Anubhav Chakravarty
The novel coronavirus outbreak has brought the global economy to a halt. In India, government sources report a total of 10824 active cases and 420 deaths at the time of writing this piece. The central government initially imposed a country wide lockdown on 24th March for 21 days. India’s informal markets, that employ a large percentage of the workforce and contribute to almost half of India’s GDP, have come to a standstill. The unemployment rate, estimated by CMIE stands at a staggering 23.4%.
Before we look into the Indian State’s response to the unfolding economic crisis, it would bode well for us to recognise that there exists an inherent asymmetry in the trade-off for the lockdown. Roshan Kishore argues that while the lockdown is absolutely necessary for the spread to be contained, and the benefits of the contained spread accrue equally to everyone, the costs borne by the population are disproportionately high for the poor, as compared to the rich. Add to that the fact that India’s occupational structure, especially that of the informal sector, is characteristically unsuitable to being shifted online. As a result, a large share of India’s 400 million plus workforce isn’t able to access the labor market and make earnings.
The central government responded to the crisis by announcing a Rs 1.7 lakh crore relief package for the entire economy. It can be argued that this package, amounting to almost 0.8% of India’s GDP, is grossly insufficient, especially for a developing economy like India. Countries like the USA have announced fiscal stimulus packages amounting to around 10% of their GDP. Krugman has even argued that the $2 trillion package will prove to be insufficient for the US economy, where more than 6.6 million people have filed for unemployment benefits after the pandemic struck.
However, there also exist gross anomalies in the package announced by Sitharaman. Consider, for example, the increase in the wages of the NREGS workers from Rs 182 to Rs 202 per day. This is something that is done every year by the government, after adjusting to inflation. It can be argued that the meagre increase in wages will not benefit the targeted sector anyways, as most of the jobs have been stopped due to lockdown; Or consider the Rs 2000 to be paid to the farmers under the PM KISAN YOJANA. This, again, has already been declared in the budget and is simply being frontloaded by the Narendra Modi government. The beneficiaries include tenant farmers who are set to lose more than 21 days of work due to the lockdown. Assuming a wage rate of Rs 200 per day, we see they are being compensated for less than half of the amount they are losing. The government has also conveniently forgotten the farmers’ debts that need to be repaid during this time. Around 30-50% of the credit in rural areas is through non-institutional forms (such as money lenders), and as such, the moratorium on loans by the RBI and the paltry transfer of Rs 2000 does almost nothing to alleviate their hardships.
The Indian State has done little, apart from announcing a fiscal stimulus package that is worth much less than what is stated and urging its citizens to bang utensils and light lamps for the medical workers. A hastily planned lockdown, along with an economy that has seen a consistent dip in the growth rate since demonetization, is a perfect recipe for disaster. What pulled us through the global financial crisis of 2007-08 was the fact that the economy displayed strong growth indicators in the years leading up to the crisis. In contrast to that, a National Statistical Office survey shows that consumption expenditure in real terms has declined in 2017-18, for the first time in 4 decades. Keeping these indications in mind, the government could have, for instance, distributed the 77 million metric tonnes of food grain stock that it has accumulated in its warehouses. It could have reduced the corporate tax concessions, amounting to almost Rs 1.45 lakh crores, and expanded fiscal expenditure in the short term. While a social security net, required to ensure that the poor do not starve during the lockdown, is present in India, it has been largely rendered useless due to the systemic degradation in the last 25 years or so.
Keeping in line with the deflationary fiscal trajectory of the post reform period, India shifted to a targeted public distribution system in 1997. Apart from the public distribution system, there also exist some cash transfer schemes for the poor. But the fundamental problem lies in the fact that any targeted anti-poverty scheme (like targeted PDS or cash transfer) is riddled with certain fallacies. Any targeted scheme has been shown to have two fundamental errors, one where a percentage of the poor (targeted) people are excluded and another where a percentage of the non-poor are included. Consider the example of Bolsa Família, a cash transfer scheme in Brazil. While it has been largely hailed as a success story, around 59% of the targeted group were actually excluded while 49% of the beneficiaries were not poor. It can be argued that instead of substituting PDS with cash transfer, both should be executed by the State with a view to extend the targeted group of beneficiaries as much as possible. The fear of inclusion of the ‘rich’ actually does more harm by excluding the ‘poor’. In India, only the states of Tamil Nadu, Kerala and Andhra Pradesh have been able to define the ‘poor’ in such a way that only a small percentage of the populace has been excluded from the PDS. The results, one might argue, have been evident as Kerala seems to have reduced the spread considerably, while it had the highest number of infections at the beginning.
The government, on its part, has yet to come up with any substantial intervention. While the lockdown had been extended till 3rd May, the poor have been left to fend for themselves. Though there are plans afoot to test the viability of HCQS (hydroxychloroquine sulphate) tablets in fighting COVID-19 among the residents of Mumbai’s slums, thereby converting them into test subjects for a drug with serious side effects, the Prime Minister has deftly turned a blind eye to their concerns. The State’s lackadaisical attitude towards the economic well being of the poor and the marginalised reeks of its true blue neoliberal character. What needs to be understood is that there can be no trade-off between economic well-being and human lives. Economic well-being can be achieved without sacrificing a lot many lives. There needs to be a clear consensus on the fact that the lockdown needs to be supplemented by adequate welfare measures from the State, failing which we might have to face the question of ‘lives’ versus ‘lives’. It can be argued that the answer to this question has a definitive class bias, and as such, no amount of moral power can pass a value judgement here. What policies are adopted by the government in the coming days will determine the extent of the economic slowdown and its sectoral damage as well as a great many lives.
Anubhav Chakravarty is a student at the Department of Economics of Jadavpur University, Kolkata.
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