Extending free foodgrain scheme till November is a first step. A more comprehensive package is needed.
Prime Minister Narendra Modi announced on Monday the extension till Diwali (November) of the Pradhan Mantri Garib Kalyan Anna Yojana — the scheme that offers free foodgrains to households. The scheme, under which 5 kg of wheat or rice is distributed free of cost to around 80 crore beneficiaries under the National Food Security Act, was initially announced only for the months of May and June as economic activity had begun to be disrupted with state governments imposing localised lockdowns to deal with the surge in Covid cases. Though some states have recently begun to roll back some of the restrictions imposed on activities as infection rates have fallen, considering the economic toll of the second wave and the rise in unemployment, the extension of this scheme is a welcome decision. With foodgrains available in the central pool considerably higher than the buffer stock norms, fulfilling this additional allocation will not be a problem.
The Pradhan Mantri Garib Kalyan Anna Yojana was first introduced in April last year when the central government had announced the imposition of a national lockdown. As the pandemic dragged on, both the duration as well as scope of the scheme were expanded subsequently. Perhaps this time around, too, considering that many eligible people such as migrant labourers may not be able to access these benefits, more relaxed criteria may be adopted. According to somes estimates, the fiscal costs stemming from the extension of this scheme till November (along with the change in the vaccination policy) are likely to be around 0.4 per cent of GDP. This would imply that part of the fiscal space created by the Centre by advancing the payment of FCI dues to 2020-21, earlier budgeted for 2021-22, will now be offset by higher spending on account of the extension of this scheme.
Considering the depth and breadth of this crisis, this measure should be seen as a first step towards a more comprehensive relief package that is needed at this juncture. To begin with, given the sharp rise in unemployment, the government should ramp up the allocation for MGNREGA this year. The approved labour budget is the same as in 2019-20 but the work demanded in both April and May under the programme, while lower than last year, is considerably higher than in 2019-20, signalling the extent of the distress. While there are indications of formal economic activity picking up, the government should consider more such relief measures to support the economy during this period.
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