5 August 2020 06:33 AM

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RAJEEV KHANNA | 3 JULY, 2020

Punjab Researchers Assess Economic Impact of Covid-19 and Lockdown

Why are our governments reluctant to make essential interventions?


The Covid outbreak and subsequent lockdown have seen various pillars of Indian democracy abdicating their constitutional role.

On Wednesday morning parents woke to the news that the Punjab and Haryana High Court had permitted all schools to demand tuition fees from them, regardless of whether they are offering online classes to those who could access them during the lockdown. The Court also granted these schools permission to collect admission fees, provided they don’t hike the fee for 2020–21.

Then there are the moneyed and influential classes availing Covid healthcare facilities in private hospitals with five star facilities, while the poor have been struggling to get even oxygen cylinders. And who can forget the misery unleashed on migrant labourers when the lockdown was suddenly imposed, compelling them to undertake hazardous journeys of hundreds of kilometres on foot?

This context shows the need to strengthen public provision, particularly in education and health. This is one of the policy interventions suggested by a team of economists in Punjab who study marginalised communities like farm labourers, migrant labourers in the informalised sector, and farmers with small landholdings.

The team of Dr Gian Singh, Dharampal and Jyoti in their latest research paper “Economic Impact of Covid 19 Pandemic: Who are the Big Sufferers” published in the Indian Journal of Economics and Development underlines that governments need to provide health and education as public goods.

The researchers argue that a disaster management framework focused on managing disease outbreak is essential for a large and densely populated country like India. They also suggest that the union government come forward with a payroll tax holiday for one quarter in such distressful times, a move that would increase liquidity and consumer confidence.

Farmers, rural artisans and labourers must be extended direct and indirect monetary benefits. For workers in the informalised sectors, particularly migrant labourers, governments must explore social policy measures and employment opportunities that can protect them from hunger and extreme poverty. NREGA and the Jan Dhan scheme can address these concerns.

The moot question is, why are our governments reluctant to make these interventions?

“They look towards their convenience,” Dr Gian Singh told The Citizen. “One needs to understand the difference between conviction and convenience. Conviction can be right or wrong but convenience is always wrong. There is a need to expand the public sector, regulate the private sector and give money to people willing to work.

“We have seen this formula work successfully as shown by historical evidence of the Great Depression which lasted from 1929 to 1934. But what is happening here is just the opposite, with a move towards privatisation.”

Singh went on to say that the outcome of the present pandemic will be far more serious than the depressions of 2008 or even 1929. “The Great Depression had largely affected the highly developed countries while the impact was less on the Second and Third World. But Covid 19 has hit the entire globe.”

Constant fear of the pandemic has affected the public’s mental well being and confidence; many have lost their incomes and have postponed their purchasing decisions. The contraction in economic activity and people’s purchasing power, increased restrictions on the movement of workers and goods, and huge uncertainty have disturbed entire production and supply chains and the demand cycle.

Daily wage earners and other informal workers, particularly migrant labourers from economically poor states, have been hit worst by this lockdown and will continue to be adversely affected even afterwards, with many going into debt.

The researchers observe that demand, particularly for non-essential goods and services, is unlikely to be restored over the next several months. There will also be widespread supply chain disruptions due to the non-availability of raw materials, the migration of millions of workers from urban areas, slowing global trade and shipments, and restrictions on travel.

India has the world’s largest informalised sector, employing around 90% of its working people and contributing over 45% of its GDP. These workers earn 20% less on average than their counterparts in the formalised sector, and have to make do with minimal savings.

As for the lockdown’s impact on the agrarian sector, the economists stress that rabi harvesting was hampered because of reverse migration. “Shortages of fertilisers, veterinary medicines and other inputs also affected agricultural production. Closure of restaurants, transport bottlenecks diminished the demand for fresh produce, poultry and fisheries products, affecting producers and suppliers.”

The paper also points to the possibility of a decline in milk demand because of reverse migration in urban areas impacting the dairy sector.

The team estimates that India has around 100 million internal migrant workers estimated to make up 20% of the work force. With almost no economic activity underway, especially in urban areas, the lockdown imposed without state support resulted in large scale income losses for them.

These losses of income “will result in lower consumption of goods and services, which is detrimental to the continuity of businesses, and to ensure that economies are resilient.”

This is the segment that will continue to be affected most, even after the lockdown lifts.
 

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