Fri, 29 Mar 2024 Today's Paper

India’s rising infections and falling economic growth

By

7 July 2020 09:06 am - 1     - {{hitsCtrl.values.hits}}

A A A

 

On 2 July 2020, India’s Ministry of Health announced 226,947 active cases of COVID-19, with 17,400 lives lost. 


India is unfortunately now among the world’s top five infected countries. As a country with one of the highest population densities in the world and a creaky public health system, India has experienced exponential growth in the number of infections. As a result, in addition to the health crisis, India’s economy has been brought to a standstill.

 


Demand & Supply gaps
The Indian economy will suffer from significant gaps between supply and demand in almost all sectors due to disruptions caused by the virus.


A recent report by CRISIL, an S&P Global company, initially reduced its GDP growth forecast for 2020 from 3.5 percent to 1.8 percent. After the lockdown was extended for a fourth phase until 31 May 2020, CRISIL raised the alarm by noting that the Indian economy would shrink by 5 per cent in the fiscal year 2020–21.


Investment bank Nomura estimates that the lockdown, in which all motorcycle and automobile manufacturers have stopped production until further notice, would cost India about 8.5 percent of GDP.


This pessimistic outlook largely stems from supply and demand shocks resulting from the lockdown. But while the Indian government is prioritising public health over protecting livelihoods, it is just as critical to support India’s hardest-hit communities, namely workers in the informal sector.


India’s informal sector often cushions the impact of India’s economic shifts. But it is unlikely to do the same this time due to the severe restrictions placed on the movement of people, goods and services within India and across the borders. Most informal sector workers are migrants from rural areas both within and outside the states.


There is no official data for inter-state migrants. Using the National Sample Survey (NSS) data drawn on the 2011 Census, it is estimated that there are 65 million inter-state migrants, of whom about 8 million workers are employed as casuals and another 8 million workers are employed on a regular basis in the informal sector. The remaining migrants work in the formal sector including the banking and IT sectors.

 


Migrant workers
The lockdown has left migrant workers in the informal sector unemployed for over two months. With no support from their employers during the lockdown, the onus lies with state and central governments to protect these migrant workers.


The central government announced on 12 May 2020 its second stimulus package of Rs 20 trillion (US$264.9 billion), which is 10 per cent of India’s GDP. The package focusses primarily on liquidity injections. Between April and June, roughly 800 million people are receiving 5 kilograms of wheat or rice and 1 kilogram of pulses each month free of charge. 


This is in addition to the existing free monthly supply of 5 kilograms of wheat or rice under the Pradhan Mantri Garib Kalyan Yojana scheme.

 


Stimulus package
In terms of cash transfers, 200 million women with bank accounts will receive a monthly payment of Rs. 500 (US$6.6) until June, 30 million elderly citizens, widows and those with disabilities will receive Rs. 1000 (US$13.2) and 87 million farmers will receive Rs. 6000 (US$79.1). The size of this stimulus package could be increased to be
more effective.


In addition to this support for the poor, many political parties, philanthropists and non-governmental organisations have distributed cash, rice and basic groceries to those who lost their jobs due to the lockdown.


In terms of liquidity measures, the Reserve Bank of India (RBI) has reduced the repo rate (the rate at which central banks lend short-term funds to commercial banks) by 75 basis points to 4.4 percent. 


A three-month extension on loan equated monthly installments was announced on 27 March.


Despite the Indian government’s financial aid packages, given the lengthy period of the lockdown, which is currently extended to the end of June, the package does not sufficiently address India’s distressed labour force.


To stimulate consumption, the government should increase the fiscal component of its stimulus packages by increasing cash payments to all those who were unemployed during the lockdown in urban areas. 


Besides increasing the cash payments, special attention should be given to the micro and small-scale industries in the stimulus package, which is currently lacking. The Mahatma Gandhi National Rural Employment Guarantee Act should be doubled to 200 days of employment for the rural poor. The minimum support prices for rice and wheat revised further up from the 2019–2020 prices. These will increase the urban and rural incomes respectively and drive urban and
rural consumption. 


Most importantly, it is imperative to speed up the distribution of package benefits for those people it is intended to reach. To do this, the Ministry of Finance needs to set up and monitor individual committees in each state.

 


Implementation of policies, procedures
A gradual easing of lockdown measures has been implemented to reduce the incidence of poverty, particularly among the poorer sections of India’s population. 


Future success will depend on whether the government, businesses, educational institutes and citizens can work together to implement the policies and procedures outlined by national leaders. Evidence so far suggests that a majority of the population has been cooperating with the policymakers despite the difficulty of maintaining social distance, for example, for India’s urban poor.

(Kaliappa Kalirajan is Professor of Economics at the Crawford School of Public Policy, The Australian National University)


Order Gifts and Flowers to Sri Lanka. See Kapruka's top selling online shopping categories such as Toys, Grocery, Kids Toys, Birthday Cakes, Fruits, Chocolates, Clothing and Electronics. Also see Kapruka's unique online services such as Money Remittence,Astrology, Courier/Delivery, Medicine Delivery and over 700 top brands. Also get products from Amazon & Ebay via Kapruka Gloabal Shop into Sri Lanka

  Comments - 1

Order Gifts and Flowers to Sri Lanka. See Kapruka's top selling online shopping categories such as Toys, Grocery, Kids Toys, Birthday Cakes, Fruits, Chocolates, Clothing and Electronics. Also see Kapruka's unique online services such as Money Remittence,Astrology, Courier/Delivery, Medicine Delivery and over 700 top brands. Also get products from Amazon & Ebay via Kapruka Gloabal Shop into Sri Lanka
  • Imaduwa Vithanage Edirisinghe. Thursday, 09 July 2020 04:51 PM

    India's callous lockdown tortured millions, particularly migrant labour. Political establishment irrespective of the diferrences between its stakeholders (BJP, Congress, CPI, CPM) have common iterests, i.e. to prioritize livelihoods over public health. Resulting huge increase of infections and deaths are weighted towards working class including migrant labour, farm workers,rural and urban poor and so on. Unfortunately political establishment is not interested in striking a balance between livelihoods and organizing work under safe conditions. This is adversely affecting the working class who produce and reproduce the economy. Government is biased towards affluents in society which is sad under pandemic conditions.


Add comment

Comments will be edited (grammar, spelling and slang) and authorized at the discretion of Daily Mirror online. The website also has the right not to publish selected comments.

Reply To:

Name - Reply Comment





Order Gifts and Flowers to Sri Lanka. See Kapruka's top selling online shopping categories such as Toys, Grocery, Kids Toys, Birthday Cakes, Fruits, Chocolates, Clothing and Electronics. Also see Kapruka's unique online services such as Money Remittence,Astrology, Courier/Delivery, Medicine Delivery and over 700 top brands. Also get products from Amazon & Ebay via Kapruka Gloabal Shop into Sri Lanka

VAT increase: SOUNDs death knell for publishers, readers

Though the Government imposed VAT (Value Added Tax) on vegetables and other e

How female change-makers are driving Sri Lanka’s energy saving platform

Saving energy has become more of a responsibility than a habit in today’s c

A dull Ramadan awaits Muslims amidst the Soaring Cost of Living

In the coming days, Muslims across the world will welcome the Holy Month of R

New wildlife underpass to curtail HEC

As of February 2024, Sri Lanka lost another 38 elephants as a result of the H