Congress leader Rahul Gandhi today called for the central government to transfer an amount of around Rs 65,000 cr ($8.6 billion) as immediate financial relief to half of Indian households as a stimulus measure to restart consumption.
He said this can be sent as a direct cash transfer of Rs 7,500 to each family.
His request comes in the wake of the US government transferring around $500 billion to all US citizens as part of its Coronavirus relief packages.
“Start putting money into India’s poorest households…It will completely transform the way people are thinking about the current situation. If you are on daily wages, you do not have choices. We have to give them a choice,” Rahul Gandhi said in an online interaction with journalists today.
“We are in an emergency… It’s not such a big price [to pay].”
The government, on its part, is wary of resorting to populist and potentially inflationary measures such as cash transfers, given that Indian sovereign debt is rated only one notch above junk grade by international credit rating agencies.
If such moves lead to higher inflation, it will bring down the value of the rupee and lead to a possible rating downgrade, which will in turn push down the value of the rupee further, leading to even more inflation.
Gandhi said that is a risk the government should take.
“We must take that chance, because if we don’t defend the foundation of our economy, downgrades or [its absence] will not matter,” he said, adding that Indian economy depends on consumption, and we must ‘start the engine of domestic consumption’ quickly.
Gandhi’s request for cash transfer is in keeping with the ‘help the poor’ line taken by his party during the 2019 general elections, as well as the overall strategy adopted by his party government before it was replaced by the BJP-led National Democratic Alliance in 2014.
Rahul Gandhi had promised a similar plan as part of his election manifesto, but had been widely criticized by some economists and others.
During the election, his party was caricatured as the party of ‘freebies’ by right-of-center economists and the ruling BJP.
The Congress Party, when in power from 2004 to 2014, did manage to transfer large amounts of wealth to the rural and economically lower population groups, but the era was also noted for the high levels of price inflation that strained the budgets of the salaried class.
Prices of certain food items would rise as much as 60%-100% during certain periods of the year.
The high inflation rate is supposed to have contributed to Congress Party’s poor performance at the polls.
Gandhi also asked for special measures to protect small businesses.
“The idea that we can simply let our job creators drown is not feasible. We have to protect them. We have to make sure that we give them a wage protection scheme, a one-lakh-crore way protection scheme and a one-lakh-crore credit guarantee scheme to MSMEs. We also have to give them a six month interest subsidy,” he said.
He said such financial support will help them fight what is coming.
“It is clear that a lot of these companies are going to go down. If we do not do anything, a massive number of them are going to go down.”
In a departure from usual practice, Rahul Gandhi also sought help for ‘big business’.
“Most of what MSMEs supply goes to big business. If big businesses are not firing, MSMEs can also not survive,” he said.
“We are giving much more benefits to small and medium sized businesses, but we are also keeping in mind that there is a link between large businesses and small and medium businesses.”