Centre should allow States to devise their own economic strategies: Arvind Mayaram

Former Union Finance Secretary Arvind Mayaram, who is now Economic Advisor to the Rajasthan Chief Minister, heads a Task Force for suggesting appropriate measures on restarting the economy in the State to mitigate the coronavirus (COVID-19) aftermath. In a written interview to The Hindu, Dr. Mayaram says the Centre should not issue detailed guidelines for the entire country but allow the State governments to devise and implement economic strategy which reflects the reality in the respective States.

How do you view the lockdown as a strategy to control the COVID-19 pandemic? Will it succeed in “flattening the curve”, as the countries around the world are trying, or will it leave an adverse impact on economy for several years in India? Would you also correlate it with demonetisation of currency notes in 2016?

I do not believe there was any other option but to lockdown to contain the contagion and flatten the curve. However, it could have been planned better and with better consultation between the Centre and the States. Lockdown with a four-hour notice heaped misery on the people, especially the poor. It has resulted in close to 65% of the economy grinding to a halt with manufacturing and the services sector severely hit. The economy would take a long while in recovering and in that sense the shock is even more severe than the one inflicted by demonetisation.

The Task Force headed by you has submitted its report with a comprehensive roadmap for restarting economic activities in Rajasthan. Has the Task Force dealt with the impact of unprecedented decline in the State’s revenue collection at the start of new fiscal year 2020-21?

The Task Force had a limited remit to suggest the manner in which the State’s economy can be restarted. This would require massive efforts by both the Centre and the State and that would require huge resources. Unfortunately, with the economic activities down to zero, tax collections have plummeted.

Committee to suggest ways to revive economy

By closure of liquor shops alone, Rajasthan was losing ₹30 crore each day. Therefore, the report also recommends certain measures that the Central government should take to shore up State’s resources. The manner in which economic activities can be started is part of the recommendations, which in turn would increase sales, improve tax collections and generate revenues.

The Task Force’s report contains the broad framework on which the economic strategy is to be developed and has also spelt out sectoral strategy for reviving the economy. How will the most vulnerable sections of society, such as migrant workers, artisans, landless labourers and marginal farmers, be able to get back their livelihood?

The first step has already been taken by the State government by ramping up the Mahatma Gandhi National Rural Employment Guarantee Scheme. Works have started all over the State and the number of persons reporting for work is touching 12 lakh per day. These are returning migrants, landless labourers, small and marginal farmers, artisans and even small shopkeepers. The idea behind MGNREGA is fully vindicated and the families in the rural areas are assured of livelihood security. Rajasthan has been perhaps the first State to ramp up MGNREGA works so quickly. Work at MGNREGA sites puts money in the hands of the poor and it is expected that the consumption cycle would slowly start from the bottom of the pyramid. Resumption of manufacturing and services would also provide employment. The process would be slow but hopefully steady. However, areas under the red and the orange categories would be much slower and people would have to wait much longer to get into the earning cycle.

Your report has also laid emphasis on synergising efforts of the Centre and the State government in meeting the economic challenge? Will it be possible in an atmosphere when different political parties are in power at the Centre and in the State and the Chief Minister has been complaining of denial of share in taxes and reduction in Central grants?

In a democracy, different political parties could be in power at the Centre and in the States. While normal political rivalry is part of the game, India’s democracy has matured enough for different parties in government at the Centre and the States to work together in times of crisis. This has always been the case in the past, whether there have been droughts, cyclones, floods or other kinds of crisis.

The coronavirus (COVID-19) is an unprecedented crisis equal of which has not been part of any living person’s memory. Such a situation requires unconventional and swift responses. As most of the fiscal and monetary instruments are within the mandate of the Central government, resource mobilisation would have to be done by them. On the other hand, the actual measures for mitigation and protection of life and livelihoods would have to be taken by the State governments. Unfortunately, we are not seeing the type of response one would have from the Centre in such a crisis. The States are starved for funds and finding it difficult even to pay the salaries.

The division of districts in red, orange and green categories on the basis of spread of contagion, as recommended by you, has been accepted by the Centre as well. What should be an effective strategy to contain the virus within the hotspots without completely stopping the wheels of economy?

The need is to intensify testing and isolate contagion in small but tight circles as it erupts. The norms for social distancing, wearing masks, use of sanitisers, etc., has to be strictly enforced. However, economic activities including retail must start, not just for sale of essential items but for things of general use. Supply chains should be aggressively restored, right down to the retail level. For quick start, it is very important to keep the instructions simple and easily understandable. The manner in which guidelines are issued with innumerable addendums and clarifications, even the most adroit administrator would find it difficult to follow. This creates confusion and in administration the old dictum “when in doubt, don’t act” works all the time. Therefore, it is becoming very difficult to start economic activity even if it is ‘permitted’.

I have consistently said that the Central government should not issue detailed guidelines for the entire country but allow the State governments to devise and implement economic strategy which reflects the State’s reality. Within the State too, the local administration must have enough autonomy to act according to the ground realities within an overall framework. The country would pay a very heavy economic price if we continue to work without an overall comprehensive strategy for restarting the economy or continue with an over-centralised control system.

Much is being said about the detection of far less number of COVID-19 positive cases in India in comparison with other countries, which may be attributed to insufficient testing. Do you believe, from an economic point of view, that the situation is really serious or is it being exaggerated to cover the failure of the Central government?

I do believe that the reported numbers appear to be less than what they are because of lesser number of testing. It would not be surprising if a large number of persons may have got infected and then would have self-cured without being noticed. Having said that, I believe the situation is very serious and we can take it lightly at our own peril.

The International Labour Organisation has stated that about 40 crore people, working in the informal economy in India, face the risk of falling deeper into poverty during the crisis. What should the Rajasthan government do to ensure that the people here do not face the heat of this crisis?

Rajasthan is a part of India and the State’s economy is intricately linked to the national economy. There is not much that the Rajasthan government can do autonomously to save people from distress. This has to be a joint effort of the Centre and the State government through a consultative process for developing a national strategy. I think we are already late in doing so. But if this is done even now, the nation could convert this tragedy into an opportunity for economic transformation.

Your recommendation that there should be no mandi operations in the red and orange category districts may create difficulties for farmers during the ongoing rabi crop harvesting season. If the procurement is curtailed at the mandis, will the farmers not be forced to sell their produce at a rate below the minimum support prices?

The red and orange zones in the Task Force report are basically hotspots of varying kinds. For instance, there could be a mandi abutting the Walled City in Jaipur, which is a containment area or a hotspot. It wouldn’t be prudent to start such mandis. But this should not preclude Bagru mandi in Jaipur district from functioning. The zoning under the Government of India guidelines are larger geographical entities, mostly with districts as a unit.

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