proclamation of financial emergency – the only way out of this nationwide crisis

let’s talk real. majority of citizens are struggling with their finances. factories, offices, shops are shut. since there is no way for anybody, save those employed with various governments and government bodies, to make money, the onus lies on governments to provide relief. agreed, a few big corporates will pay salaries during the lockdown period from their reserves and some bosses driven by ethics and morality will also do so.

but india is a big, big country. nearly 90 percent of total workforce is employed in the informal sector and most of the employers will find it impossible to pay their workers due to nil cash flows and unavailability of reserves earmarked for such situations.

amid all this, the governments are charging for electricity and other supplies. they are doing so since the employees of the state and state-owned enterprises will be paid their salaries in full. but is this justified? at a time when companies are laying off workers and not paying salaries due to exigencies that are beyond the control of employers, how can the state pay its employees in full? how can state-owned enterprises, from public sector undertakings to public sector banks to institutes and bodies under various ministries pay their employees in full?

and if they are doing so, this is against the principles of equity. moreover, the state doesn’t earn from commercial activities. a bulk of its revenues comes from taxes and other levies. even the poorest of poor contributes to the exchequer by paying indirect taxes when a bucket or biscuit is bought. it is this money that is used to pay the state staff.

let’s talk about public sector banks. although they undertake commercial activity, we know they rarely do so in the best way. this is the reason they are supported regularly from budgetary resources to save them from sinking. institutes, bodies and associations under various governments and ministries too are funded from budgetary resources.

now when the very foundation of the budget, the taxpayer, is under severe stress, is the state justified in paying its employees in full? although a handful of state governments have declared some cuts in such expenditures, they aren’t enough to tackle the crisis. the only answer is the government proclaiming financial emergency by using powers under article 360 of the indian constitution. after all, the provision has been added to tackle emergencies and the current crisis is deserving of such action since what is happening is unprecedented.

article 360 gives power to the state to issue direction and “any such direction may include a provision requiring the reduction of salaries and allowances of all or any class of persons serving in connection with the affairs of a state.”

nation’s resources belong to every citizen, rich or poor. and hence, equity must be brought without any delay.

good governance in the times of covid-19

at the time of writing this, a few more than 27,000 samples have been tested in india, a country of more than 1.3 billion. of these, more than 800 have returned as positive for coronavirus. but this may not be the only concern. we are short on testing kits and test centres and the government’s and other authorities’ response to the crisis is worrisome.

let’s start with the announcement that the prime minister will address the nation at 8pm on 19 March, 2020. this announcement came in advance and gave enough fodder to rumour mills. the pm has a history of causing panic at 8, one can recall the demonetization episode. an advance announcement of pm address triggered panic buying and people stockpiled. in fact, the pm and his team of advisors failed to realise this would happen.

then came the declaration of a ‘janta curfew’ on sunday. will this be a curfew, a lockdown or something else, nobody knew. without planning anything, this went ahead. many people misunderstood the clapping thing and thought it would lead to an end to the coronavirus crisis. many states extended this janta curfew and made no provisions with respect to those not in their homes, especially migrant workers.

trains were halted and buses too, leaving migrant workers no way to return to their homes. this came in the wake of losing jobs since economic activity has literally stopped. a few days later, pm addressed the nation yet again at 8 pm and declared a poorly-planned lockdown till april 14. what was intended was preventing people from leaving homes and contracting the infectious disease. however, exactly the opposite of this happened. people gathered outside grocery stores, medical shops to buy essentials.

then came another announcement, this time from the reserve bank of india. that term loan emi will be deferred for 3 months was announced and every news house bought this on its face value without reading the fine print or without thinking that if all emis are suspended will indian banks be able to sustain?

moreover, prudence suggests that allowing moratorium to public sector, government and mnc employees who shall be paid in full even during lockdown is unjustifiable. will this not adversely impact banks’ balance sheets and shatter priority sector lending? but, at the time of writing this, there is still no clarity.

good governance in the times of crisis means planning and management, not mere presentation and oratory. tens of thousands or even more migrant labourers are out on the roads walking to their home states. are they not vulnerable? central, state and district authorities are not on the same page and nobody knows how to exactly implement lockdown. the police is seen beating up people who have stepped outside of their homes, even when they may have done so to buy essentials.

we, indeed, elected good marketers, orators, but not good planners, good managers.