India Balances Short-term Gain with Long-term Strain

Fiscal stimulus package to boost consumer demand . . .

Earlier this week, Indian Finance Minister Nirmala Sitharaman announced a C$13.1-billion fiscal stimulus package to boost consumer demand in a “fiscally prudent way” through advance wage payments for government employees, increased investment in infrastructure, and interest-free loans for various states. The government hopes it will stimulate demand and assist in the recovery of the Indian economy, which the International Monetary Fund projects will contract by 10.2 per cent this year. Economists argue that an income support measure would have better ensured that Indians are well-placed financially to borrow and invest when everything stabilizes, supporting long-term economic growth. The Narendra Modi administration, however, is focused on fully re-opening the Indian economy ahead of the high-spending festival season from October to December.

Wage relief scheme extended and boosted . . .

India’s Ministry of Labour and Employment recently announced an extension of Atal Beemit Vyakti Kalyan Yojana (a wage relief scheme for those formally insured through their employers) for another year, ending in June 2021. The scheme, launched in 2018 as a pilot initiative, provides 25 per cent of the average daily wage for up to 90 days for insured workers who have lost their jobs. Along with the program’s extension, the government has announced that it will also increase the rate to 50 per cent of the average daily wage. Some eligibility requirements have also been relaxed. Claims can now be made directly by insured workers, and applications can be made online. The relief payment waiting period has also been reduced from 90 days to 30 days from the last day of employment.

Informal and migrant workers still left behind . . .

The enhanced wage relief scheme arriving at the festive season's onset is good news for insured workers. Since the announcement, nearly 400 daily claims have been received by the Employees' State Insurance Corporation. The relief payments are accessible to those with bank accounts and cards. Nevertheless, given that most of the rural population remains ‘unbanked’ and works in informal sectors, the people who would benefit the most from the wage relief scheme will instead have to wait for other initiatives.

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