COVID-19: Economists say preventing starvation first and foremost priority for India

Indians are by now aware that the Novel Coronavirus poses not just a health emergency. It is also an economic threat. It’s a warlike situation, we are told and that we can’t afford to lose this battle on any of the fronts. While our government does not seem too kin on ramping up our barebones public health infrastructure and increasing the testing rates, the lowest for any major country, people have nothing else but pseudoscience like the effect of sound and light energy on the virus’ genomic structure to bank upon. But the truth of the matter is the economic threat facing the nation is worse than one posed by a war. In war, demand does not collapse. Under the assault of COVID-19, not just demand, the entire supply chain management system has collapsed across the nation. Production has grinded to a halt. It is estimated that as many as 14 crore Indians will be out of work in a few months from now. As it is, even before the COVID-19 pandemic hit India, Indian economy was in trouble with the highest unemployment rate witnessed in the last 45 years.

Professor Arun Kumar, veteran economist, feels this is no time for a fiscal package. “What we need is a survival package. This is a battle for survival. This is unprecedented in our living memory. The vast poor people of this country have negligible savings. They can’t stock up on essentials. Unless the government wakes up to this reality, we will have food riots erupting across the nation.”

Kumar believes only an expanded Public Distribution System (PDS) can salvage the situation and not cash transfers. “Look, due to the lockdown, movement of foodstuff and other essentials has been badly hit. Prices may go through the roof. In such a situation, money does not help. Direct intervention is the only way,” he says.

Kumar advocates a system of door-todoor distribution so as to contain social transmission of the virus. “If people come and gather at a point of distribution, the entire purpose will be defeated. Every state government has a large number of buses lying idle and a lot of departments which are not functioning. These buses and these personnel can be mobilised to go to specific areas and goods can be distributed, sans any proof of identity. Right now, you have to give it to anyone who wants it. There is no other way,” he says.

While Kumar concedes saving the majority of the people from starvation will require a tremendous amount of political willpower, he insists that the bigger issue is the health problem. “The economic woes will not be over unless the battle on the health front is won,” he avers.

If the government is to stop massive business failures. Majority of the nation’s output and more than 90 per cent of the country’s workforce is engaged in the unorganised sector where businesses use their rollover money or bank loans. The government must make sure that SME entrepreneurs’ existing loans are not foreclosed and loans are extended at subsidised rates. Kumar cites the example of Kerala when he says, “The government can take upon itself the responsibility to pay the interest on such loans. If businesses, that employ 9 out of every ten in the Indian labour force, perish, it will be a nightmarish situation.” However, he concedes that this will affect the health of an already beleaguered financial sector which the government needs to take special care of.

With produce from farms not reaching the cities and towns in a regular manner, rural India has witnessed a crash in prices of crops and vegetables. In this light, an expanded PDS system makes sense. Even milk procurement has dropped by over 50 per cent, according to reports. If the government can devise a mechanism to procure the milk, to turn them into milk powder and distribute it amongst the citizens, it will go a long way in alleviating concerns regarding malnutrition among India’s poorest.

But this will require both political and bureaucratic coordination between the Centre and the states. For this, special purpose committees need to be set up to iron out roadblocks so that such a massive endeavour can be turned into a success.

While it is common sense that fiscal and monetary policy won’t work when businesses are shut and factories are closed, when taxes will fall and expenditures will rise, one way to rationalise expenditures may also be cutting salaries of those employed in the organised sector according to their payscale and grades.

Also, other non-essential schemes and expenditure heads like the Central Vista plan can be shelved and the resources diverted to health and the expanded PDS scheme. The lack of social safety nets for most of India’s workforce is also something that irks Surajit Das, Assistant Professor at the Centre for Economic Studies and Planning, JNU.

“Our average wage rate as the Periodic Labour Force Survey (PLFS) shows is around Rs 10,000 a month. This is the weighted average of the earnings of our rural, urban, male, female, regular, casual and self-employed workforce. Since around 10 per cent of the population earns much more than this, one can understand how much the 90 per cent makes. Unless these people are compensated for their loss of work, they won’t be able to survive for much longer,” he says.

Das feels since the government has some data with respect to 13.65 crore MGNREGA job cards and Jan Dhan Yojana, it must undertake a direct cash transfer exercise without delay after eliminating duplications. He also says the government’s bailout package needs to be upwardly revised to at least Rs 3.5 lakh crore or about 1.75 per cent of the GDP from the Rs 1.7 lakh crore allocated thus far.

“The government can take the amount as loan from RBI as monetisation in a climate of demand depression is not inflationary. Also the 10-12 crore migrants need to be reached out on the basis of some form of identification,” he says .

The government’s Rs 1.7 lakh crore package is also opaque. It is not clear how much of it is reserved for premiums of healthcare professionals who have been promised health insurance coverage of Rs 50 lakh each. Also, not all of the amount has been freshly allocated. For example, the first instalment for the farmers and a few other heads were already budgeted in the last Union Budget.

In this light, expanding PDS seems to be the best way out and ensuring people do not die of starvation in India. There are reports coming in from certain remote parts of the country where families have not eaten for days. The government needs to act fast to stop a famine-like situation engulfing rural India which will invariably lead to unprecedented socio-political unrest.

At the same time, the government must ramp up production of health equipment like PPE suits, gloves, masks, medicines and ventilators at battle-speed. To bridge the number of shortfall in terms of trained manpower, retired doctors, nurses and equipment operators need to be roped in too. Second, third year, fourth year MBBS students, nursing students also need to be called in. Colleges, hotels, schools need to be transformed into hospital facilities like the railways has done by turning many coaches into isolation wards. The first challenge in front of India is to combat COVID-19 as a health emergency while ensuring that people do not die of lack of treatment and starvation. If that battle is won, the rest will fall into place.