Capital Calculus
Opinion| India’s trade off: Save lives or the informal economy
In anticipation of a longer lockdown, daily wage workers are going back to their villages
Last week India finally joined the rest of the world in ordaining lockdowns of varying degrees. In his inimitable style Prime Minister Narendra Modi put a formal stamp on this strategy when he made an appeal in his national address for a “Janata-curfew” on Sunday; implicitly he signalled that this could be the norm over the next fortnight as India, with the world’s second-largest population, scrambles to flatten the Covid-19 pandemic curve—so far the only proven solution in mitigating the spread of the virus which originated in Wuhan, China and spread to 171 countries; China with a combination of its indomitable spirit and draconian measures showed that ‘social-distancing’ works in containing the spread.
From all accounts, the PM Modi nudged self-imposed quarantine has been an outstanding success. Yet it has extracted a cost: brunt of which is being borne by the informal economy. The daily wage labourers or those associated with the gig economy—many of whom were laid off when restaurants were shut down or when people started to shun the app-based taxi services—have lost a day’s livelihood. Extend this for a week and the impact is likely to be devastating on this segment of the economy. Not that the organised sector is not bearing the load, but in the short run, the informal sector is the key pain point.
Indeed while the immediate priority is to save lives, it is apparent that India faces an equally compelling humanitarian challenge: the informal economy. It is a difficult trade-off facing the country. It is a no-brainer that the immediate priority is to head off the Covid-19 challenge and save lives. Simultaneously though attention needs to be devoted to the workforce supplying the informal economy. Neither do they have fixed wages nor do they (at least most of them) enjoy benefits like medical insurance, leaving them very vulnerable to an economic shock.
Exactly why hordes of them, ignoring fundamental rules of social distancing, are working their way back to their villages in anticipation of a longer lockdown in the offing. This is a double whammy. Not only are they losing out on their livelihood but many of them may be Covid-19 victims and will hence be potential carriers of the virus—in other words, rural India, which so far has been relatively free of this pandemic threat will all of a sudden be in the cross hairs of a disease they are ill-equipped to deal with.
There is only so much the union government, no matter how powerful, can do. If indeed this pandemic has to be contained both in its spread and impact, then the state governments have to throw in their mite; the sum of the parts, in a federal polity like India’s, is always greater than the whole.
Worryingly some state governments, instead of focusing on the challenge on hand, are behaving cussedly and are playing the political blame game to show up the Union government; fair game if these were normal times, not when the world and India are facing an unprecedented threat. One suggestion doing the rounds is for the state governments to come up with some kind of social register to log the names of those afflicted by the lockdown—by tagging their Aadhaar and bank accounts the government can transfer cash directly to them.
One way of generating bi-partisan support and action on the ground to fight the pandemic is to activate the GST Council; yes, it is a body formed to implement India’s most far-reaching tax reform, but, given that it is made up of state finance ministers and chaired by Union finance minister Nirmala Sitharaman, makes it a perfect platform to brainstorm and strategize.
Surely, smart bureaucrats can explore some loophole which will enable such an extraordinary move—the current crisis requires not one but several out-of-the-box solutions.
In the final analysis, it is clear that India faces a difficult trade-off. How it deals with it may well determine the legacy of PM Modi.
Anil Padmanabhan is managing editor of Mint and writes every week on the intersection of politics and economics.
Comments are welcome at anil.p@livemint.com
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First Published:22 Mar 2020, 11:11 PM IST
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