Covid Crisis: Need for Multi-Pronged Strategy by the State

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Covid Crisis: Need for Multi-Pronged Strategy by the State

Monday, 25 May 2020 | Dr. Shruti Priya

The outbreak of covid-19 has exposed the country to challenges- economic, social and political- never thought of. On one hand it has led to plummeting demand while on the other hand has caused disruption in production and supply chains. It also serves as a lesson for any government in power in the country to revive expenditure on health sector which stands one of the lowest in the world at hovering around 1.5 percent of GDP as against more than 12 percent by OECD countries.

Although the pandemic has hit the entire economy the dire consequences are faced by those living at the margin who have little or no resilience to mitigate the impact both social and economic. Around 72 percent of men and 62 percent women working in non-agriculture sector are informal workers who do not have access to employment/social security benefits provided by the employer. The total proportion of unorganized workers is more than 90 percentof the workforce when one adds those employed in agriculture sector and informal workers of the formal sector. Bereft of any social security their situation is most vulnerable.

The livelihoods and incomes of large section of the population has been affected and this is going to have adverse repercussions on private consumption expenditure in the country that constitutes 60 percent of the GDP. This means either government consumption that constitutes only 12 percent of GDP needs to be beefed up to make for the gap and keep the economy going or cash should be transferred in the hands of the people to generate effective demand and the multiplier effect. Further the immediate need of the hour is procurement of food to people. The total stock of of rice and wheat held by FCI as on 1st March, 2020 was 77.7 million tonnes and the procurement of rabi crops has begun. This provides FCI enough room to disburse foodgrains to almost 80 percent of the country’s population after maintaining the minimal stock of 24 million tonnes by making these transfers universal in the backdrop of the crisis.

The disruption in production and return of distress migrants poses pressure on agriculture and rural economy. An allocation of rupees 40,000 crore to MGNREGA is a welcome step considering the fact that budgetary allocation of rupees 61,500 crore for the current fiscal was 13 percent lower than the 2019-20. However, these were already obligations of the government and should not be clubbed under relief measure to tide the crisis. Again, far greater demand work would be generated on account of collapsing informal employment and return of migrant workers. This would call for far greater amount of allocation. Moreover, similar programmes are needed for urban enclaves as well. The MSMEs in the informal sector employs around 1109.8 lakhs employees. While focusing on MSMEs is an important area being considered however credit flow to galvanize production would not be realized until demand for products stay afloat and that is possible only through compensation to workers to maintain demand in the first place that has dropped suddenly. Moreover, the tax reliefs announced addresses only the formal sector workers and not the informal workers who outnumber them.

Further there is issue of migrant labourers who don’t have access to social security schemes at the places of their work since they usually belong to different states. Ensuring access to social security schemes and other safety nets to the migrants at the place of their work without the need to linking with Aadhar or furnishing a card with a local address would enable maintaining both demand and also labour supply. Moreover, direct money transfers shall help the maintain the demand momentum.

Thus, a multi-pronged strategy ranging from food distribution, cash transfers, generating rural employment under MGNREGA, addressing issues of migrant labour and agricultural infrastructure development is required to ameliorate the impending economic, social and political challenge posed by the pandemic.

(The writer is an Assistant Professor, Department of Economics, Gaya College, Gaya,, Contact-9304311213)

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