiaries, and the collateral-free loans have increased from Rs 10 lakh to Rs 20 lakh.

Poor households will be given free cooking gas for three months and, in addition to the 5kg of wheat or rice already given, they will each receive a further 5kg of wheat or rice per person for the next three months.

Construction workers have a Building and Other Construction Workers' (BOCW) Fund, and state governments are being directed to use Rs 31,000 crore from the welfare fund to safeguard 30 million workers in the construction industry.

In the organised sector, the Government of India (GoI) will pay the employee provident fund (EPF) contribution to both the employee as well as the employer. This decision will extend to the next three months and is available to organisations that have up to 100 employees and where 90 per cent of whom earn Rs 15,000 per month.

These relief measures have come within 36 hours of Prime Minister (PM) Narendra Modi’s announcement of a complete national lockdown for the next three weeks. Drones were deployed in Delhi to ensure that no one violates the three-week isolation.

Earlier in the month, the Union Cabinet made a slew of announcements to position India as a global leader in mobile manufacturing.

India is Asia’s third largest economy, and its domestic mobile market was recently given a boost as the Union Cabinet announced the Production Incentive Scheme and approved a sum of Rs 48,000 crore towards strengthening its ecosystem. The intent is to offer production-linked incentives (PLI) to boost domestic manufacturing, and electronic manufacturing companies will be given incentives between 4 per cent and 6 per cent of incremental sales of good manufactured in India. Once this unfolds on a large scale, it is expected to attract large investments in mobile phone manufacturing and specified electronic components. This will include the assembly, testing, marking and packaging (ATMP) units. All these measures reinforce the Make in India vision of Modi.

An announcement of this nature covers many dimensions. The vision is that, in the next five years, the scheme will have the potential to generate direct employment by creating over 200,000 jobs. Besides employment generation, the scheme is expected to help large-scale electronics manufacturing at the national level with the industry estimating indirect employment will be around three times that of direct employment. An estimated calculation indicates that the total employment potential of the scheme is approximately 800,000.

The production of mobile phones in the country has gone up significantly from around Rs 18,900 crore (US$3bn) in 2014-15 to Rs 1,70,000 crore ($24bn) in 2018-19. The domestic production takes care of most of the requirements of the domestic market. To take this further, the concept of 'Assemble in India for the world' is being integrated into 'Make in India'. This in turn, can increase manufacturing output.

Even during lockdown, Covid-19 has opened minds to domestic products. A long-term perspective is that there will be an impetus on homegrown talent, particularly as global supply chains are being disrupted all over. This will lead to delays in the supply chain and even result in an abrupt end-of-supply of certain spare parts and critical components. The US-China trade tariff that began sometime ago has, to an extent, set the ball rolling; Covid-19 is an added dimension to the scenario.

The GoI has estimated a budget shortfall of 3.8 per cent of gross domestic product (GDP) in the current year and 3.5 per cent in the year starting 1 April.

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