Coronavirus – Economic Issues

The universal delivery of food and cash transfers by the state amid Covid-19

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 2- Provision and suggestions to reduce the impact of corona crisis on the poor.

This focus of this article is on the universal delivery of food and cash transfer amid corona pandemic. There are some estimates of the cost of universal cash transfer and food delivery in the article and suggestion to ensure universal delivery.

Universal food and cash delivery is needed

  • The immediate need for universal food and cash delivery is by now obvious and urgent.
  • Across the country, there are reports of people — migrant workers, local workers, peasants, pastoralists, fisherpeople, vendors, ragpickers, and the destitute — facing extreme hardship, even starvation, because their livelihoods have been extinguished by the lockdown.
  • These have created further an unprecedented humanitarian crisis, as millions of households with depleted savings have no way to access food and other basic necessities over the coming weeks.
  • The threat of infection from COVID-19 makes even harder their coping mechanisms.
  • In these dire circumstances, it is essential for the state to directly provide the basic means of survival to anyone who needs it.
  • This must be in both cash and kind. Food access is the most important.
  • But because of the closure of economic activity and the absence of any livelihood opportunity, this must be combined with cash transfers to tide over this period and the immediate aftermath.
  • Food transfers must be provided for at least six months, and cash transfers for at least three months, though these can be extended depending on the period of lockdown.
  • Because of the severity of the crisis and the high probability of widespread hunger and descent into poverty, these transfers must be universal, made available to every person who needs them, without relying on exclusionary criteria, existing lists or biometric identification.

The points mentioned below give us the ideal of food-grain stocks with India. And there are also the estimates of how much would be required if we decide to go for universal delivery of food. The data given below is important from Mains perspective.

How much will be the cost of universal food delivery?

  • Consider first free universal provisioning of 10 kg of grain (wheat or rice) per person per month.
  • This is likely to be availed of by at most around 80 per cent of the population.
  • With an estimated population of 1.3 billion, providing this for six months would require 62.4 million tonnes of grain.
  • This is a maximal estimate — the actual requirement would be lower.
  • Stocks with the FCI: The FCI is currently holding 77 million tonnes of foodgrain stocks, compared to buffer stock norms of 24 million tonnes.
  • It is expected to procure another 40 million tonnes from the current rabi harvest.
  • It could easily release and allow the free distribution of foodgrain of 5 million tonnes and still have foodgrain stocks of 54.5 million tonnes, if the expected rabi procurement targets are met.
  • Cost of storing grains: Furthermore, it is costly for the FCI to store this grain. The current costs of storage are estimated to be Rs 5.60 per kilogramme per year or Rs 2.80 for six months.
  • This means that by releasing 4 million tonnes to feed the hungry of India over the next six months, the FCI would actually be saving Rs 17,472 crore, assuming that these idle stocks would have persisted.
  • But even if these were sold, the costs are the revenue that would have been earned.
  • This is difficult to estimate but by using Finance Minister’s estimates in Budget we get a (maximal) figure of Rs 1,17,000 crore.

Cost of universal cash transfer

  • In addition, a proposed cash transfer of Rs 7,000 per month for three months to every household, assuming again that 80 per cent of households would receive this.
  • With five persons per household, this expenditure would be Rs 4,36,800 crore.
  • The two transfers together amount to Rs 5,53,800 crore, or around 9 per cent of currently estimated GDP.

Financing the expenditure through fiscal deficit

  • This sum of Rs. 5,53,800 is not a forbidding sum.
  • A great part of the responsibility to make these resources available vests with the Union government.
  • But whatever taxes are introduced in a supplementary budget that has become unavoidable, the expenditure incurred has to be financed immediately through a fiscal deficit.
  • Given the massive deflationary pressures and a complete collapse of economic activity, there is a strong case for financing the additional public expenditure through deficit financing or borrowing directly from the RBI.
  • This is required both for coping with the pandemic and for softening the blow of the lockdown.

Following two suggestions are important suggestions for the delivery of food and cash in case we don’t have reliable data.

How to ensure universal delivery of food?

  • The question arises of how universal delivery of these food and cash transfers is to be ensured.
  • Existing lists are inadequate for the purpose because they significantly underestimate and exclude those who should be beneficiaries.
  • For example, at least 100 million people are excluded from access to food under the National Food Security Act based on the 2011 Census.
  • The most effective way of dealing with the food emergency is to provide food delivery at doorsteps or neighbourhood collection points to anyone who asks for it, with a simple marker such as the indelible ink used during elections to serve as the indicator of receipt.

How to endure universal delivery of cash?

  • For cash transfers, the matter is more complicated.
  • In rural India, MGNREGA job cards and pensions cover most households and allow bank payments.
  • The urban poor include migrants, contract and casual workers mostly in small and medium enterprises, daily wagers, domestic workers, self-employed persons like street vendors, sex workers and ragpickers, and the destitute including homeless people.
  • But there is no comprehensive record of the urban poor because the state has instituted no effective mechanisms to secure labour rights or social security rights to most urban workers.
  • The urban poor build and service the city, surviving without rights and a hostile or indifferent state.
  • The legally-mandated registration of inter-state migrants and construction workers in practice excludes most because their employers with the connivance of the state don’t wish to be bound to secure their rights.
  • The humanitarian emergency created by the pandemic and lockdown entails universal cash transfers again to every adult who presents herself to designated officials in decentralised offices.
  • For those who have accessible bank accounts, the funds can be credited to these accounts.
  • For others, the Odisha system, whereby pensions are disbursed as cash in hand at pre-specified times, maybe a useful model to follow.
  • This also can be adopted with indelible ink as proof of receipt.

Employment schemes after cash transfers

  • The income transfers must quickly give way to an expanded rural employment guarantee scheme, and a new urban employment programme.
  • These urban employment programs include caregiving and building water supply, sanitation and shelter for the urban poor.
  • Private hospitals also need to be nationalised at least for the duration of the pandemic.

Conclusion

The working and poor people should not be made to bear the burden of the pandemic. There is a need for a bold resolve, by central and state governments, to literally reach the last person, rural or urban, with the food and cash they require to survive with dignity.

 

 

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