The Congress on Wednesday asked for immediate government intervention to prevent large-scale retrenchments in the private sector by releasing financial assistance to ensure that salaries for the month of April could be distributed to millions of people.
“Eleven crore people are engaged in 6.3 crore micro, small and medium enterprises (MSMEs),” former finance minister P. Chidambaram told a media conference. “Most of them would not have worked a single day in the month of April because the entire country was in lockdown. These people’s livelihoods are in danger now because most of the employers are unable to pay wages/salaries. Large swathes of the private sector are faced with what economists call an extreme liquidity shock.”
A herd of Nilgai have a free run at a construction site in Noida on Wednesday. Picture by Prem Singh
Even the future of these businesses is uncertain, Chidambaram said. “The Government of India has to step in today to protect 11 crore Indians and give hope to MSMEs. It is bewildering that there has been absolutely no financial package or assistance announced for businesses since the onset of Covid-19. The government may have the luxury of time but the MSMEs do not. They need to know right away whether they will be helped to stay afloat and thereby pay salaries/wages to those dependent on these businesses.”
He repeated the Congress proposal for a Rs 1 lakh crore wage-protection assistance to help MSMEs pay wages and salaries for April and a Rs 1 lakh crore credit guarantee fund for these enterprises to help them borrow.
“Further, for the non-MSMEs, we urge the government to announce a pay cheque protection programme, similar to the one announced in the United States. This is not a legislation but a financial assistance package,” Chidambaram said.
He added: “According to the income tax department, there are roughly one crore people with a salary income of less than Rs 350,000 a year or Rs 30,000 a month. Assuming an average salary of Rs 15,000 a month for these one crore people, the total cost comes to Rs 15,000 crore for the month of April. This is not a large sum to protect the livelihoods of one crore people who have filed tax returns and paid taxes in the past, and can be easily found.”
He also suggested a temporary waiver of employers’ contributions to the employees provident fund (EPF) and employees state insurance (ESI) for the next three months.
Asked if the Congress was hunting for credit as the government had already said a package for the MSMEs was in the pipeline, he said: “What has the government done? We heard the finance minister last on March 25. For 35 days, they have not announced a financial package even as the salaries have to be distributed from May 1. It is the duty of the Opposition to pressure the government to act.”
To a question about the government’s non-committal attitude towards financial assistance to states, he said: “The government has been non-committal on everything — exit strategy, finances, migrant labour problem, ramping up testing. The chief ministers are very worried. The Prime Minister must make a statement that the states’ finances will be supported.
Asked about speculation about a financial emergency, the Congress leader said: “Even to utter these words will be inappropriate. Hope we are not pushed into that. Hope the government acts boldly and wisely, and listens to what economists have been saying, to avoid that situation. In financial emergency, whatever little autonomy the states have will be suspended.”
Arguing that the government had so far offered band-aid solutions, he said: “Cutting interest rates, stopping DA hurt the middle class. Extraordinary times call for extraordinary remedies. All the economists are pleading for helping the poor, protecting the economy from total collapse. If the fiscal deficit target of 3.5 per cent is breached, that doesn’t really matter now. The government should borrow more. A part of it can be monetised later if it becomes necessary. But we have to save the people who are pushed to the brink.”
Chidambaram demanded that the Central Vista and bullet train projects be scrapped, suggesting that all other non-essential expenditure should be suspended.
He rued that power had been centralised, that too in one office (PMO), and hoped that institutions would start functioning, courts would hear more cases and parliamentary committees resumed work.