Bengaluru: Global economic output is expected to contract by 4.9% in 2020 owing to the COVID-19 lockdown. India announced a lockdown on March 24, 2020, which was extended over two months, and continues in pockets of states depending on the spread of the disease, which has now infected more than half a million people in the country.
The lockdown impacted millions of inter-state migrant workers who form the bulwark of India’s economy, many of whom have been forced to return home to their villages in poor and less developed states, to face an uncertain future. On May 13, the government announced a Rs 20-lakh-crore ($266 billion) stimulus package to revive the economy and its various sectors. But “what we need is not just a stimulus but also immediate relief for vulnerable households”, said Jean Drèze, development economist and social activist, in an interview with IndiaSpend. Putting money in the hands of poor people facilitates the revival of the economy by fortifying consumer demand, and helps to tilt the composition of the gross domestic product (GDP) towards goods and services that are consumed by the working class, he added.
There is “much talk of reopening the economy, but reopening public services is no less important”, said Drèze, suggesting that the government needs to put more food or cash in the hands of the poor, and emphasised the “need for more enlightened health policies”.
Drèze is one of the architects of the rural jobs programme or the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), and a visiting professor at Ranchi University. He has taught at the London School of Economics and the Delhi School of Economics, and authored ‘Sense And Solidarity - Jholawala Economics for Everyone’. With Nobel laureate Amartya Sen, he has co-authored ‘Hunger and Public Action’ and ‘An Uncertain Glory: India and Its Contradictions’.
In an interview, he suggested solutions to improve social security in India, the challenges to public distribution system and portability, and the country’s economy before and during COVID-19.
India faced a slowing economy and high unemployment even before the pandemic including a 26-quarter low in GDP growth. Simultaneously, there were anti-CAA/NRC protests and riots. How would you describe the last year economically, and how have our institutions responded? How has our welfare system (healthcare, pensions, public distribution system etc.) coped during this time?
The events you mention, and the COVID-19 crisis and the lockdown that followed, have created multiple insecurities for people. There were, of course, many insecurities in the first place, from illness to displacement and crop failures. It is this pervasive uncertainty that creates the need for a strong social security system, in other words, for helping each other in times of crisis. This is nothing new, it is a well-accepted objective of public policy in most democratic societies, except in a few countries such as the US where the poor are largely left to their own devices, with disastrous consequences. Unfortunately, the idea that India needs a social security system is often greeted with cynicism, reflected in disparaging terms such as mai-baap sarkar [paternalistic state] and nanny state. One lesson of the current crisis is that it is time to shed this cynicism.
India already has some important elements of a social security system, such as the MGNREGA and the National Food Security Act (NFSA). They have served us reasonably well in this crisis. Thankfully, the public distribution system was in place before the lockdown began, making it possible to provide enhanced food assistance to more than 800 million people without delay. Similarly, the MGNREGA started employing tens of millions of impoverished rural workers as soon as the worksites reopened in May. However, India’s safety net is still very patchy, with large numbers of poor households excluded from the PDS, employment guarantee an elusive goal in many states, limited coverage of other social security schemes such as old-age pensions, and meagre benefits all around. Very little has been done, in the last few years, to plug these gaps and consolidate the foundations of social security in India. Had there been more progress in this field, the country would have been better placed to handle the lockdown.
What three main changes would you suggest to fix our social security system and public services as we tackle the pandemic and its fallout?
I hesitate to answer this question because public policy does not consist of picking items from a menu. Much depends on who is seeking change and what they can do. For instance, I could suggest ending corruption, but would that help? Still, let me mention three possible areas of change. First, I think that it is very urgent to reactivate most of the essential services that have been suspended during the lockdown. There is much talk of reopening the economy, but reopening public services is no less important. In my view, many of them should not have been closed in the first place, at least not in relatively green zones. Poor people depend a great deal on local public services, from schools and health centres to anganwadis [childcare centres], courts, public transport, and administrative offices. It is worrying to read that most of these services, including child immunisation and out-patient departments, have been shut for months in many states. Think of all the people who are languishing in jail because the district courts are not hearing their bail applications, or of all the patients who are deprived of routine healthcare. The privileged can easily fall back on private services, but not the poor.
Second, the Centre should do more to put food or cash in people’s hands during the next few months, or help the states to do it. It is hard enough for small farmers and agricultural labourers to pull through the monsoon months at the best of times, this year it is going to be even harder, because their reserves are depleted from the start. So far, the central government has not announced any extension of the lockdown relief measures beyond the end of June, not even an extension of emergency food assistance. The assumption seems to be that with the lockdown over, people will manage somehow. The Centre seems far more interested in rescuing business than in helping poor people. Unless this bias is rectified, the hardships induced by the lockdown are likely to persist in the next few months.
Third, there is an obvious need for more enlightened health policies, and specifically, for a radical departure from India’s pathological, profit-driven health system. The COVID-19 crisis has demonstrated not only the shortcomings of profit-oriented healthcare, especially in matters like communicable diseases, but also the value of public action in this field. Slender as they are, India’s public health services did rise to the occasion and led the fight against the virus. Gone are the days when primary health centres were “the greatest symbol of how little things have changed for the poor” since Independence, as renowned demographer Ashish Bose put it less than 15 years ago. Not that the health centres are so great today, but we know that it is possible to improve them at least, not just in leading states like Kerala but everywhere. A big investment in public health services in the next few years, based on the principle of universal healthcare, is likely to be very rewarding.
The government announced a Rs 20-lakh-crore stimulus for the economy, which is now in “negative territory” and is expected to go into recession. Does this suffice to handle the current crisis and how must the government handle the immediate need of cash to the millions who are now unemployed?
Much of this so-called stimulus looks more like a bailout, or rather, a pot-pourri of stimulus, bailout, window-dressing and stealth reforms. Further, what we need is not just a stimulus but also immediate relief for vulnerable households. The nice thing about putting money in poor people’s hands is that it serves both purposes in one go. It helps poor people, and also facilitates the revival of the economy by fortifying consumer demand. It also helps to tilt the composition of GDP towards what used to be called “wage goods”, that is, goods and services that are consumed by the working class. Giving credit guarantees to indebted firms is a very different sort of intervention, more like a shot in the dark. Suppose, for instance, that a firm simply uses the guarantee to take fresh loans and repay its old debts. That is a good deal for the firm, and also for the bank, but is it going to help the economy, let alone poor people? Maybe, maybe not. Yet the stimulus package consists largely of that sort of measures.
This is not to say that I am opposed to supporting at least some enterprises, or to giving loans. But more lending should be conditional on greater transparency and accountability, starting with disclosure of the names of major defaulters. Today, if a poor Adivasi fails to pay a forest department fine, he is often sent straight to jail, but a well-connected tycoon can get away with siphoning off thousands of crores from public-sector banks with impunity. The crisis of non-performing assets in the banking system has played no small role in the slowdown of investment and growth, throwing more money at indebted enterprises is hardly the way to solve it. Also, how about giving priority to enterprises that paid their employees during the lockdown? More likely, we will see another round of opaque and arbitrary lending, and another pile of non-performing assets a few years down the line.
In the end, the most startling aspect of the so-called stimulus package is that there is so little in it for the common person. Its name, Atmanirbhar or self-reliance, says it all.
Reetika Khera, Meghana Mungikar and you had calculated that PDS leaves more than 100 million people excluded from its reach because the central government uses the 2011 population census. Has there been enough foodgrain allocated at the local PDS shops since the lockdown, and do you fear widespread hunger-related deaths?
Since the estimates you mention have caused some confusion, let me take this opportunity to clarify. Today, about 800 million people receive food rations from the public distribution system under the NFSA. That leaves out more than 500 million. What we pointed out is that, of these 500 million, more than 100 million are unfairly excluded because the central government persists in implementing the NFSA on the basis of outdated population figures. The rest are excluded because the NFSA itself does not extend PDS entitlements beyond two-thirds of the population.
Among the excluded 500 million, about 250 million are covered under additional ration cards issued by state governments, according to a recent statement of the food ministry. However, these state ration cards may or may not go with substantial foodgrain entitlements. For instance, if you have a so-called APL [above poverty line] card issued by the state government, you may or may not get food rations, depending on the state.
Coming to your question, foodgrain allocations during the lockdown were significantly enhanced, in the form of providing an additional 5 kg per person per month to NFSA cardholders for three months. This was a good move, but there is no sign of it being extended beyond the initial period of three months, despite abundant evidence of continuing food insecurity. Also, it did nothing for those who don’t have a ration card. Meanwhile, foodgrain stocks are going through the roof. According to the official Foodgrains Bulletin, the central pool stock was close to a stunning 100 million tonnes [including the rice equivalent of unmilled paddy] at the end of May. There is every reason to extend additional rations beyond the end of June, and also to enable the states to issue more ration cards, if only on a temporary basis. Some states have already done it using their own resources, but the natural way to do it is to release more food stocks from the central pool.
‘One nation, one ration card’ (ONOR) is expected to be extended across the country by March 2021, providing “100% national portability”. Your comments?
Portability in the public distribution system would not be a bad thing, if it works, but there are at least three dangers with the ONOR project. First, it could easily flounder on technicalities, initially at least. The details are likely to be daunting, all the more so as the modalities of the PDS vary widely between different states. Even if the so-called teething problems last for just a year or two, which is quite optimistic, they could cause considerable damage. There are many precedents of this sort of dream ending in a nightmare. Even the recent diversion of Shramik trains can be seen as a failed experiment with national portability. Second, ONOR involves imposing Aadhaar-based biometric authentication on the PDS across the country. In fact, I suspect that this imposition is the real purpose of ONOR, but that’s another story. The main point is that biometric authentication often exposes poor people to significant hassles, or even deprives them of their entitlements. Simpler and more reliable technologies, such as smart cards, would be more appropriate for the PDS. Third, ONOR is a leap towards centralisation of the PDS. This is not a healthy trend, because state governments are more accountable to the people concerned. Also, they have proved more enlightened than the central government in matters of social policy for many years. As it is, over-centralisation has done much damage to the MGNREGA, initially intended as an enabling legislation. There is a risk of similar problems with the ONOR project.
The risks might still be worth taking if ONOR had major benefits. But the benefits of national portability are likely to be small, because most people want their food rations where they live, not far away. Even migrant workers will generally prefer their ration card to be used by the family at home rather than for themselves. If it works, ONOR may be useful for the minority of migrant workers who migrate seasonally with their families. But this limited benefit must be weighed against the risks and costs of ONOR. Why not focus on intra-state portability for the time being? That would be much simpler, and bring significant benefits, such as breaking the monopoly of local PDS dealers. As of now, very few states are anywhere near intra-state portability. Going straight for national portability is a case of trying to climb the ladder from the top.
What changes do you observe in terms of the role women are playing in the rural economy, especially with men returning to their villages? Are work opportunities reducing for women?
In the in-migration states, such as Gujarat and Maharashtra, work opportunities may actually increase for women with the exodus of migrant workers. If factories and other establishments reopen relatively soon, even as migrant workers continue to stay away, employers will be looking for local labour, and paying higher wages if need be. It is possible that some local women will step into the shoes of migrant workers, or into the shoes of local men who step into the shoes of migrant workers.
In the out-migration states, however, women’s work opportunities are more likely to shrink if migrant workers prefer to stay close to their homes for the time being. In some fields, for instance domestic work and nursing, the gender division of labour may protect women’s work opportunities to some extent. In others, like street vending where men and women tend to compete for the same jobs, women may find it harder to get gainful employment. All this, of course, is a little speculative, because the labour market does not respond in a simple way to supply and demand.
MGNREGA is being seen as a lifeline in these times. Two years ago, you said that “the stagnation of real wages, along with the government’s chronic inability to ensure timely and reliable wage payments, is discouraging rural workers from taking up MGNREGA work”. Does this continue to be an impediment and what must be done immediately?
That statement was still true until a few months ago. Today, the situation is a little different. During the last few months, lots of people had virtually nothing to do, because of the lockdown, and they were also desperate for cash. So the demand for MGNREGA work surged, in spite of the continued stagnation of real wages. Delays and other glitches in the wage payment system also continue, though there has been some improvement, at least in that part of the financial year when funds are not a problem. The system responded to this surge in demand, but only partially, especially in the poorer states where the capacity to generate MGNREGA employment tends to be relatively low.
As the monsoon advances, the demand for MGNREGA work will dip, with many rural workers going back to farming, but it is likely to remain much higher than in normal years. The poorer states will have a difficult time keeping up with the demand, because MGNREGA works are harder to organise during the monsoon. This is why everything possible must be done to facilitate employment generation, from filling vacancies in MGNREGA staff and expanding the list of permissible works to simplifying the formalities and launching work application campaigns. MGNREGA employment is one of the few rays of hope for poor people who have been largely abandoned otherwise by the central government.
(Paliath is an analyst with IndiaSpend.)
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