The 21-day lockdown imposed across the country to counter the coronavirus, as per WHO guidelines, may yield positive results in controlling its spread, but the economic consequences would be devastating with an already declining unemployment level reaching rock bottom. This would affect the economically weaker sections and low income groups, which constitute near 50% of the population. As it is, the ILO has predicted a global economic crisis which would destroy up to 25 million jobs around the globe.
Underemployment is a severe problem and will aggravate in the next six months due to stagnation already prevailing. Recall economists had forecast joblessness would rise further during 2020-21 due to slowdown of the economy. The stoppage of economic activity in both industry and trade sectors is a cause of great concern. When economists talk of development and manufacturing technologies, they fail to realise that India has a huge workforce, with most having no worthwhile jobs, and the fact that a major segment lives in rural and semi-urban areas struggling for basics.
A recent analysis warns: the Rs 18-lakh crore tourism industry is expecting direct job losses of 1.2 million; hotel industry revenue losses of $1.3-1.5 billion; restaurant industry, which employs 7 million people, will see job losses of 15-20%; aviation sector over Rs 4000 crore loss to private carriers and the retail business 11 million job losses, if the current crisis continues. However, these estimates may exceed, specially in tourism and hotel sectors, as there is little likelihood of any travel at least till April-end, if not more.
The other sectors which will take a hit include automobile, real estate, retail and even cinema and entertainment. The auto sector, already reeling under a sluggish demand which necessitated laying-off temporary workers, will see massive job losses at least in the next three months. In this backdrop, the government should have already started work on revival plans alongside dealing with the pandemic crisis spreading. Worst, it failed miserably to extend relief to migrant, daily labourers and the unorganised sector, which constitute over 93% of the workforce.
Remember, if markets are shut and goods are not moving, the impact will also be huge on the working class, whose survival depends on daily/weekly work. “Its impact may be similar to what demonetisation did to the economy”, says Prof. Santosh Mehrotra of Centre for Labour Studies, JNU. However, some others fear the effect will be more severe as 75 to 85% workforce will be impacted. Insofar as self-employed are concerned, Mehrotra cautions if the crisis continues for two-three months (March-May), which is probable, the self-employed would begin to run out of savings and working capital would become scarce.
A comparison of the rate of infection reveals that so far it has been lower in India in comparison to European countries, and this could largely be due to the EWS and LIG sections don’t have means to travel and the rural folk are mostly in their villages and blocks. In this scenario, some economists have questioned the rationale of the prolonged lockdown across the country and opine that it should have been limited to certain districts where the virus cases came up. This would have helped the daily wage earner sustain himself and family, at least in some parts of the country.
An offshoot of the pandemic clearly shows that the cuts in Budget outlays for rural employment scheme, food subsidies and minimum support price for farmers’ reveals that sadly rural economy is a low priority with Modi government. A report of government agencies, Right to Food Campaign (RTFC) and Alliance for Sustainable & Holistic Agriculture (Asha) tracking farm and food sector have referred to the fall in food subsidy outlay from its Rs 1.85 lakh crore in 2019-20 to its Rs 1.15 lakh crore in 2020-21. The RTFC says only Rs 1.15 lakh crore was not enough to provide subsidised ration to 70-odd crore people in households across the country that rely totally on the PDS for their needs.
Further, the outlay for National Rural Employment Guarantee Scheme has been Rs 61,500 crore for 2020-21 compared with the revised budget estimate of Rs 70,000 crore for the past fiscal. Worse, though the government pledged MSP would reach every farmer it has not followed it with disbursement of funds. Asha observes that implementing the pledge would have cost Rs 75,000 crore but the government spent only Rs 4000 crore in 2018-19 and slashed the allocation to Rs 1500 crore in 2019-20 and to Rs 500 crore for 2020-21.
Finance Minister’s Rs 1.70-crore financial package spread over three months falls short of expectations. A new scheme, PM Garib Kalyan Yojana, has been announced to benefit workers from marginalised sections; MNREGA wages have been increased from Rs 182 to Rs 202 as also release of first instalment of Rs 2000 in the new fiscal out of the total Rs 6000 given annually to poor farmers, benefitting 8.60 crore farmers. To aid the industry and workers, a second package of deferment of EMI of all loans, including business loans, up to 3 months has been announced.
However, economists feel it is not enough and may only benefit a small section. More so, given that lakhs of migrant and daily workers are returning home, with no money even to have a meal a day. Moreover, many listed reliefs are part of the ongoing relief measures and thus the additional fiscal stimulus may be below just 0.5% of GDP. In such a situation, it is difficult to believe the government’s concern for the working class and daily labourers, not just due to reduction in welfare expenditure but the inordinate delay in announcing this meagre package.
There are no two opinions that the need to control the spread of the virus is of utmost importance critical. However, the situation would be grave and unacceptable if the poor die out of starvation! The government should have had a plan in place before announcing an abrupt lockdown.
It would also need to think of ways of how to lessen the overall impact of the pandemic, such as how employment can be generated after 2nd week of April or beginning May; reducing bank rates for home and bike loans for those in LIG category; raising MNREGS allotment to provide job opportunities on a larger scale from May onwards. Importantly, finances should not be a problem as a 3-4% tax may be levied to those earning above Rs 20 or Rs 24 lakhs per annum.
At the same time, the government must seriously consider gearing up health infrastructure and raise employment not just of doctors and nurses but also of skilled technicians, laboratory assistants and unskilled workers who could be trained. Plus, as echoed by doctors over the years, the health budget must be raised at least 3 per cent of GDP.
Finally, though a controversial observation but needs reiteration: whether such a prolonged lockdown was necessary in the first place and in rural areas where incidence of the corona pandemic is minimal? And even if such lockdown was necessary, why did the government not plan ahead and announce relief measures and provide transportation facilities for migrant workers, earlier instead of putting them in grave misery and distress?