Create jobs to beat back post-Covid slowdown

The World Bank and IMF chiefs have said that the world will be in recession soon. Everyone is expecting that. More surprising is a recent study by the UNCTAD (United Nations Conference on Trade and Development), Geneva, which has forecast that India and China will escape the recession. India has already gone into recession because GDP in the first two quarters of the current financial year is showing a declining trend. According to former Finance Minister, P. Chidambaram, GDP will be 2 per cent lower in the third quarter.

Other signs of recession are apparent, including joblessness in all the sectors. Unemployment has risen to 23.4 per cent. The informal sector, comprising thousands of micro enterprises, is in distress, as a result of which thousands of migrant workers have had to return to their villages. If the various sectors that are under pressure today do not recover fast enough, these migrants may have no jobs to return to. Even if they return, there will be severe congestion, like in the slums of Dharavi, Mumbai, where 99 per cent of the population uses public toilets (some 80 to 90 persons share each toilet, making it easier for the pandemic to spread).

It would be great if the relief package of Rs 1.7 lakh crore could help migrants set up small retail business through loans. This might lead to a pile of NPAs, but nothing compared to the big loans that the mega business magnates took from PSBs and defaulted. India must beware, however, of widening the fiscal deficit. Should the fiscal deficit widen, the international rating agencies will downgrade India’s credit rating, and investments will dry up, and the rupee will fall. On the one hand, low rupee value will mean an increase in debt servicing charges on foreign loans by the government and corporates. This is happening in the background of lower revenue collection and a huge increase in government expenditure. But the government has no choice but to take austerity measures. Yet, cutting down on interest rates on small savings which will affect mostly the elderly has not been a welcome step.

China has been giving out a relief package ever since its economic slowdown began one year ago. Perhaps that is why UNCTAD thinks that China will be able to avoid recession. Many income generating programmes have been started, and banks have been asked to extend loans and roll over debt without penalty or negative rating. Rents have been cut. China has increased access to borrowing by the MSMEs and it has led to unemployment falling. It has pumped in $14.3 billion into the financial sector.

India’s latest CMIE report states that rural unemployment is higher at 31 per cent compared to 20 per cent in the urban areas. We have been caught unprepared in dealing with the recession so far.

Other signs of recession are that there will be job losses in all the sectors like aviation, hospitality, manufacturing and automobile. The farming sector is under great stress.

Farmers will be facing lower prices and reduced incomes. How can they support migrants from towns? They will have to be given massive support for their migrant relatives. Shelters and food kitchens ought to be started, plus they — both the farmers and migrants — got to have money in their pockets in order to survive. At such a critical time, the government should go all out to help the poor in every way it can.

Microenterprises in villages should be given all support. For all microenterprises in the country, the RBI’s slashing of repo rates was a good idea, but whether it will translate into lower commercial banks’ lending rate has to be watched carefully. If the MSMEs are activated, then the migrants would return. But the best option would be to resettle them in the villages and towns. It will help in decongesting big cities and relieve pressure on their resources.

Any kind of village enterprise, even the handicrafts, requires a continuous supply of power and water, and good living space for the workers. Hence, refurbishing the village infrastructure should be top priority for the government. Construction of roads will increase employment, for example, by making the startups easier.

The workers should be given living wage, which covers their food and lodging, and not just minimum wage. A few years ago, I visited Bishnupur, a village near Kolkata that is famous for its woven textiles and doll making. Business was slow, and expert weavers of age-old Baluchari saris made on complicated Jacquard looms depicting stories from the Ramayana and Mahabharata, were abandoning their age-old trade and taking to selling potatoes because of the absence of a living wage. Some migrants also could take to selling vegetables if they had seed capital.

Women are adept at retail, so it is good to hear that the money from the relief fund is reaching them. Thus, the prime goal of the government and the state governments is to reach out

to the migrant workers who are in great distress right now. They are also afraid of catching Covid-19 in the congested slums they live in. Besides, unless jobs return, they will not return. The economy is not in the pink of health and job creation will be slow in the affected sectors, and will have to be revived. As for the hospitality and aviation sectors, much will depend on global revival.

While China may escape recession or experience it in a mild form, India is likely to experience it more harshly. According the International Labour Organisation (ILO), India will add 300 million people to the number of poor.