The Next Pandemic: Rising Inequality
On the eve of 24th March 2020, Govt of India announced a nationwide lockdown, way bigger and austere than other countries, but lacked any prior safety nets for the most vulnerable classes. Post that announcement rather than the threat of the novel virus. An existing age-old pathogen “inequality” has ensured its presence more severe than it should have been.
The complex structure of inequality in the society and its consequences, as picturized in the recent dark comedy flick “PARASITE” by Bong Joon-hoo. The film, for instance, depicts a sudden rain that inundates the home of a poor family, making them deprived of their livelihood. The same rain is treated as a blessing by the rich. This has been brought into actuality by the recent Coronavirus Pandemic.
Historically inequality(a) social stratification has always existed in Indian society since the Vedic age traces its origin from the Varna system prescribed in Manu-Smriti (an ancient legal text among the many Dharmaśāstras of Hinduism)which stratifies people into four classes. Hitherto there’s been a modicum of upliftment in the life of those vulnerable people, despite all the struggles and legislations made by contemporary leaders and the Gandhian principles enshrined in the Directive principles and state policy (DPSP) of our constitution.
This pandemic has cleared the haze spread over the boundaries of classification and sharpened the edges of inequality, corroborating the precarious presence of vulnerable classes in the society, primarily just because of how the lockdown was executed.
The COVID-19 being a global threat, its effects are not the same on all of us, rather it had an uneven impression across the countries and even within the states, especially in the Indian Subcontinent. In a country known for its diversity, inequality is the only consistent factor that is most pervasive in our society. How is it that, we corporeal beings, equally vulnerable to plight and agony, allow only a subset of people to experience states, which we won’t even bear for few minutes?
At the moment when you’re reading this, Scores and scores of people who had laid the roads we commute, built the apartments we relish, served us in some way or other way either directly or indirectly, are with hunger and languor. By walking thousands of kilometres for hours or perhaps days in the scorching sun waiting for some miracle to occur, that would probably ease their tedious mission of reaching home. What triggered this sorry condition?
The Center for Monitoring Indian Economy estimates that about 140 million people have lost jobs since the lockdown.
Corroded levers of the economy!
Perpetual extension of the lockdown just exacerbated the situation, made the economy as well as the arm of the informal economy (migrant workers) devastated, not only deprived of their income and food also proper ways and means to reach back their home. Where they are ensured of minimal food and shelter, all this katzenjammer could’ve been averted by designing a safety net in cohesion with the lockdown measures.
Our honourable PM in his address, requesting every citizen to take care of 9 low-income families, puts the onus on fellow citizens. While the call to compassion is unremarkable, it has two implications. It minimizes the need for state intervention required to deal with the economic crisis, and it passes on the duty to citizens with an emphasis on citizens’ duties as against citizens’ rights.
In addition to all these, the saddest part is the institutions’ apathy meant to look out for their interests. I refer here to the Supreme Court, which had failed to adequately acknowledge that the fundamental rights of migrant labourers have been violated, and ignored these workers when they most needed protection.
At this point, if you’re hoping that the elaborate stimulus package offered by our govt will serve all the immediate needs and assure the social security of the people at the bottom of the pyramid. Let’s dig in a little deeper into this.
Does a Stimulus Package suffice?
Initially, before getting into the context of the response measures adopted by the govt for accelerating the economy, which is inoperative now, Let’s know the difference between a Relief package (acts on demand-side) and an Economic/Stimulus package (acts on the supply-side). The former aims to boost the demands for FMCG(Fast-moving consumer goods) by putting more money in the hands of consumers. Latter intends to infuse liquidity(i.e: , ease of access to cash) into specific sectors and relax the RBI’s policies or Govt legislation that has been restricting the market players, which would enhance Foreign Investment(FDI), Production, Competition. Indirectly creating employment opportunities thereby generating demand.
India’s package is not entirely government spending; it doesn’t add any great trouble on govt’s exchequer. The package includes spending of the Reserve Bank of India (RBI), which is anticipated to generate economic benefits equivalent to 10 percent of GDP, on the whole, it is likely to cost the government not even 1 percent of GDP. The enormous difference between the benefits and the actual cost is due to the non-material benefits such as collateral-free loans to the MSME (Medium, small, micro enterprises) sector, street vendors and privatisation-FDI limit relaxation announcements in various sectors. The total policy support of Atmanirbhar Bharat stands at nearly Rs 11 lakh crore, with a direct fiscal impact (i.e., the burden on govt’s exchequer) of mere Rs 1 lakh crore (0.5% of GDP). In contrast, the reverse is happening in other countries. For instance, in the US, the entire $ 2.7 trillion package is by Trump Administration and does not include Federal Reserve funds.
When the vacuum is on the demand side, pushing the supply would bring only marginal changes in the economy. Suspending the GST for a couple of months or cutting the tax rates temporarily, additional transfers to people in cash and kind by increasing the spending on employment programs will help much in accelerating the demand. The choice of a demand-side stimulus seems to be reserved for a future date if the outbreak does not subside or a second wave begins, which ultimately prompting another lockdown. The problem with this approach is that there is a desperate need for a push in demand-side now. A strategy to accelerate consumption as above-stated, combined with a liquidity boost, may have worked better under prevailing conditions.
MGNREGA- The Magical tool to assure social security!!
One of the most visible signs of the growing inequality in India has to be the demand for work under MGNREGA. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has come a long way since its inception. It has become a lifeline to millions, which aims at ensuring social inclusion, gender parity, social security, and equitable growth in the society. The decision of govt to increase the budget allocation for the MGNREGA scheme is significant in helping the migrant workers who have moved back to their villages to get meaningful work to compensate for their loss of wages. For the time being, the payment of wages under the scheme should be made in the form of cash instead of digital payments. This idea might hurt the prophets of digitalization, but the rural economy is cash-dependent. Payment of wages in cash would reduce the ordeal of standing in long queues of the banks for the beneficiaries . Albeit, there are chances for leakages in cash payments, they perhaps a tolerable price to pay in this pandemic situation. So, What is the role of States in constraining the growing inequality?
Circumscribing the surge of inequality
In the wake of the mass movements back home, there has been a dilemma on how states with rebounding migrants can manage the situation. Could they afford to turn this into an advantage?
Instead of deeming this crisis as an interstate problem that requires the union Government’s intervention, What should they do? Every state should take action to ensure the eradication of the pathogen, which keeps the people out of their homes. Implement palliatives which would ease their situation pro tem, such as giving employment and skill training schemes for these returnees. A more long-term approach would be to invest in education and health at all levels and improve the business environment.
States need to assure that all people, irrespective of where they live, have access to minimum levels of economic and social security. Coordination between states and centre is key to managing this. Ultimately the responsibility of rendering such protection must be with the individual states. After all, it is the one which is benefitting from the migrant’s services.
Let’s confront the challenges together. Every crisis contains the seeds of opportunity. The deeper the crisis, the better the opportunity, this crisis has not caused an abominable plight. It has solely highlighted the stark flaws in India’s growth trajectory. Flaws, which have the potential to derail it.
Way Forward
While we must address the immediate concerns and save lives from the threat of the virus, we also must make choices that build the world we want to live in on the other side of this crisis. The challenge in front of us might be daunting, but there is a way to get out of every impasse. The govt must give up being a tightwad and relax its deficit targeted approach. By increasing public spending, with borrowing at low-interest rates from RBI, or a “monetisation” of the deficit (In layman’s language, monetisation of deficit means printing more money). The cost incurred by the govt could be counterbalanced later once the economy kickstarts.
Views are personal.
