Recently, the Kelkar Committee published a roadmap for fiscal consolidation. The report stresses the need and urgency to address India’s fiscal deficit. A high fiscal deficit – the excess of government expenditure over receipts – can be problematic for many reasons. The fiscal deficit is financed by government borrowing; increased borrowing can crowd out funds available for private investment. High government spending can also lead to a rise in price levels. A full PRS summary of the report can be found here. Recent fiscal trends Last year (2011-12), the central government posted a fiscal deficit of 5.8% (of GDP), significantly higher than the targeted 4.6%. This is in stark contrast to five years ago in 2007-08, when after embarking on a path of fiscal consolidation the government’s fiscal deficit had shrunk to a 30 year low of 2.5%. In 2008-09, a combination of the Sixth Pay Commission, farmers’ debt waiver and a crisis-driven stimulus led to the deficit rising to 6% and it has not returned to those levels since. As of August this year, government accounts reveal a fiscal deficit of Rs 3,37,538 crore which is 65.7% of the targeted deficit with seven months to go in the fiscal year. With growth slowing this year, the committee expects tax receipts to fall short of expectations significantly and expenditure to overshoot budget estimates, leaving the economy on the edge of a “fiscal precipice”.
Figure 1 (source: RBI)
Committee recommendations - expenditure To tackle the deficit on the expenditure side, the committee wants to ease the subsidy burden. Subsidy expenditure, as a percentage of GDP, has crept up in the last two years (see Figure 2) and the committee expects it to reach 2.6% of GDP in 2012-13. In response, the committee calls for an immediate increase in the price of diesel, kerosene and LPG. The committee also recommends phasing out the subsidy on diesel and LPG by 2014-15. Initial reports suggest that the government may not support this phasing out of subsidies.
Figure 2 (source: RBI, Union Budget documents, PRS)
For the fertiliser subsidy, the committee recommends implementing the Department of Fertilisers proposal of a 10% price increase on urea. Last week , the government raised the price of urea by Rs 50 per tonne (a 0.9% increase). Finally, the committee explains the rising food subsidy expenditure as a mismatch between the issue price and the minimum support price and wants this to be addressed. Committee recommendations - receipts Rising subsidies have not been matched by a significant increase in receipts through taxation: gross tax revenue as a percentage of GDP has remained around 10% of GDP (see Figure 3). The committee seeks to improve collections in both direct and indirect taxes via better tax administration. Over the last decade, income from direct taxes – the tax on income – has emerged as the biggest contributor to the Indian exchequer. The committee feels that the pending Direct Tax Code Bill would result in significant losses and should be reviewed. To boost income from indirect taxes – the tax on goods and services – the committee wants the proposed Goods and Service Tax regime to be implemented as soon as possible.
Figure 3 (source: RBI)
Increasing disinvestment, the process of selling government stake in public enterprises, is another proposal to boost receipts. India has failed to meet the disinvestment estimate set out in the Budget in the last two years (Figure 4). The committee believes introducing new channels [1. The committee suggests introducing a ‘call option model’. This is a mechanism allowing the government to offer for sale multiple securities over a period of time till disinvestment targets are achieved. Investors would have the option to purchase securities at the cost of a premium. They also propose introducing ‘exchange traded funds’ which would comprise all listed securities of Central Public Sector Enterprises and would provide investors with the benefits of diversification, low cost access and flexibility.] for disinvestment would ensure that disinvestment receipts would meet this year’s target of Rs 30,000 crore.
Figure 4 (source: Union Budget documents, PRS)
Taken together, these policy changes, the committee believe would significantly improve India’s fiscal health and boost growth. Their final projections for 2012-13, in both a reform and no reform scenario, and the medium term (2013-14 and 2014-15) are presented in the table below: [table id=2 /]
On March 19, Gujarat reported its first two cases of COVID-19. Since then, the number of cases have risen steadily. As of May 2, Gujarat has 4,721 confirmed cases (second highest in the country, after Maharashtra) of COVID-19. Of this 3,750 are active cases and 236 have died. The state government has responded with various actions to contain the spread and impact of COVID-19. In this blog, we look at the key measures taken by the Gujarat Government till May 1, 2020.
Initial phase
As COVID-19 cases were rising in other parts of the country, the Gujarat government notified the Gujarat Epidemic Diseases, COVID-19 Regulations, 2020 on March 14,. These regulations detail the responsibilities of hospitals and individuals, and the powers of officials with regards to COVID-19. These include: (i) flu corners in all hospitals for screening purposes, (ii) mandatory collection of travel history of people during screenings in all hospitals, (iii) mandating people with travel history to COVID-affected countries to be isolated /quarantined based on symptoms, (iv) forced detention and isolation of suspected patients who refuse voluntary isolation, and (v) containment measures in an area once positive cases are detected. Some of the other early measures are summarised below:
Health measures
The COVID-19 regulations were immediately supplemented with the n-COVID-19 Guidelines. These guidelines cover: (i) case definitions, (ii) basic infection prevention control measures, and (iii) standard precautions to be followed during the care and treatment of suspected patients.
On March 15, the government instructed all higher education institutions and other educational institutions including schools, polytechnics, anganwadis, to shut down till March 29. However, examinations of class X, XII, and universities were permitted to continue. Further, spitting in public was made a punishable offence.
On March 19, the government ordered the closure of gyms, amusement parks, wedding halls, till March 31. Additionally, all private doctors, practising modern as well as traditional systems of medicine, were instructed to report suspect cases to the government.
A Fever Helpline 104 was launched on March 20 for reporting of suspect cases of COVID-19. Further, guidelines were also issued on the reporting of cases of Severe Acute Respiratory Illnesses (SARI) to the government. These include: (i) preparation of travel history and contact lists of reported suspect cases, (ii) nodal officer to decide on steps and treatment protocol for such cases, (iii) relevant authorities to initiate follow up and contact tracing for the patient for last 14 days, and (iv) initiating cluster management guidelines when new cases emerge.
Essential goods and services
On March 20, a committee was formed by the government for daily monitoring of the availability, supplies, and manufacturing of medicines, masks, and sanitisers. On March 21, a Khas Kharid Committee was set up to ensure procurement of necessary medicines, equipments, and human resources during emergencies, bypassing existing purchase guidelines, if necessary.
Between March 21 and March 22, the government announced a partial lockdown and released a list of essential services and businesses that were allowed to operate till March 25 in the cities of Ahmedabad, Surat, Vadodara,Rajkot, Kutch and Gandhinagar. These include: (i) government and municipal departments, (ii) shops selling essential goods, (iii) various medical facilities such as hospitals, clinics, and pharmacies, (iv) public utilities, (v) railways and transportation facilities, (vi) media, telecom, IT services, and (vii) banks and insurance firms.
The government also invited NGOs to collaborate in the fight against COVID-19, by arranging for the supply of masks, sanitisers, and infrared thermometers, and running awareness campaigns.
Administrative measures
On March 18, the government issued guidelines specifying preventive measures to be taken in all government offices and employees. Recommendations inlcude: (i) avoiding face-to-face meetings and non-essential travel, (ii) closure of gyms and yoga centres in the Secretariat, (iii) home quarantine for officials exhibiting any symptoms, and (iv) mandatory leave to be given to such persons going on quarantine.
On March 21, the government released the terms of reference of Regional Nodal Officers appointed to work towards preventing the spread of COVID-19.
On March 23, the Gujarat Legislative Assembly decided to indefinitely postpone the Rajya Sabha elections that were originally to be held on March 26.
Other measures
An advisory was issued requesting private firms to not lay off workers (even if they fall sick to COVID-19) or reduce their salaries.
During the lockdown
On March 23, the state government extended and expanded the partial lockdown announced in select cities to the entire state. The lockdown was to be in place from March 23 to March 31. In addition to the exemptions announced in the partial lockdown orders, services such as (i) cattle feeding and veterinary services, (ii) stock broking, (iii) postal and courier services, and (iv) operation of industries where workers are available on site, were permitted. The state-wide lockdown has been followed by a nation-wide lockdown since March 25 . This has been further extended until May 17. Some of the key measures undertaken during the lockdown period are:
Health measures
On March 27, all private clinics and hospitals in the state were directed to utilise the Dr. TeCHO mobile app developed by the government. The app can be used for uploading information related to: (i) sample collection and (ii) reporting and surveillance of all SARI cases. Another app was launched to keep track of home quarantined people.
On March 30, COVID-19 was included as a notified disaster under the State Disaster Response Fund (SDRF). Thus, all expenditure related to relief measures for displaced / homeless people, migrant labour or other stranded persons due to the lockdown, will be made out of the SDRF.
On March 31, the government released new guidelines for the clinical management of COVID-19. These cover: (i) triage activities, (ii) case definitions and classification, (iii) infection and prevention control measures, (iii) specimen collection and handling, (iv) management and prevention of medical complications, (v) clinical management for COVID-19, (vi) discharge policy for patients, and (vii) dead body management.
To exclusively cater to COVID-19 cases, four government hospitals and three private hospitals were declared as designated COVID-19 treatment facilities. Further, the government instructed all COVID-19 hospitals to provide treatment to the people free of cost. On May 1, 26 hospitals were additionally designated as COVID-19 facilities.
Resource Management: Between March 31 and April 7, the government initiated multiple measures to address the shortage of medical practitioners in government hospitals. These include: (i) extending tenures of retiring medical personnel, (ii) ad-hoc recruitment of teachers in medical colleges, (iii) contract-based appointments of class-1 specialist and class-2 medical officers from private sector, (iv) additional responsibilities to select class-1 doctors from the epidemiologist department, and (v) temporary shifting of Ayurvedic medical officers to various locations.
On March 28, the state released guidelines for Human Resource management (HRM) in COVID-19 facilities. These include: (i) creation of district level task forces, (ii) patient flow algorithm, (iii) deployment and rotation of HR, including residents and nursing staff, and (iv) pooling of HR from various institutes and cadres.
The state has also allowed the use of AYUSH remedies and medicines, particularly for persons quarantined through contact tracing and to frontline personnel. Teams of corona warriors have been formed to assist people with preventive care. In addition, local officials have been asked to utilise the services of important stakeholders such as teachers, priests, and others, who can influence the social behaviour of people to deal with COVID-19.
A new State Health System Resource Centre has been established as the nodal agency in the state for all COVID-19 related research. Further, a COVID-19 research activity committee has been set up to lead this endeavour.
Welfare measures
On March 25, the state government decided to provide ration to 60 lakh poor families who live on daily wages. Further, on March 28, to minimise the adverse effects of lockdown on casual labour, autorickshaw drivers, and street vendors, the government announced free wheat, rice, pulses, sugar, and iodised salt for the month of April 2020.
A Vadil Vandana scheme was launched to provide free of cost meals to the elderly and the aged living alone in various cities of the state.
The state also announced that electricity bills from March 1 to April 30, can be paid by May 15.
The government announced compensatory packages worth Rs 25 lakh for each frontline worker who may lose life on COVID-19 duty. Such workers include: (i) police personnel and (ii) other government employees under the state government, panchayats, and nagar palikas .
Other measures
Industry: Relaxations from the lockdown were announced for factories and IT/ITES firms, from April 20 onwards. For factories, the conditions specified that adult workers shall be allowed to work for not more than 12 hours per day (six hours at a time) or 72 hours per week. Female workers are not allowed to work between 7 pm and 6 am. Wages are to be proportional to the existing wage structure. IT/ITES firms are allowed operate in non-containment zones at 50% strength and social distancing norms will be required to be followed.
Administrative: On March 30, the government issued an order to continue paying full wages to all fixed-pay government employees who are on leave or working from home during the lockdown. However, the employees are required to report to work whenever required by the government during the lockdown.
On April 15, nodal officers were appointed and given additional financial powers to take control of infectious disease control hospitals.
For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.
