The “Second Wave” has finally “plateaued” and whereas the “plateauing” syndrome is not a favourable sign, I’m also fairly apprehensive about our vaccination programme. Whereas we need around 1.46 billion doses till December we have in our hands just 1.12. Assuming the remaining quantities are tied up with Moderna, Zydus, Biological-E and Novavax then also our speed has to be around 1 crore jabs a day where the best we did was 85 lakhs, we average around 40 (June’21). Similarly in Goa, our target is 31st July. We need in all, around twenty lakh doses (two shots for each person), we did nine lakhs already in five months – now in one month we have to do ELEVEN! Whereas, UK and US are around 50% fully vaccinated we are not even 5%. Where they’ve done 100 doses per 100 population, we are still at 23. The task is huge and I wonder whether Dr Nicholas Butler would still say, “The one Serious conviction that a man should have is that nothing is to be taken too seriously” (in his “Between Two Worlds…”)
And this IS Serious for, on this rests the medium-term future of our purse strings!!
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My Take: Before I come to the economy, post the 2nd Wave, a retrospect on the 1st wave would be useful: Last year just this time, World Economy (2020-21) was foreseen by IMF to shrink (-) 4.9%; Country-wise: Russia to shrink (-) 6.6%; US: (-)8%; Brazil: (-)9.1%, UK: (-)10.2%; France (-)12.5%, China: (+)1% and India (-) 4.5%. Today, the actuals of last year are out – the same countries actually stand as follows (per IMF): Russia (+) 1.9%; Brazil: (+)1.1%; UK: (+)1.4%; France: (+)1.3%; China (+)1.9% and India (-)7.3%!
I think it’s important for policy makers to tell the nation exactly of the 20 trillion rupees of stimulus-packages (10% of GDP) announced, how much was actually sanctioned, how much disbursed, how much deferred and what balance expired. Why I say this is, the proof of the pudding has necessarily to lie in the eating. Our unemployment rates (May’21) are still 11.9% (CMIE), the 2nd Wave dealt a blow of 2-trillion loss in output (per RBI), consumption refuses to pick-up, yet retail inflation is 6.3%, credit off take still stunted at 5.7% growth (against deposits growth of 9.7%), GDP growth slashed for the current year from 10.5% to 9.5% (RBI). This means consumption is weak
Let us see now, what the Government gave this week in its new Stimulus: 1) There is a loan-guarantee scheme aggregating 1.1 lakh crores of which the health-sector gets Rs 50,000 cr and additionally 23,000 cr for paediatric care and hospital beds. The credit-guarantee scheme proposed in the last package at Rs 3 lakh crores has worked well, according to the ministry, and is now enhanced to Rs 4.5 lakh cr. A good idea no doubts. For tourism, an activity that needs urgent intervention in my view – a loan of upto Rs 10 lakhs has been proposed as also a Rs 1 lakh loan for tourist guides. An amount of Rs 60,000 cr has been set apart for this. Rs 5 lakh free I-month tourist visas (mostly optics in my view). Favourable for Goa’s tourism (little but OK). I only hope travel bodies at Goa are able to enthuse stakeholders to avail of these benefits immediately.
My Recommendations: My first recommendation is “CAUTION”! Whilst we had a good pay-out from the RBI surpluses for the year at Rs 99,000 cr, we have huge liabilities of close to Rs 1.5 lakh cr of increased food and fertiliser subsidies, about Rs 1.23 lakh cr of extra contingent liability on guarantees and an additional deficit of around 1%. Now, all this could lead to strained ratings by international agencies, benefits are in the medium term. Add to this, the looming possibility in the horizons of a Fed-Rate hike around Q4 2022 due to inflationary pressures there.
Second: I think a lot more needs to be done, monitored and reported, the stakes are too high!
I wanted for example; We are today at 8 hospital-beds per 10,000 persons – we want 30 per 10,000 persons by 2 years (Lanka is already 42, Vietnam is 32) or We are today 5.8 doctors per 10,000 persons today; we want 10 by 5 years (Lanka and Vietnam – both have 10 already)!! I wanted that type of a resolve – the third largest world economy (to be) cannot be seen depending upon aid in a crisis!
Third – look at the urban poor; extend the MNREGA for example to urban youths in smart-city projects. Also, some sort of a direct cash-transfer to urban poor like the PM-Kisan scheme would be useful.
Fourth – control inflation – cut petroleum taxes by around Rs 4.50 a litre. I saw a study by a reputed consultancy-house arising from increase in volumes of consumption.
Fifth – tie up vaccine capacities and human resources – this is priority.
Sixth – report progress each month with head-wise numbers.
Seventh – Defer all non-immediate expenses like the Central Vista project, with magnanimity (even with a favourable Top-Court Order in hand), instead arrange for the compensation for COVID Deaths with that money. (We are on the expensive route of borrowing or enlarging our balance-sheet). Select criteria carefully, (since the Court has given the leeway) it’s the poor who should get compensated, not wealthy inheritors.
And in conclusion: We saw we suffered, and we suffered considerably more than our peers – we are not an ordinary country, we are the seventh-largest economy even after last year’s shrinkage and we want to be the number three and that’s SERIOUS!
(Binayak Datta is a Finance Professional)
