Stimulating economy via fiscal package: The only way out to save vulnerable Workers' lives and livelihood in Covid‐19 pandemic

Abstract

This paper examines critically the economic package announced by the Indian central government to counter the challenges of lives and livelihood in the Covid‐19 pandemic. This paper estimates the shares of the fiscal economic packages in two phases as per the shares of the vulnerable workers and number of Covid‐19 cases in the Indian states. The recent data on labour market are used from National Sample Survey Organization and data on Covid‐19 cases from Ministry of Health and Family Welfare. This paper recommends alternatively a fiscal stimulus package of Rs. 10 lakh crores (5% of GDP) with an immediate effect to counter the present problems of health, food and unemployment in the pandemic and should be extended to Rs. 24 lakh crores (12% of Indian GDP) to the Indian states for at least 1 year to protect the lives and livelihood of the most vulnerable, informal and migrant workers. The populous and poor states like Uttar Pradesh and Bihar have higher share of vulnerable workers and highly industrialized states like Maharashtra, Gujarat, Delhi and Tamil Nadu have higher number of Covid‐19 cases. Due to the unplanned lockdown in India, there has been a surge in Covid‐19 cases across the country that in turn led to an increase in vulnerable workers in poor states due to reverse migration from industrialized states to populous and poor states during the pandemic. Furthermore, the paper explains the five significant factors that justify the adoption of an expansionary fiscal policy rather than monetary policy.

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