With the Indian economy floundering and millions facing destitution due to the coronavirus lockdown, Jayanta Roy Chowdhury charts the road to ruin… and possible recovery
For Lakhan Majhi and his motley group of eight fellow travellers from the Deoria district of Uttar Pradesh, India’s most populous state, it was a huge journey. From a construction site at Manesar near Delhi back to their village is a distance of nearly 900 kms and it had to be covered on foot.
Indian Prime Minister Narendra Modi’s declaration of a countrywide lockdown from March 24, in order to save lives amid the coronavirus pandemic, caught the group unawares. Just before the announcement was made, they had been working to build a mall in the dusty industrial town of Manesar. Now, with no jobs and no pay and bus and train services stopped to prevent the virus spreading, Lakhan, the leader of the group, faced a stark choice. And, like hundreds of thousands of workers in the same plight all over the country, he decided that the best bet for him and his friends would be to desert the tin shanty shelter they shared and head back to their village.
‘Back home there is food… my own people. We can survive. Here we need money to even get a glass of water… and then there is this disease which can kill us,’ he reasoned.
After all, COVID-19, the global pandemic, has till now mostly been raging in India’s cities, with rural areas mostly free of the disease.
As Lakhan and his friends evaded police barriers erected to enforce the lockdown and begged for food en route to supplement their supplies of gram flour and jaggery, their march was in some ways reminiscent of Mao Zedong’s famous ‘Long March’ of some 85 years ago, which saw peasant-soldiers of the Chinese communist party escaping to the mountainous north, traversing thousands of kilometres.
While the abrupt decision to lock down the world’s second most populous country may have saved lives – as of April 22, the number of coronavirus positive cases in India stood at less than 18,000, with some 559 deaths – it does cast a lengthening shadow over the question of what will become of the nation’s millions of poor, who are now out of work.
Analysts estimate that nearly 50 million short-term migrant workers have lost their livelihoods. A prolonged lockdown without social security packages could lead to more deaths from starvation than those caused by the coronavirus, experts reason. Health experts also fear that migrants allowed to move across state borders without being tested could carry the virus into India’s vast hinterlands, where medical facilities are few and grossly inadequate to handle any major pandemic.
Top economists and former policy-makers including Lord Meghnad Desai, former Deputy Governor of the Reserve Bank of India Dr Rakesh Mohan, former Planning Commission Member Dr Abhjit Sen, and Professor Deepak Nayyar, a former Chief Economic Advisor, have called for a transfer of Rs 6000 (about £63) to each household not in the tax net, or which does not have a member working for the formal sector. Others such Arun Kumar, the Malcolm S Adiseshiah Professor at the Institute of Social Sciences, have argued in favour of feeding them, thus using up India’s vast stock of reserve food grain.
While India does have the ability to feed its millions as it has a stock of 56.5 million metric tonnes of food grain, the crisis in labour mobility due to the lockdown means that part of its bumper winter crop, which is waiting to be harvested, may well wither in the fields. And spending the reserve stock, which India by law has kept ever since it suffered devastating cycles of droughts and floods in the 1960s, may mean that a food crisis is simply postponed.
India’s ability to give large handouts to its people and businesses is also challenged as revenues have been dipping and public debt, most of it internal, stands at $1.3 trillion. That said, many economists believe that the debt level is not a major worry as it amounts to 44 per cent of the country’s GDP, far less than that of most developed nations.
Despite problems, the Narendra Modi-led government did swing into action after these warnings were sounded by announcing aid for farmers, widows and pensioners, and limited free rations for the poor, as well as asking district administrators to round up migrant labour on the roads to house them in empty schools and to feed them using community kitchens. However, many fear these actions may not be enough to address the disaster that may be in the making.
Those penned down in schools or over-crowded hostels have started demonstrating, demanding better conditions or the freedom to go back home. But allowing them to make that journey is considered dangerous.
Just over a century ago, some 12-17 million Indians died from an import of the Spanish flu in 1918. Lessons learned from that tragedy are about the only playbook that Indian policy makers have.
‘Containing the infection at the point where it starts and not letting it rage unabated through the country is the biggest lesson from that pandemic,’ points out Professor Biswajit Dhar of Jawaharlal Nehru University.
However, other analysts warn that, without monetary or food aid for tens of millions of poor jobless Indians and the families they support, life would not merely be tough but near impossible.
Possibly realising this, and partly under pressure from big business whose bottom lines have been hit by the lockdown, the Indian state announced that, from the third week of April, factories located away from cities could re-open, albeit with stringent conditions for health, safety and worker housing. However, with markets still shut apart from shops selling food and necessities, supply chains in disarray and consumer demand plummeting, many factory owners have chosen to keep their doors closed.
This could not have come at a worse time. India’s economy has been slowing ever since it inflicted a demonetisation of 86 per cent of its currency by value some three-and-a-half years ago. A botched introduction of an otherwise well intentioned Goods and Services Tax a year later made matters worse and India’s growth, which had averaged over 7 per cent in the decade till 2016, started slipping, with the economy growing by just 5 per cent in 2019-20. This year’s growth forecast by agencies ranging from Barclay’s, which feels India will have zero growth, to the World Bank, which forecasts 1.5- 2.8 per cent, shows that India will certainly not be among the out-performers in this pandemic year.
‘The long protracted battle against coronavirus and the destruction of demand means that, besides the short term migrant labour employed mostly by the construction, trucking packaging and service sectors, many more workers may be laid off or may see their wages cut, deepening the existing demand recession,’ says Professor Dhar.
Hopes that exports will be able to pull the Indian economy out of the morass seem a mirage, as global demand has also been falling and countries anxious to protect domestic manufacturers build tariff walls against global trade.
Already the IMF has warned that the coming global recession is going to be the worst since the Great Depression of the 1930s. For India, one way out of the slump is to spend big without worrying too much about deficits and debt levels, and hope that with booster shots to consumption it can spin its way out of trouble.
If it chooses that route, it could lead to fiscal pain later. But its millions of poor will survive and perhaps turn the country into a moderate growth sweet-spot which can help pull other countries in the region out of the abyss the world seems to be heading for.