MMT India presented a policy proposal during Oct. 2019 in which the possibility of sudden disruption to all economic activities was considered and proposed an economic model focused on ensuring availability of basic necessities to all at all times and having critical & strategic infrastructure in place to meet any eventuality.
Covid19 is the worst crisis faced in the modern era, which caught all the countries, particularly the developed nations, completely unprepared & woefully short in their response to medical exigency of unseen proportion. No other crisis known to us has brought entire world to a total physical standstill, abruptly stopping all activities. It is not only a health crisis which doesn't have a known cure, it is spreading very fast & killing people, it could cause unimaginable economic disruption, shattering the livelihood of millions & millions and destroy most of the private sector if the impact is long-lasting. The crisis is unprecedented and so, better to be prepared for the worst. With the technological & medical advancement & top-notch medical facilities, we thought that we will never face a healthcare emergency threatening entire humanity; but a micro molecule has exposed our inadequacies.
It brought to the fore unbelievable deficiency in the healthcare system throughout the world and also the lack of critical & strategic infrastructure in all the countries. It also showed us that we have left substantial number of people completely vulnerable, without any guilt, to the vagaries of nature & exigencies, that too at a time when major climatic catastrophe is expected to strike us. It also reminds the Government of its primary duty that it would do all it could to provide the basic needs to every one of it's citizens at all times and also create & maintain the critical & strategic assets that may come to life-saving rescue during exigencies.
A country without much of human, natural, industrial & financial resources would struggle to provide these. Financial resources was a constraint when our currency was under gold standard. But now, ours is a fiat currency and Govt being the currency issuer, spends currency into existence through keystrokes whenever money is required for its planned programs (meaning, it is not a separate process of create & then spend; spending is currency creation) and so, it doesn't have financial constraint. We are endowed with huge human resources with one of the youngest population in the world, much of natural & industrial resources needed, but limited majorly by petroleum products. Country is only constrained in its priorities & planning of productive programs. If money for a fiat currency issuing Govt comes in to existence as it spends through keystrokes for its productive programs, then fiscal space could be defined as consisting of deployable human resources, infrastructure needs & industrial capacity. That way, we have huge fiscal space.
Economic priorities, needs & model cannot be the same, post the pandemic. The enormous sacrifices made by people on the front-line, including Doctors, Para medics, other hospital staff, policemen, municipal staff, transport workers, retailers, deliverymen, functional production workers & many of the Government staff working during this crisis can never be forgotten, unrecognised and not taken into account while rebuilding the economy. World & the economy cannot be the same again which is not giving preeminence to such people. Such a careless, completely inadequate, uncommitted & unrewarding institutional structure cannot be continued.
The pandemic had taught us 'we depend on each other & we are connected'. We need to stop having policies which favor the fortunate. Otherwise, nature will strike again harder & harder. As a first step towards a life reflecting this, economic support provided now should not differentiate people.
ENSURING BASIC NECESSITIES TO ALL AT ALL TIMES & HAVING A FUNCTIONAL STRATEGIC & CRITICAL INFRASTRUCTURE TO FACE EXIGENCIES LIKE THIS ARE THE LESSONS LEARNT BY ALL COUNTRIES FROM THIS ATTACK. If not, why all of us work so hard & for what?'
Stakeholders are people, private sector, local/state Governments & Central Govt. Only the Central Govt is the currency issuer and all others, including local/state governments are currency users. While looking at the role of all the stakeholders, as a currency issuer, Central Govt has to fund all others. So, during exigencies like this, State Governments have to be provided with the funds & other resources as a top priority, as they're in the forefront and basic necessities have to reach people to get their total compliance & cooperation.
First, the pandemic has to be contained & mitigated, people affected by lockdown & deprived of their livelihood have to be provided with basic necessities & households not having access to provisions & other daily needs have to be serviced.
Recommended Immediate steps:
- Lockdown to suppress & contain the spread. If it is spreading rapidly, then 'extreme lockdown' should be imposed. Early lockdown is extremely important & we did that. Now, is the critical period. Lockdown has helped in many ways, but we're still not out of danger. If we look at the comparative graph, we are in the same trajectory as US. So, we need to continue the lockdown, till the new cases comes down drastically.
- Stranded people at various parts of the country. State Governments are taking good care and it should be continued with stricter implementation of social distancing.
- Public Distribution System with it's infrastructure is very well established with access to every citizen. Utilize the PDS fully to reach food-grains, pulses & other essentials to all types of ration cardholders at doorsteps of households at free of cost. Provide cash compensation to free category of ration cardholders. 'One nation One ration card' should be given effect immediately.
- Permit pharmacies, kirana shops, super markets & online suppliers to operate with strict enforcement of safety protocol.
- Increase the number of beds in isolation wards with all the necessary medical equipment & protective gears. Beds should be adequate to meet huge influx of patients. On need basis, engage additional space for this, which could be converted in to isolation wards in a short time. Have adequate ambulances. Book hotels near the hospitals for the stay of doctors & hospital staff.
- Increase the testing facilities all over the country. For collection of swaps for the tests, use mobile vans.
- Do contact tracing fully, test & quarantine.
- Whichever private hospitals are not treating covid patients, temporarily bring them under Govt control and use it
- Make the treatment completely free during this period, including testing.
- Ramp up the manufacturing capacity of the needed medical equipment & protective gears; request the private sector manufacturers to participate, if conversion of their existing facility is possible for this purpose.
- As fast & immediate reach of reliefs to all those in need is the aim, preventing leakage need not be the focus at this time.
Recommended permanent infrastructure as strategic assets, in operational condition at all times, to face exigencies like this:
- Increase healthcare bed capacity with isolation wards, adequate manpower, equipment & protective gears. Let isolation wards be safely segregated. Build more medical colleges, post graduation seats, nursing colleges & institutes for other healthcare & hospital services.
- Establish manufacturing facilities for equipment, disposables & protective gears with adequate stock of raw materials & finished products, equipped to operate 24x7.
- Build Choultries for travelers, which could house homeless & stranded during exigencies. Takeover financially stressed hotels, colleges & convert them to Choultries.
- Build community kitchens all over the country to undertake feeding on need basis; Choultries also could house them
- Expand Amma Canteens all over the country; Akshaya Patra Foundation could also pitch in. Choultries also could house them.
- Stock essentials for a long haul. Our PDS is well established with last mile connectivity of ration shops providing access to every household. Let PDS be strengthened further with advanced technology, storage & delivery systems & expanded list of products.
- All buildings should be earthquake, fire & flood proof.
- High internet capacity to handle large volume of data transfer during lockdowns & floods.
- Promotion of kitchen gardens in a major way.
Financial support to overcome the impact:
We have never ever seen a complete physical standstill of all the economic activities throughout the world for a prolonged period, disrupting all the industries, with total hold on import, export, supply chain, banking credit, debt servicing, FDI & most other industries. Without unprecedented support from Govt, most of the companies will stare at bankruptcies. As importance of most of the companies, except the larger ones, is better known to local/state Governments, the support has to come from them, with the Central Govt providing total backing to the local/state Governments with financial & other support.
This disruption will affect private sector in an unprecedented manner, putting their viability in serious doubt; those who survive could continue with the support of lenders & Govt and those who cannot survive but strategically important can be nationalized. In this extraordinary situation, rebuilding the economy & society, as it involves unprecedented spending from the Govt, should address, consider the following factors:
- How did we get in to this situation of finding ourselves completely inadequate, unprepared & vulnerable to a virus, in spite of so much wealth creation & technological advances?
- Having a functional strategic & critical infrastructure to face any kind of exigency is the primary requirement for the survival of a country & it's people.
- Basic necessities of all the people should be met at all times; otherwise, no point in having an organised economic structure.
- Rebuilding the economy & bailing out private sector & banks are funded by the public purse as always and so the outcome should be oriented towards equitable benefit to all.
- All kinds of exigencies, including possible second cycle of this pandemic & climate catastrophe have to be factored while rebuilding.
Rebuilding the economy should address all the above to create an equitable, caring & environmentally sustainable economy, by segregating the economic activities in to three segments: essential basic services to its citizens, critical & strategic infrastructure creation and other economic activities; and public sector be the lead and dominant player in the first two segments.
Recommended Financial Support during the impact period:
To cover the basic necessities of every household, the following support is recommended during the impact period of the pandemic:
- Direct cash distribution of Rs 3000 to a household covering 13.6 Cr families which is under NREGA, 20.4 Cr Jan Dhan women account holders, 8.7 Cr farmers under PM Kisan Yojana & 3 crore senior citizens, disabled and widows among the poor. This will be paid on monthly basis during the impact period. Whoever is left out & needs relief can record it in a register which would be maintained at each ward and also through mobile & online to receive the cash assistance in a bank account that will be opened in their name.
- Free grains, dhal & other essential groceries through PDS to the above households during the impact period.
- Free gas cylinders for the above families during the impact period.
- Rent waiver for the tenants in the above category during the impact period.
- Electricity bill payment waiver for the above families during the impact period.
- Interest waiver, EMI & principal holiday for the borrowers belonging to above category during the impact period.
- Universal healthcare for all the citizens under an insurance scheme, which will be effective post the pandemic also.
- Subsidized Food Canteens like Amma Unavagam in Tamilnadu all over the country. Support Akshaya Patra Foundation to expand.
- Rs 1 Cr compensation to medical workers family and any other worker in the front-line, in the event of death during the pandemic. This is to be covered by insurance. Exceptional Monetary compensation to every heathcare worker & medical professionals
- As we will not know the length of the lockdown & social distancing period, arrangements have to be made to manage the incoming harvest requirements. As it involves saving huge quantum of food-grains which is extremely precious now, huge number of harvesters may be required or putting together Manuel harvesting practice with safe distancing under strict supervision of village administration officers. This will also ensure cash in the hands of farm workers & farmers.
Support for Private Sector:
For the private sector companies to have any chance of survival from this paralysis, this period of shutdown have to be considered as holiday period; this is an extraordinary time, so, we need to accommodate extraordinary response; understanding & sacrifices are required from all the stakeholders; steps suggested here are an attempt to make the companies survive this; to do that, they need to be protected from all dues; workers of all the enterprises are considered together with the common public with respect to relief and if they fall under the categories mentioned above, Govt is meeting that, as per the recommendation. In addition to the support provided by the Govt to meet the basic necessities, it cannot compensate the private sector's salary bill also. We are at a point in time in history that Governments cannot treat their people differently as we're paying the price for that now. At this stage, we don't know where we're heading, how long the pandemic will last and the strength & weakness of whatever is left.
Recommended support for private sector:
- Deferment of principal & interest payment till further orders for all debts.
- Deferment of all kinds of dues till further orders
- Extension of insurance coverage for the period without payment of premium.
- Nationalize strategically important, but financially failing enterprises.
- Fast track insolvency process for companies whichever want to exit; provide relief to the promoters by allowing them to participate in the process.
- A Job Guarantee Program to provide transitional jobs to the unemployed till they are hired back by private sector.
Govt & the banking system will incur huge cost on account of the private sector during this period. In addition, Job Guarantee program & building the infrastructure will require large continuous infusion of money by the Govt, so, large financial support for private sector is not recommended.
Recommendation for the Govt:
With almost all the workers out of work, supply lines severely crippled, including international supply chain, finances in tatters and the net result of policies & institutional structure leaving us with lacking critical & strategic infrastructure & vulnerable society (which suddenly make us realize that we're cheated all along by the system), the present standstill, as we're going to restart from scratch, provides an opportunity to build an economy which meets the basic needs of all and build the infrastructure to meet this & the exigencies; this will also suit the huge informal workforce we have; a major unexpected window of opportunity is the chance to shift whole hog to green economy from fossil fuel.
We reiterate again & again that this is an opportunity for the Govt to build an economy based on a model which respects & recognise all its citizens by providing equal space for them to be part of the economic activity with a decent living wage, makes available basic necessities for all and have critical & strategic infrastructure in all sectors.
A transitional Job guarantee program is a simple & perfect solution to achieve the above and create all the needed infrastructural assets at the local level.
Private sector is the mainstay of the economy of a country and significant provider of employment. For the private sector, profit maximisation is the driving force, but for the public sector, social and strategic objective is vital. During this crisis, the limitations of private sector is totally exposed, with the public sector coming to the rescue of every stakeholder with a massive support. Govt is the currency issuer, policy maker and whenever other sectors fail to manage on their own, acts as the rescuer with unprecedented bailouts, quantitative easing, relief & stimulus packages.
Between two crises, that is between bailouts, the institutional structure, consisting of Govt policies, regulations, taxes, physical infrastructure, State money, the credit money, payment & settlement systems (supporting annual volume of at least $1000 trillions globally) and central bank's lender of last resort function, paved the way for creation of the hierarchical society with all the weaknesses we have now; finally, after many such instances, it ended up in a never-ever-seen crisis like this.
Rather than repeating this again and ending up like this to helplessly face death at any time, Governments should use the power of its currency creation capacity and economic policies for what it is meant for, that is, for the benefit of everyone, by opting for a model which ensures basic necessities to everyone & have critical and strategic infrastructure in place to face any kind of exigency, as the threat of climate catastrophe or second coming of this virus or any other pandemic is a real possibility.
India's 80% of workforce is employed in informal sector. We are all well aware of the lack of rural infrastructure needed for self-sustaining & self-reliant rural India. That is why, we see a huge migration from rural India. Food & water security are our two most important needs. India currently stores only 6% of its annual rainfall or 253 BCM, while the assessed total water requirement is 1447 BCM by 2050. Nearly 80% of rainfall flows unutilised to the sea, causing disastrous floods, while 99 districts of the country are drought prone. Solution is the inter-basin transfer of water. Food Parks in villages with warehouse, cold storage & food processing can supply grains, vegetables, fruits, spices, seeds, milk & milk products. Such planned programs in food, water & other sectors together can be executed with a job guarantee program. Energy security will get a major boost with the promotion of solar power in villages. So, this crisis is providing an opportunity to engage the rural workforce and the migrants who came back to villages to create self-reliant rural India, which also is an answer to the long lasting rural distress.
As both demand & supply has simultaneously come to a standstill, unless it is faced head-on with the enormous money power of a fiat currency issuing government, it will lead to disastrous result. That is why, many Governments have launched trillions of dollors worth relief & stimulus packages.
- State Governments are going to face severe loss of revenue (State Governments are currency users, unlike the Central Govt which is a currency issuer) and they have to sustain public service; to compensate lose of revenue & sustain public service, we recommend Rs 1000 per capita contribution to State Governments.
- A transitional job guarantee program for all.
- Build critical & strategic infrastructure.
- Rural infrastructure to create self-sustaining rural India, with food, water & energy security.
The pandemic taught us that while Central Governments formulate policies &:issue currency, it is the State Governments which administers the day-to-day operations, bringing out the best in leaders at the state & local level, showing many leaders to the country. We need them as local & state governments have to be the implementing agency for the job guarantee program.
Let us create a strong, self sufficient India which serves all its citizens.