The Maverick Choices Of The Democratically-Elected
Showing remarkable consistency through 15 months of the Covid-19 pandemic, the Modi government announced its fourth, or perhaps fifth, ‘stimulus’ package. Honestly, it should be called a ‘palliative’ package, because as always, it’s primarily aimed at saving borrowers from immediate foreclosures and bankruptcies, rather than giving a demand stimulus to a sputtering economy.
Palliative, Not Stimulus
Please don’t get me wrong. I absolutely welcome this stress buster for enterprises whose cash flows have dried up. All I am asking for is a more scientific nomenclature, ie. call it a ‘palliative’ and not a ‘stimulus’.
Out of the headline number of Rs 6.29 lakh crore, nearly half is a straight guarantee or backstop for banks to encourage them to give risky loans or rollovers to struggling businesses and micro-entrepreneurs. Others are truly long-term initiatives with little immediate impact – for instance, the extension of the performance-linked incentive scheme for electronics, or the village broadband program, or reforms in power distribution. These are positive course corrections, but hardly a stimulus or even a palliative. Some, like the extension of the free food-grain distribution or urban employment guarantee scheme, will give instant relief but have a muted impact on resurrecting demand.
So, the bulk of the government’s exertion is a non-cash push, which will only devolve on the exchequer if the borrowers go belly-up in a few months or years. Since most people would hang on for dear life rather than give up on operations built with their sweat and tears, the ruler’s clever bet is that only a small fraction of these guarantees will ever be called in, thereby creating a win-win-win for everybody – i.e., most businesses will be salvaged, banks won’t have to deal with write-offs, and the government could end up paying only say Rs 50,000 crore, against exposure of Rs 3 lakh crore, and that too over several years!
So yes, it’s smart, but as experts and economists have gone crimson arguing, it’s not enough, it’s not a cash stimulus, and it will not pull the economy out of a downward demand-and-investment spiral.
Ideally, it should have been a three-pronged push, say Rs 2 lakh crore on additional infrastructure investment, Rs 2 lakh crore in tax cuts, and Rs 2 lakh crore in direct income transfers. That could have ignited an economic revival.
But well, the Modi government does not believe in such a direct stimulus, period. To be fair, it’s their political call. They are democratically elected to make political economy choices, even palpably wrong ones. And if they have opted for a ‘drip debt’ method of irrigating India’s GDP, so be it. They have made the choices and they will have to weather the consequences.
That’s the way it is and ought to be in a democracy.
Punjab Is Not Delhi
Staying with maverick political economy choices, the irrepressible people at the Aam Aadmi Party are back with their “free 300 units of electricity for all”, this time in Punjab. Sure, it’s their political call, and they shall have to live with the consequences, but this is akin to lighting a matchstick in a gas factory.
Along with a lopsided minimum support price that favours paddy, free farm power has helped distort Punjab’s crop mix. And unlike Delhi, which boasts of a strong state budget and high per capita income — which is three times Punjab’s — Punjab is groaning under public debt that could double in the next five years. So even if Delhi could afford to give free power to all households without wrecking its finances, Punjab’s misadventure could be near-fatal. But when have politicians ever bothered about such silly little details, especially if they believe that a victory can be replicated riding on a tried-and-trusted freebie?
To complete our disagreeable trilogy, here’s one more self-destructive political economy choice. The Modi government has stuffed the boards of the most coveted public sector companies with overtly political nominees in place of ‘expert independent directors with domain knowledge’. The mantra is ingenious – if you’ve lost an election, don’t worry, be happy, because a maharatna or navratna PSU will happily take you onboard, with all the trappings, staff cars, free air travel, guesthouse accommodation, influence on tenders/contracts, and attractive ‘sitting fees’ for meetings and committees.
After all, have you heard the shareholders of IOC, Air India, Power Grid Corporation, SAIL, Airports Authority, Numaligarh Refinery, Garden Reach Shipbuilders, etc., etc., complaining?
What’s more, if the Manmohan Singh government could pack the boards with Congress nominees in the noughties, then how can the Modi government ever be outdone by that good-for-nothing sarkar? Sigh, the more things change in India, the more they remain the same.
‘Green Pass’, Red Light For Covishield
People like me whose luck-of-CoWin-draw got them Covishield were shocked when our vaccine passports have failed to fly through Europe. Why? Because Serum Institute, which manufactures Covishield under an AstraZeneca/Oxford license, has yet to get EUA (emergency use approval) from EMA (European Medicines Agency). Frankly, that’s EMU (extraordinarily mystifying and un-understandable).
It’s not a new or different product. It’s exactly the same generic, duly certified by the holder of the intellectual property to be an ‘authorised reproduction’. So then, why should a merely different brand (what’s in a name, anyway?) attract such stringent conditions? At best it should be an automatic registration process based on a certificate from the parent. Why this vaccine apartheid?
Is The Tide Turning?
Finally, do you remember Grand Princess, the cruise ship that almost inaugurated the global pandemic when it was anchored off the San Francisco Bay with a load of Covid-positive passengers in early March 2020? Over a hundred people had tested positive, seven died, and 3,000 were quarantined. The cruise business, along with many others, simply shut down. Well, it may be time to heave a sigh of relief and rejoice. Because Royal Caribbean Celebrity Edge has set sail from Florida with more than 1,000 passengers, with 36% capacity and a floating hospital to boot. The crew is fully vaccinated, and except for two adults and 24 children, all passengers are jabbed too. Normal times, ahoy!
Raghav Bahl is Co-Founder – The Quint Group including BloombergQuint. He is the author of three books, viz ‘Superpower?: The Amazing Race Between China’s Hare and India’s Tortoise’, ‘Super Economies: America, India, China & The Future Of The World’, and ‘Super Century: What India Must Do to Rise by 2050’.