Extend Cash and Food Transfers In Covid Package, Say Economists

Two key elements of the government’s economic support package — cash transfers and free foodgrain — are set to end in June even as the economy remains weak.

While economic activity has picked up in May and June, economists argue that the improvement remains patchy and the most vulnerable sections of the population may need further aid.

The Pradhan Mantri Garib Kalyan Yojana, announced on March 26, promised a cash transfer of Rs 500 to women Jan Dhan account holders for a period of three months. This period ends in June. Food transfers, announced in tranches, also end this month.

The amounts for the cash transfers were hardly anything to begin with, said Reetika Khera, associate professor of economics at IIT Delhi. Hence, while there is a need for the cash scheme to be extended and enhanced, the case for extending the food security scheme is also very strong.

Though limited in nature, the cash transfers and food subsidies stood out from all the welfare measures announced by the government, said Ankita Pathak, economist at Edelweiss Financial Services. In the absence of demand revival and high unemployment rates, it is too early to not extend them for  longer, she said.

Need For More Cash Transfers?

The cash transfer scheme benefited 21.61 crore women account holders with a total of Rs 30,952 crore being disbursed, according to a progress report by the central government dated June 20.

Two factors support the demand for extended cash support.

First, urban areas where a large number of migrants were employed, remain under restrictions. Even if the lockdowns are not as stringent as earlier, migrants in the hinterlands are unlikely to return to urban areas in such conditions, said Pathak. As such, demand for employment in rural areas is likely to remain high, she said.

Second, the availability of work under the flagship rural employment guarantee scheme (MNREGA) remains inadequate.

In June so far, 43 million households were in need of work while work was supplied to only 28 million, according to figures compiled by Pathak from the MNREGA portal. The gap between work demand and work supplied widened over May, perhaps due to reverse migration into rural areas.

Using Ample Food Stocks

Khera argued that the least the government can do is extend the food transfers given the large stocks of wheat and rice that India holds.

Of the 113 lakh metric tonnes of food grains allocated by the centre under the PM Garib Kalyan Yojana, 87.02 lakh metric have been distributed, according to the government’s progress report. Under a separate scheme, the government announced free food grains and chana for migrant workers for 2 months. As on June 19, 2020, 6.3 lakh metric tonnes of foodgrains has been lifted by state governments under this scheme.

According to data compiled by BloombergQuint, distribution under both schemes, along with distribution under regular channels, stood at 205.88 lakh metric tonnes in the April- June period. This continues to be a small part of the the food stocks India is holding.

On a monthly basis, the food distributed remains a small fraction of the holdings, the data shows.

For April, the food stocks distributed accounted for 12% of the total food stocks of rice and wheat held by the Food Corporation of India. In May, distributed food stocks were at 11.84% of the total food stocks at the Food Corporation of India. After the government’s procurement in June, food stocks rose even further, bringing distributed food grains to 7.34% of total stocks.

Food stocks are meant for situations like the current one, said Khera, adding that the measure would be a relief even for the government as it grapples with the economic cost of maintaining the stocks. Also, the transfers need to be extended beyond just the current beneficiaries, Khera said.

Food grain stocks have continued to rise indicating that the government has procured more than it has distributed, said Vikas Rawal, professor at the centre for economic studies and planning, JNU. FCI is under a mountain of debt trying to preserve these grains, he said. Rawal added that states were initially caught off guard which delayed the distribution. It is only now that they have gotten into the act, he said.

In an interview to The Wire dated June 27, Union Minister for Consumer Affairs, Food and Public Distribution Ram Vilas Paswan acknowledged that eleven states have demanded that benefits under the PM Garib Kalyan Yojana be extended by three months. “The government will review the circumstances and take a decision on this,” Paswan told the publication.