Pandemic 2nd Wave: Not GDP alone, strategy vital

The second wave of the pandemic posed a downside risk, severely affecting economic activity in the first quarter of the current fiscal with future expectations of a muted economic impact as compared to the first wave, according to experts. The first wave due to a national lockdown had hurt economic activity in two successive quarters. However, in the second wave the impact has been much severe with growth estimates being affected.

The RBI still maintains that the dent to aggregate demand is expected to be moderate in comparison to a year ago. In a separate report, the SBI stated they are little apprehensive of double digit growth in this fiscal though other agencies have downgraded growth to around 9 per cent.. “Given the rise in cases and restriction in every State, real GDP growth of 10.4% looks a bit ambitious. Regarding the question if the pent-up demand would support economic activity once the restrictions are removed, we believe recovery will depend on the psyche of people to come out and this will not happen till the larger population is vaccinated”, Soumya Kanti Ghosh, SBI group’s  Chief Economic Adviser observed. But the larger population being vaccinated may take another six months, if not more.

Though recently the growth rate has been downgraded to 9.3 per cent by Moody’s Investor Services from 13.7 per cent predicted earlier, there are reasons to believe that the rate in the current fiscal would not be less than 8.5 per cent. However, the problem in assessing growth is focused on the rate of increase of GDP. This narrow perspective of analysing growth obviously does not take into account the rise or fall of the incomes of the poor segments and economically weaker sections, which constitute around 40-45 per cent of the population. In the present situation, not just these groups but also the lower income sections have been greatly affected.

One may also refer to a recent study of Centre for Monitoring Indian Economy (CMIE), which found that a total of 73.5 lakh jobs were lost in April with the unemployment rate rising to over 14 per cent by mid-May from 6.5 per cent in March. It pointed out that the lockdown and economic slowdown has devastated small enterprises in rural areas. India had almost 39 crore employed people at the end of December 2020, counting both the organised and unorganised sectors. The number rose to 40.07 crore by January-end but fell to 39.82 crore by February, 39.81 crore by March and 39.08 by April end. A section of the 73.5 lakh people who lost their jobs in April were agricultural workers, who had just finished harvesting.

Besides, as per a study of Pew Research Centre, which analysed the situation last year, a massive 32 million people slipped from being in the middle class, in terms of income, to the lower income group. The number of people, living in the country with an income of $2 or less per day, increased by 75 million. Another study of Azim Premji University, observed that 23 crore people have been pushed into poverty from March to October 2020, increasing the number of poor households by a staggering 77 per cent, which may now be anything around 80%.

As reports have indicated that apart from loss of jobs, partial lockdowns have very severely affected daily wage earners as also small traders and shopkeepers. The lack of demand, even in urban areas but, due to reduced purchasing capacity of a major section of the population, is another indicator of the economy not being in proper shape. Moreover, the sudden spurt in prices of pulses, edible oils and some other grocery items has put most families in great crisis. Food inflation climbed over 5 per cent — may have crossed 5.5 per cent by end April — and overall consumer inflation is above 5.5 per cent.

Though industrial output jumped at the fastest pace in at least nine years, clocking 22 per cent jump in March, on the back of a 19 per cent decline a year ago, the reality is that this has had little effect on the masses. The increasing pool of unemployed people has emerged as an enormous problem with no hope of new livelihood opportunities coming up. The pandemic as, is generally agreed, is of stunning proportions leading to a weakened economy crippled by inadequate attention and faulty policies.

What needs to be assessed is not the overall growth but the extent of income loss and deteriorating conditions of the lower segments of society. In this connection, there emerges the need for a planned strategy to provide work to the poorer and impoverished sections, both in rural and urban areas. However, the government has yet to come up with any remedial measures to ameliorate the sufferings of the struggling masses.

It is the Supreme Court that has understood the problem and directed the Centre and the governments of Delhi, Uttar Pradesh and Haryana to provide free rations to migrant workers in the National Capital Region without insisting on identity proof and arrange transport for those migrants who want to return home. The bench of Justices Ashok Bhushan and M.R. Shah said these governments must open community kitchens and serve two meals a day to the migrant workers and their families as the petition  estimated 8 crore migrant workers are facing severe hardship due to the second wave of Covid. It is now necessary for the different State governments to take a hint and adhere to the recommendations of the order.

However, this may not be enough as employment opportunities need to be created both in the rural and urban areas and this can be done by making available more funds for MGNREGA, which has reduced in the current fiscal. Also some such programme needs to be thought of in urban and semi-urban areas. Not just the poor workers, who are stranded or have lost their jobs, there are sectors like construction, where work has slowed down, while the problem is severe in hospitality and tourism, aviation, jewellery manufacturing etc.

Finally, if the Covid situation does not improve by June, or latest by July, sufferings would accentuate, even if two meals are made available. For one class of citizens, education has come to a standstill as also treatment of diseases, except Covid-19. Government planners and economists should not just calculate the GDP but evolve a strategy so that the lowest 30 per cent of the population do not die of starvation or under nutrition. When will we hear something from the authorities sitting in glass houses in New Delhi?


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Dhurjati Mukherjee

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