In the Coronavirus outbreak, governments must deal with known and unknwon fallouts. In his latest column for The New Indian Express, Shankkar Aiyar discusses the undeniable need for income support. He explains that adequate measures must have clear objectives and incentives must align.
“The quest to flatten the curve of Covid-19 infection has deepened distress. Regimes are faced with a challenge at the intersection of economic and political survival and sustainability. The lockdown on public engagement has resulted in partial-to-total paralysis of economic activity rendering millions vulnerable to deprivation.”
“What can be done is clearly dependent on circumstance and economic context. And the way to think about it is to outline the objectives. It could range from protecting jobs to sustaining segments to national security concern about economic fragility. What is critical thereafter is to align incentives to the objectives. These could span an array from temporary dole to tax rebates to reskilling grants to living cost benefits.The ‘how’ is critical. Initial estimates reveal costs will be in multiples of trillion dollars. So sustainability depends on how these will be funded. The headroom available in country balance sheets is limited and will shrink further as data flows in — the lockdown will drive down tax revenues, both consumption and income.”
Read full article here