 Hello and let's talk about Finance Minister Nirmala Sitaraman's stimulus plan. The minister announced the Atman-Irbhar Bharat 3.0 package, what is being called is that at least on Thursday. On the one hand, at least there is a plan. After all, the country's economy is in the doldrums. The RBI data shows that the economy shrank in the July-September quarter as well, and it now says that India has entered into a technical recession. At this point, something had to be in the offing, but already experts have noted flaws with Nirmala Sitaraman's plan, including the actual spending being much less than the 2.65 lakh crore that the government has claimed. Now it's also centred on providing more credit, a model that has not really succeeded in the previous months. So what kind of spending would be needed by the government here? Are such stimulus packages, the kind of packages Nirmala Sitaraman announced, really the way forward? We talked to Anindya Chakravarty on this issue. Thank you Anindya for joining us. So Nirmala Sitaraman is around, she had got the package. There's been a lot of demand, of course, for a stimulus package. We've talked about it, about the need for governments to spend in this point of time, and which they have not been doing. At the same time, this government record is pretty bad when it comes to actually spending. It's excellent at recycling. I'm sure there'll be a lot of information coming out of that. So first thing before we go into the much maybe deeper set of questions, your basic take on what she's proposed. So I would say that I think most of them are pretty positive, especially the one where they're targeting specific sectors. Now, this appears to be an import substitution policy being introduced by the government, which is why they're called Adatman Invar 3.0. Now, the point is that import substitution, obviously, works with other things working along with that. There has to be a welfare. Several welfare measures in place for import substitution to work because A, prices go up of things. Number two, the quality that you normally receive is likely to be not the same, at least in the initial period. So people have to be protected with other welfare measures. The question is whether that has been announced or not. As of now, nothing has been announced for those who actually buy these things. Let's say there are batteries and I think there is a direct plan to invest or give subsidies and direct subsidies, what they're calling incentive. If they'd given it to the poor, they would have called it subsidy. It's called incentive. So essentially, if you increase production by let's say 1000 crore, you're going to get 6% of that, which is 60 crore rupees. The government will give you budgetary support. That's a lot of money to get from the government. Of course, there'll be lags and stuff like that, but that's a good amount of money. And if you look at the sectors specifically that have been identified, some of them are mass market sectors, like for instance, batteries. You'll see that it's a rural consumption of batteries does exist. And someone at once told me that there's a deep penetration of Chinese batteries in rural areas because there's an electricity that they do buy batteries for torches and stuff like that. So there appears to be a plan, finally a plan, if one could say that. Till now, everything appeared ad hoc, but one can now say that there is a certain plan that has been put into place. Even taking care of the entire PFMA of both the employer and the employee isn't in a sense an employment incentive. So you hire more people and you don't have to pay the mandatory employer's contribution and also the salary, effective salary to the first people to the employee goes up because they also don't pay their mandatory 12% contribution that they would have otherwise paid. So you can actually pay 5% less and even then the person has a 7% higher take home salary, right? So effectively that is again, certain things which are in the right direction. I think that the emergency credit line, all that is, you know, we've had too much of that already and unless it is on the ground, it is implemented on the ground, it's really beyond the point it's meaningless. The amount of subsidy, amount of incentive being given, I think is not enough, right? And but some of the things that have been done for us since the slight bit of income tax rebate on housing, buying homes, whether that works out on the ground or not is difficult to say. But yes, we do know that middle class savings have gone up. People have not gone out of their home. So a lot of conspicuous consumption, which becomes an important part of a middle class family's budget in this world, especially urban middle class, I would say that that has not taken place. So there is a certain corpus that is developing over the year, which we are not aware of, but it is happening in the bank, right? So maybe there will be suddenly a certain amount of money available. I had pointed to availability of money because the middle class is not going on holidays, right? And we had worked out that about easily two lakh crore worth of money can be spent by the middle class because they didn't go on holiday. And I suspect that there would be similar things that are happening. For instance, people don't eat out. They don't even order in, right? They're worried about ordering it. That is, they're going to bring in the virus. I'm sure Diwali spending is going to be much less this year than compared to any other festival spendings have been much less. So if you go to the, if you take the entire year, then a certain corpus of money exists. So maybe that can be deployed to buying houses or getting EMI's and stuff like that. I don't know that we'll have to see whether that works out. And the amount of money being put in is again, I don't think it's a lot because you see what is being done is that what the government is doing is it's providing what can be called equity in the sense that it's like a down payment, right? So in infrastructure, it's saying, okay, we are giving this much money. Now you raise loans on top of that. It is, in a sense that 20%, 10% equity I don't think is enough given circumstances. The government has to somehow ensure that if they're encouraging private companies, they have to ensure contracts, they have to ensure payments. No one is going to risk it anymore. So even if you provide equity there, I don't think there'll be enough. What is good in jargon is banking jargon or financial jargon is called leverage. So you get 2 crore rupees. You leverage it as in you get four times as loan, 8 crore rupees, and you can invest 10 crores to start a business. Now, I find that very, I mean, not convincing at all. I don't think the credit route is worth going on repeatedly. The amount of money, as you know, is let's shade over 1 lakh crore. So it's not really significant. But the direction, I would say, is right. That is finally there is some sense in what the spending is being done on. Absolutely. Right. I'm sure there's, in the next couple of days, you'll see a lot of commentary on that as well. But I want to go back to one thing which we sort of discussed right before this recording, which was about the nature of the stimulus package itself and whether a stimulus package is what we need. And it's interesting because I think globally there has been a call for stimulus package. It's been almost one of the universal demands, not necessarily even from the left, even liberal sections, even centrists for that matter. On the other hand, you do think that... No right-wingers. Exactly. New liberals have actually asked for stimulus package. Precisely. On the other hand, you do seem to think that a stimulus package right now is maybe not exactly what we need. So why is that? So here's the thing that if you, you know, I've also, as you know, which hasn't been a lottery of stimulus packages and I've been a voter of stimulus package for the last four, five years, saying they spend more, spend more, spend more. I think now it's too late. It's too late and not timely. In a sense maybe, and my mind has changed only in the last, I would say, one month or so. And the reason I'm saying that is because towards the, I would say, middle of September, end of September, there was a sense that India has crossed the hump of COVID infections. Right. In many states it is still true, the number of infections is reducing. But in a lot of states, especially in northern states like Delhi, Himachal, Haryana, it's completely exploded. And this explosion, I don't know what it has, what is called it, maybe it is pollution. Maybe it's simply that people have been a little lax during the festival season. But it's a simple thing. Think about a construction site. What do you see? You see people with stones or bricks on their head or cement on their head, handing it over to the next person. How do you maintain six feet distance there? How in strenuous jobs like that, how do you maintain, how do you ask people to keep wearing effective masks? So people do complain. I see a lot of, in my area where I live, there are a lot of houses have their own security guards. And I see that many of them complain that standing all day with a mask is not easy. Right. It's a difficult thing to do. And maybe especially if you're doing something strenuous, lifting stuff, you do get choked inside a mask. So it's not easy. The tendency will be to lower the mask, bring it down. You will see it across the border as people who deliver stuff to your homes, they push up their masks when they're coming in your house because they also are feeling choked by the amount of, you know, the way they're having to wear these masks, they're used to it. So for me, I think it is impossible at construction sites to maintain any kind of COVID protocol, whether it is social distancing, whether it is hand washing, whether it is wearing masks, it's not possible. Right. Given that what you're likely to see is that these can easily become hotspots. Of course, open air, there is a reduced chance of exposure, but we also have to remember that similarly in factories, we have to remember that both in construction sites and factories, the level of noise is very high. And we know that when people speak above a certain level, then the amount of the droplets they're releasing is much higher. So in COVID, it is universally now acknowledged that when you're singing loudly, when you're talking loudly, chances are you are likely to spread much more at a much higher distance and not 60, much more than that than you would if you were talking softly. So in all these places, these are all COVID potential COVID hotspots. Right. And again, if I think of offices, I know you have started going back to your office, but I'm assuming that there's a significant degree of. Oh, there are just four people in office. Four people in office, right? Four people in office and each of you are isolated in different rooms wearing masks. But there's a point at where you go and fill your cup of tea. Now, you will have to, there are four people in office, you can say, OK, I'm going to go in to get my tea. So in the next eight minutes before that, which is what they say that the droplets are going to be there, and eight minutes after that, please, no one come here. It's easy to implement. It's not difficult. Think of an office with just 50 people and one coffee machine. Is it possible to do that? One, two bathrooms. Is it possible to do that? I don't think it is possible at all. But there's clear evidence that a lot of offices which had opened up have started shutting down again. Factories, workshops, shop floors which had opened up are shutting down again. So therefore, again, let me think of the garment industry in India, right? If you go to even Northeast Delhi, which saw those rights late last year and early this year, then you will see. I think, sorry, not late last year, early this year. Yeah. So there you will see that there are small rooms, maybe 10 by 10 rooms where there are eight people sitting next to each other. So one person is sewing, is running the sewing machine, handing it to the next person who stitches buttons, puts a collar in, hands to the other person who folds it, hands it to another person who packs it. So there are packers and folders. These are defined jobs in this industry. How do you maintain social distance there? It is impossible to do that, right? Do we know today that this explosion in Delhi has led to a complete absence of ICU beds in Delhi? There are no ICU beds. People with other illnesses are unable to get even hospital beds, right? So given that, I would think that we cannot open up till there is a clear decline in COVID infections. We cannot open up until we have a handle over how to deal with it. We cannot open up, right? Given that, all these incentives will come to naught because you can give it. But a factory which starts to produce it will actually not be able to because they'll have to shut down in two days or three days or five days. So therefore, in a situation like this, I don't think incentives will work. We are looking at economic stimulus as if this particular recession, because there's a difference between slow down and recession. You could argue that India was already in recession, as some people have argued. And it was not really slowing down and GDP growth is all fudged or it doesn't capture the picture. Yes, that's a possibility. But this is a recession not caused organically by lack of demand, lack of production. It's a recession caused by a lockdown, right? And by the fact that people are not going out to work. And therefore, to my mind, this entire idea of reviving the economy has to be put on the back burner as right now. Right, but you are definitely not arguing for austerity, I understand. No, not at all. In fact, I'm saying that spend even more. I'm saying that this spending is meaningless. You need to spend 10% of your GDP, right? Borrow, but not for things which will generate more income directly. Okay. You need to take this as a period to create a welfare structure, right? Use it, use it as an excuse. Say that, okay, there'll be a welfare structure we're investing in. Which just to sort of clarify, how would a welfare structure work? Because I think especially over the past couple of decades, you almost completely lost that concept of what a welfare structure is. So how could that be implemented? So you compared, I'm not talking about socialism or left or anything. I'm just saying England. Think about the National Health Service, right? It was built over a period of time without any returns after the war. And it was a decision taken that we are going to provide free health to people. Free education across the developed world, right? The right to free education. And things have changed now. We are, you see, there is something called obsolescence. If you have an early mover, if you're an early mover, what happens is that you get the latest technology. Now if you invest, you can get a lot of new technology. You can work digitally in health. I mean, I'm looking at an example of people in villages who we call quacks, but people go and get better, right? They have some basic idea of medicine. So they'll say that, okay, you've got this, so maybe this is the issue, right? They provide the first line of health services, medical services to millions of poor people in India. They do not have degrees. They're all quacks in that sense. There are now many medical apps, startups that you're working, who can easily go out and organize these people. And they can be called front line or first line medical workers, train them over an intensive period online, right? Tell them that there will be centralized doctors who will monitor you online, right? And we will see whatever you're saying, take photographs. It's so easy now. Everyone has phones, right? So I'm talking about the health sector. Now let's say that you take workers and people who work COVID positive, who have recovered. Create a database. These are people who can actually work. Use them to build hospitals, clinics, set up a network of broadband across the country. That involves spending 6% of your GDP on health, right? All that you've been saying all these years, just spend it. It means 12 lakh crore rupees in today's terms. It's a huge amount of money and the government. So I'm saying that if you have spending approximately, let's say 30 lakh crores in your budget, right? Some of it is not being spent because none of these projects are going to take place. Because of the lockdown. Use that existing money, divert it. I do not see, I think that when we look at GDP and all that, that's fair. It's worth looking at. But today we have to look at two things. One is distribution of food to rich and poor and everyone. It should have a basic. If you have money going by more, but you should have universal access to food. Because you can't go to work, right? This has to be, there are so many ways to do it. I mean, look at all the restaurants that are sitting idle, the apps which are around. They can work various ways to deliver food to you. There are NGOs who give free food to village schools, right? There are NGOs which give meals to the poor. So you work that out. It's for the government to work out and create these organized things. Yes, you can always be worried about big brother watching you and too much centralization and all that. Decentralize it, give it to state governments, give it to panchayats who's stopping you from doing that. Set up a model and say, you will run this. We have nothing to do with it, right? Here's the money, right? We will monitor whether you're spending the money or not. And not we, but state governments will do it. State governments will give it to districts. Districts can give it to panchayats and what then it can be done. No one is asking you to do it. So of course, this is all utopian. Why would they do it? So there is always a danger that this can be used to actually even centralize further, right? My point is, what is the option available right now? I don't think there are options. The options are to spend on food, universal food access, which is cereals, proteins, milk. And that involves large scale government procurement. Procurement, precisely. Yeah, right. Food procurement and distribution, right? These are the places where you have to invest. And these are the places where you create a database of people who will not get infected. Look at the districts where there are no infections. Maybe invest, focus on those first, right? So I'm saying that the idea of the economy has to be put on the back burner. We have to forget about it. And therefore, obviously, you have to say that there can be no interest payments. You don't receive interest and you don't get rent and you don't get profit in this particular year. It's like being in the middle of some nuclear Holocaust. I don't know what would happen if, what happened in the world war? I don't know. Some people didn't make money, but a lot of the regular stuff that you thought economies were put set aside. These are war economies. Exactly, right. Effectively, I'm saying that this is an opportunity to build what you do not have, right? Of course, the private sector won't let you do that. The private sector does not want you to do that. This is a great time for private health, right? Making huge amounts of money. Why would they want you to spend, want the state to spend on health, right? But on the other hand, there is the entire private startup ecosystem, which would love the state to invest there. Right. So of course, the biggest obstacle here, like I said, maybe was that something of this sort has vanished from the imagination of economists and policymakers for at least three, maybe four decades right now. Because what we're looking at is the line of thinking, which was there immediately after independence, where the government was seen as having this function primarily to create infrastructure for the people, a long-term perspective on development and issues like that. And that has completely vanished in terms of notions of productivity. So that would be the key question that even as a government right now, do we necessarily have the infrastructure in terms of personal? No, I don't think we have the infrastructure. You have to build that infrastructure. Oh, no, I mean, in terms of execution of policies. People. No, I've just been big people. Just people with ability to think like that. I'm saying that, you know, when the plans were implemented, think about it. They were not socialist plans. You can, in hindsight call it socialist, yes, there was planning. The original model was provided by the Bombay plan, where GD Birla, J.R.D. Tata, these are the people, right? What did they say? They said, okay, we need to have in the next 15 years, everyone closed, everyone with homes, everyone educated. What do we need for that? Right? In fact, when GD Birla died, J.R.D. Tata, who did not get along with GD Birla at all, but he said that he, the praise he gave was that when we sat down to do the Bombay plan, we were wondering, where do we start? The Bombay plan, which was I think 1946, which was like it, which was a kind of a directive or a set of suggestions to the new government that was going to come. And how do you proceed with the economy? These are by the top industrialists of India. And he said that GD Birla got down and said, look, we just need the basic map. Today is, this is our population. This is the rate at which it will grow. So we need so many houses. We need so many people educated. We need so many clothes, right? We need so much food. Let us say that this is what we need to achieve in 15 years, right? And what is the rate of growth we need? And what does the investment that is required? And it is very, I think in one of these places, they said that there is in Bombay plan itself, that we do not believe in the difference between socialism and capitalism kind of thing. So clearly they were also worried that they will be called socialists even then, because if you remember, the power is full of... Or alternatively they were worried that they would be danger with it, both valid explanations. Yeah, exactly. Exactly. But I think that they were also not to forget the Siddharth Patel and all those people who were very worried about socialism and capitalism. Right, right, right. Community communism and were definitely pro-business at that time. Exactly. For their own reasons. I'm not saying that there's anything wrong in being that. But so effectively, this is a capitalist idea. There's nothing socialist about it. That's what I'm trying to say. Unfortunately, we have become so neoliberal today that we are not even willing to look at that. Absolutely, right. So this is definitely an opportunity in terms of not scale spending, but it does still look like the government's policy will be. And I think the other key aspect which you also refer to is the fact that there is no real national model or systemic model in terms of how to combat COVID-19 socially. Which means that what you said mentioned at the beginning that as time passes, people just get tired and you just abandon everything. And also, you see that the, okay, it's deepening down. We have now crossed the curve, it's down there. So let's start going out. Exactly, right. So there's no social. And then suddenly you see all your friends are getting it. And so many people are getting it. Your driver's getting it. So suddenly the middle class sees that, oh my God, it's come back. So let others start their companies. I'm going to say because I don't want to die. So this is precisely what is going to happen. And of course, if suddenly by December, we see the worldwide COVID has suddenly disappeared. There have been such cases of viruses which suddenly disappear and don't come back for years. I think even the original SARS, something like that's happened. Then obviously you can go back to the old models of Genshin demand stimulation or trying to stimulate production as well. But as of now, I don't see that happening simply because we have another round of outbreak, not just in India, across the world. Across the world, absolutely. The US is going through its third. So it does not look like it's going to subside anytime soon. Unless we get a vaccine and there's a massive immunization effort. Which is again interesting because what you suggested also has to do with that. Even if you want to vaccinate, you need that kind of education. How will you? I mean, if you have to really vaccinate people with what Pfizer is making, then you need a cold chain operation. Like you would have to, I don't even if suffer trucks which deliver your frozen mutter and frozen french fries and corn. Whether even they have a minus 80 degree ability to transfer it, I don't think they do. Because a normal freezer at best goes to minus 25 degrees in your house. Minus 80 degrees. That's the Pfizer vaccine. That's where it had to be maintained. I don't think it is even possible in India. It's just not possible in India. Yeah, absolutely. So just to deliver that, think about the infrastructure you have to build on a war footing right now. Just to put refrigerated vans which will carry these. That's all. Not even anything else. Or provide electricity to a village which will maintain that thing. So I'm saying that these are easier. Obviously, vaccine is not an option for most of India unless a new vaccine comes. I think the Russian Sputnik is, I mean, I think they're saying you can put it in the fridge and stuff. Yeah, there are some option, there are some vaccine options which are relatively much more easier to maintain. Yeah, but as you don't know what will happen after the vaccine. I mean, obviously one hopes this ends, but there has to be, in my opinion, one has to proceed by saying it's not going to end. So therefore, this kind of stimulus is not the right way to proceed. Absolutely. Right. Thank you so much Arunji for talking to us. Thanks a lot. That's all. We have time for today. We'll be back on Monday with more news from the country. Until then, keep watching NewsClay Club.