With India’s second wave of the coronavirus pandemic lashing at its interiors, the economic fallout is likely to be far more severe than the first wave, further delaying a recovery in Asia’s third-largest economy
With India’s second wave of the coronavirus pandemic lashing at its interiors, the economic fallout is likely to be far more severe than the first wave, further delaying a recovery in Asia’s third-largest economy.
The second wave has entered the hinterland in populous states like Uttar Pradesh, Bihar and West Bengal, straining their creaky health infrastructure. The share of predominantly rural districts in new cases in April was 30%, up from 21% in March. This is still lower than the peak reached in the first wave at 40% in August 2020, according to a report released by Crisil Ltd on Monday.
Yogesh Jain, a founding member of Jan Swasthya Sahyog, an organization working towards providing healthcare services in rural India, said with healthcare and testing facilities much worse in rural India than urban India, the consequences are going to be frightfully worse in the villages. “With younger population mostly moving to bigger towns and cities, a significant chunk of the remaining population in rural areas comprise the elderly who are at greater risk. When the disease spreads in rural areas, there will be mayhem," he cautioned.
According to the latest Rural Health Statistics 2018-19, the number of public health centres (PHC) increased by only 1,619 to 24,855 during the 15 years from 2005 to 2019, with 60% having only one doctor. An average PHC covers 35,567 people, covering 120 sq. km in rural India. With about 45% contribution to national GDP, a rapid spread of the pandemic in rural India could further weaken overall consumption and economic recovery.
Pronab Sen, a former chief statistician of India, said that last year when the country had a lockdown and a general economic collapse, rural India became the saviour because its consumption basket is heavily loaded towards essentials. “This time around, rural India may be badly affected. The fear factor is going to play a major role in rural India. There are two parts to it. First, what happens in the mandis? Will people have the courage or desperation to actually go to the mandis? If not, even with a good harvest, rural income could get pretty badly affected. Two, in rural India, agriculture is only 40% of the income generated while 60% comes from non-agriculture, a very large part of which is services of various kinds. If the fear factor is high, then services can also get impacted. So, from both agriculture and services side, the news is bad," he added.
Though the India Meteorological Department has projected normal monsoon in a rare piece of good news, Sen said it could turn out to be a cruel irony on the farmers.
“They will have the production, but they may not be able to sell. The problem is not the fields where a certain amount of social distancing and precaution can be followed; it is the crowded places of transactions like mandis, which is the real worry," he added.
Pinakiranjan Mishra, retail and consumer products leader at EY India, said on the business side, the impact will be higher in the informal segment of retail which is generally not on anybody’s radar. “Sometimes, we monitor the performance of the big FMCG companies, and we don’t realize that while they might have done well, it is the smaller companies that are not on the radar, which could have been severely impacted. If you are a small business with a few employees, you may not have the resilience of a big organization," he added.
Himanshu, an associate professor at the Jawaharlal Nehru University, said the impact on rural India may not be visible in hard economic data immediately. “In rural India, the harvest is over. So immediately, there is not much impact on agriculture. It will be more of a humanitarian crisis due to the lockdown and loss of livelihood for wage workers. It will not be captured in your aggregate GDP number immediately. In the medium term, obviously, it will be reflected in the GDP numbers as it will lead to a sharp decline in income. Once you have covid in the family, you could end up in a debt trap and that will worsen consumption demand for a longer period of time," he said.
The ability of rural India to sustain the economic shock this time after a year of stress is much weaker because they already have seen a year of disruption with depleting savings, according to Himanshu. “The longer the pandemic runs, it will become more and more difficult, because rural India does not have resources left to face the economic downturn. Economic recovery will become more painful and slow. It can improve only if the government pumps more money into the rural economy," he added.
Almost half of India’s population was vulnerable to slipping back into poverty even prior to covid-19, with consumption levels precariously close to the poverty line, despite absolute poverty reduction in the past two decades. The World Bank has warned that the coronavirus pandemic is pushing millions of Indians into poverty and eroding hard-fought gains of the past two decades.
Leroy Leo contributed to this story.
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