‘No one will go hungry’: India unveils huge £19bn coronavirus stimulus package

Measures a ‘good start’, says economist Vivek Kaul, but still unlikely to prevent India suffering a historic first recession

India has unveiled a £19bn package of economic relief measures aimed at helping its huge workforce of unskilled labourers survive through a national lockdown to contain the coronavirus pandemic.

About 800 million Indians are set to benefit from handouts of food staples such as rice and lentils, finance minister Nirmala Sitharaman told a news conference, while almost 90 million farmers would be given immediate direct transfers of cash to help them keep on feeding the nation.

“No one will go hungry,” Ms Sitharaman declared. “[This] package is ready for the poor who need immediate help, like migrant workers and the urban and rural poor,” she said.

The announcement came amid mounting concern for how a 21-day lockdown, announced by prime minister Narendra Modi on Tuesday night, would impact the informal, cash-in-hand labourers who represent more than 85 per cent of India’s workforce.

Markets reacted positively to the news, particularly given the government had only previously committed £1.7bn in spending on the crisis, mostly on strengthening healthcare facilities. The benchmark Sensex index gained five per cent on Thursday, while the Indian rupee rose 64 paisa against the dollar after days of losses.

Vivek Kaul, an Indian economist and author of the Easy Money series, said that while the stimulus package represented a “good start”, although much of the package involved advance payments of benefits that poorer Indians would have been entitled to in the coming months anyway.

He suggested the package was lacking in measures to help traders and small business owners, and that the government could have followed the UK’s example by letting small businesses defer payment of VAT for several months. “There was clearly more that she could have done,” he said. “But this is at least a little better than what had been offered until now.”

Whatever the package, he said, it was now “a given” that India will suffer the first recession in its post-independence history. “We may not have grown as fast as China, but a recession has never really happened. [But] this crisis is coming on top of the fact that the economy was already slowing down big-time. It has come at a very, very bad time for us.

“Essentially we are taking one month’s worth of the economy out of the picture, and that’s assuming this [lockdown] is over by mid-April. No government could tackle that,” he said.

In one way at least, the timing of the pandemic is fortunate for India, with the spring harvest just getting under way and government warehouses – which already supply large amounts of rations to the nation’s poorest under the existing welfare schemes – reporting healthy surpluses.

Police had already stepped in to help handing out sacks of food in some states including northeastern Assam prior to Thursday’s announcement, such is the demand caused by the current lockdown.

There will be questions, too, over how food can be safely handed out to such large numbers of people while maintaining social distancing and personal hygiene measures to prevent the virus spreading. Homeless shelters in the capital Delhi have reported a more than three-fold uptick in the numbers of people claiming free hot meals, and videos showed queues of people bunched together in the street.

Authorities said they were working with existing charities to try and map out locations where food could be distributed in the capital, from government schools to political party headquarters.

“These are extraordinary times and proving food to the poor is a mammoth task,” Vinay K Stephen, the head of a nonprofit group working with the government to feed the capital’s homeless, told the Associated Press. “But we will do it.”

What is in the package?

While India’s national lockdown is due to last 21 days, the measures rolled out on Thursday by Ms Sitharaman – who also chairs the government’s Covid-19 ministerial taskforce – were all due to run for three months. “Hopefully, we would be able to contain the virus in this period,” she told reporters.

In order to identify and support those in need as quickly as possible, most of the measures were in effect just building upon existing welfare schemes.

Thus, 800 million ration card holders would have their allotment of free rice or wheat doubled from 5kg to 10kg, as well as being given an additional 1kg of the pulse of their choosing.

Women who have opened their first bank account since 2014 under a Modi administration scheme – about 200 million mostly working-class people – will receive Rs 500 (£5.50) direct into their accounts each month for the next three months. “It’s a good move because it’s the fastest way to get money into the hands of the people who need it most,” Mr Kaul said. “The only quicker way would be for the government to hire helicopters and throw money out the window.”

Ms Sitharaman also announced what amounts to a guarantee that all health workers would have their treatment paid for if they fall sick while fighting the virus on the front lines. She said each doctor, paramedic and community health worker would be provided Rs 5m (£55,000) in health insurance during the next three months.

And the government said that vulnerable groups – including poor senior citizens over 60 years of age, widows and disabled people – would receive an additional Rs 1,000 (£11) paid in two instalments over three months. Ms Sitharaman said this would benefit 30 million people.

India’s confirmed cases of coronavirus rose to 694 on Thursday, with at least 16 deaths, but health officials struck a positive tone over the trajectory of the outbreak.

Health minister Lav Aggarwal told a regular news conference that the “initial trend” suggested the number of cases was stabilising, though India only recently expanded its stringent testing policy. R Ganga Ketkar, from the Indian Council of Medical Research, suggested cases would “hardly increase” if the public strictly follows the government’s “effective” containment measures.