“Go shopping” was the famous exhortation by then US President George W Bush in the aftermath of 9/11 terror attack in 2001. In first reactions, many questioned the logic of the statement, asking how shopping could be a response to terrorism.
Later, people realised, Bush was employing calibrated strategy aimed at containing a crisis faced by a globalised world. Every human crisis is also an economic challenge for the masses, and countries. Globalised life runs on the fuel of economy. The novel coronavirus pandemic is the biggest human — and economic — crisis since World War II.
Economies have come to almost standstills in many countries, including India. This situation calls for a spendthrift government. There have been calls from experts and financial institutions to infuse trillions of dollars in the world economy to revive it. India too needs to infuse more money into its economy.
The government has, however, decided to adopt austere measures. An Ordinance has been promulgated implanting a 30 per cent salary cut for all the Members of Parliament, and pensions of former MPs.
The President, Vice-President, Prime Minister and Governors too followed the cue voluntarily. The combined saving for the government would be around Rs 69 crore — Rs 65 crore from the salary and pension cut of MPs and Rs 4 crore from others.With paltry savings from the cut in salaries of MPs, the move appears only symbolic in nature.
The decision comes two years after the salary of an MP was increased from Rs 50,000 to Rs 1 lakh. Before the hike in salary, the government spent, it had been reported, an average Rs 2.7 lakh per month on an MP. In the previous four years, the government had spent close to Rs 2,000 crore on salaries and perks of MPs.
The government also announced a suspension of MPLAD (money at an MP’s disposal for local area development) funds for two years. This would save Rs 7,900 crore, Union minister Prakash Javadekar said.
The MPLAD scheme has been found effective particularly in remote areas of smaller districts. The fund under MPLAD is used in development works, and thereby creation of employment by an MP in her constituency. Under the scheme, each MP has the option of suggesting to the district collector works to the tune of Rs 5 crore per annum to be taken up in her constituency.
As per data available on the MPLAD website, it is one of the successful development schemes running under the government. The sanctioned against released ratio is over 100 per cent and utilisation over released ratio is above 95 per cent.
It was from this fund that BJP MP Gautam Gambhir offered Rs 50 lakh to the Arvind Kejriwal government to purchase medical equipment for a more effective fight against novel coronavirus outbreak.
Suspending the MPLAD fund presents a serious challenge to the exit route from the mess created by novel coronavirus outbreak in India. The country has been forced into a complete lockdown except for essential services.
The unemployment rate is rising as small and medium scale industries face closures in the view of lockdown. According to the latest report by the Centre for Monitoring Indian Economy (CMIE), the unemployment rate has gone past 23 per cent. In its report, the CMIE said the employment rate fell to an all-time low of 38.2 per cent in March under the impact of coronavirus-induced lockdown.
The government, too, anticipating a loss of revenue for companies has tried to pre-empt lay-offs in the private sector with an appeal to private firms. It announced help by the means of paying PF amounts for three months for smaller and more vulnerable companies.
A revival of these companies can happen only with an infusion of billions of dollars into the Indian economy. The government has announced a relief package of Rs 1.7 lakh crore aimed mainly at the poor and vulnerable income groups. But it was not enough. The sentiment was reflected in the crash at the stock markets, which don’t represent the actual health of economy but do reflect prevailing economic and business sentiments in the country.
This is the time for the government to go spendthrift. China announced an infusion of $1 trillion into its market as stimulus in the middle of the fight against novel coronavirus pandemic. Iran sought money from the International Monetary Fund (IMF) for the first time since 1962. It sought an emergency fund of $5 billion.
The US has unveiled a $2 trillion package to deal with the challenges posed by the coronavirus pandemic. The message from the world over, and the economic experts of all kinds is the same: novel coronavirus has halted the conveyor belt of economy and it needs loads of money to restart. This is no time for austerity. The government may have given out a wrong signal by announcing cuts in salaries.