India announces $22.5 billion aid package as COVID-19 lockdown hits economy

By Iqbal Abhimanyu and Sarwar Kashani

New Delhi, Mar 26 (efe-epa).- India on Thursday announced measures worth 1.7 trillion rupees (around $22.5 billion) to help the poor and most vulnerable segments of the population, which have been hit hard by economic activity grinding to a halt amid a total lockdown aimed at preventing an outbreak of the new coronavirus.

On the second day of the three-week nationwide shutdown, Finance Minister Nirmala Sitharaman announced at a press conference that the government would release food aid for two-thirds of the population – around 800 million people – and release cash, subsidies and loans for the poor, farmers, construction workers and rural women.

“It has only been 36 hours, now we have come with a package which will immediately take care of the welfare concerns of the poor and those who need immediate help,” said Sitharaman, who also announced a medical insurance cover worth 5 million rupees for medical and sanitation personnel fighting the epidemic.

The package includes the monthly release of 5 kilograms of free wheat or rice per person and 1 kg of lentils per household for the next three months to the poor – in addition to the grains they already receive from the government – at an expenditure of 450 billion rupees.

In addition, the government plans to transfer cash aid directly into the bank accounts of over 200 million poor women, senior citizens, widows and physically challenged people over the next three months, with the amounts ranging from 1,000 to 1,500 rupees.

Around 87 million farmers are set to receive an advance of 2,000 rupees, one third of an existing annual cash scheme to help them, while the minimum wage under a rural employment guarantee scheme has been increased from 182 to 202 rupees per day.

Sitharaman also announced collateral-free loans through around 2 million mostly rural self-help groups, free cooking gas to families below the poverty line and benefits to organized sector workers.

A 310-billion rupee fund for construction sector workers has also been activated, which will be used to augment medical testing, screening and providing better healthcare facilities, the minister said.

The package comes amid increasing concerns over the effects of the lockdown- set to last until Apr. 14 – on India’s large poor and migrant populations, with reports of people being forced to walk hundreds of kilometers to reach their hometowns as all passenger transport has been suspended and daily wage employment has collapsed.

The government had already announced some fiscal measures, such as delaying tax payments in anticipation of the expected economic downturn, as well as 150-billion rupee emergency funding to boost healthcare to tackle the COVID-19 outbreak.

The package does not include any stimulus for the corporate sector and industry and experts have warned of the adverse effects of the lockdown on an already struggling economy, where GDP growth has dwindled in the last few quarters.

“One month of the lockdown means consumption will come down by almost 30 percent. If you have a 30 percent drop in consumption, then GDP will contract,” economist Mohan Guruswamy, a former economic policy adviser to the government, told EFE.

“We should expect a contraction of GDP (between) 5 to 10 percent because I don’t think this lockdown will end in 21 days. Statistically, it doesn’t bend the (infection) graph. They will have to do it for some more time.”

This could prove a major blow to the unorganized sector that forms a majority chunk of India’s economy.

The sector employs an estimated 410 million workers and major job losses are feared in the coming months in the wake of the closure of factories, private and public offices, restaurants, movie theaters, supermarkets, transport and airlines.

Analysts have also warned about the burden of relief and aid measures, and economist Santosh Mehrotra said the government doesn’t have much fiscal elbow room to weather the economic storm due to the recent low growth rate.

“The government (…) doesn’t have money. If it’s going to spend money, it has to get the central bank to print more notes and that is going to cause inflation,” he warned.

After the announcement of the aid package, the focus has shifted to its implementation as an effective blockade of all regions has disrupted supply lines in a country where the poor are divided between far-off rural populations and densely populated urban slums.

However, Guruswamy downplayed the possibility of social unrest even if food supply to the poor is disrupted.

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