Political economy of coronavirus pandemic

Aunindyo Chakravarty

Aunindyo Chakravarty

Senior economic analyst

My carpenter — let’s call him Manoj — called me last week, asking for a loan since he had run out of cash, just four days into India’s 21-day lockout. I knew he was poor, but not so poor that he wouldn’t last four days without work. Like many others, Manoj too had tried to leave for his village in eastern UP, but got scared and returned to his room when he saw cops chasing a few people. One reason he wanted to get back home is because his name is on the family ration card. Manoj had heard that the Modi sarkar was giving 5 kg of free rice to each person. His wife had not been able to make it to the ration shop, and an able-bodied male would be of use.

Manoj and his brother together own about two acres of farmland. It isn’t enough to support the family, but it is useful when they need loans from the local mahajan. It also entitles them to Rs 6,000 every year now, under PM Kisan. His wife got an LPG connection free of cost early last year, but they haven’t bought a refill. Manoj had heard that Modiji was giving free refills for the next three months. Even his wife had heard about it from neighbours in the village.

However, the biggest reason why Manoj wanted to get out of the city and go home was because he had a support system to fall back on, in times of great need. Delhi was the exact opposite. The landlord of his small room that he shares with two others also owns the local kirana shop. Manoj told me that he has been buying his provisions from this shop for over five years, but when he needed rice and dal on credit during the lockdown, the shopkeeper refused. So, he had to reach out to people like me to see whether he could get some assistance. “Modiji is trying his best to help us,” he said, “but he should let us go home, because the seth-log won’t let us survive here.”

Herein lies the political economy of the Modi government’s relief package. When one looks at pictures of hundreds of thousands of daily-wage workers walking with their meagre belongings on the highways, the unplanned and sudden lockdown seems like political suicide. This, however, does not take into account the political opportunity such disruption gives to the Modi sarkar.

India’s economy was already floundering well before the coronavirus came to mess with it. The Centre for Monitoring Indian Economy (CMIE) employment data from the first four months of last year showed that employment in agriculture had increased by 51 lakh, though the total number of jobs had gone down by 15 lakh. On the other side, 46 lakh jobs were lost in construction. This means that a reverse migration of sorts had already begun one year ago.

The push factor for this was the slowdown in the housing and real estate sector. However, there was possibly a pull factor as well — government schemes such as the PM-Kisan, money given under the PM Awaas Yojana, some hope of work under MGNREGA. In the absence of an economic environment that creates jobs, the poor had no option but to take whatever the state was willing to give as handouts.

In any case, India’s economy has always operated on two separate planes — one which is immersed in the market system or is at its peripheries and the other which continues to have subsistence existence through local non-market economic relations. Of course, a large chunk of India’s poor straddle both these planes, periodically entering the market and exiting it. Construction workers are one such lot. They migrate to the cities when the construction season starts after the monsoons and go home to their villages during agricultural seasons.

In the urban spaces where they offer themselves as cheap manual labour, they experience a labour market, get paid in cash, and use part of that cash to buy food from the local market, along with pre-paid SIM cards. And a part of what they earn is sent home. When they go back to the village, however, they partially fall out of the market system. Some have small farms which yield a few months’ worth of foodgrains, some vegetables, a bulk of which does not get monetised. They have to supplement their income by working on other people’s farms. Again, not all the wages are paid in cash, some of it is in the form of foodgrain and vegetables.

While output estimates give us a sense of the economic operations in the non-market sector, the exact network of transactions that enable the poor to survive is never really captured by the official data. Neither are mainstream economists — who focus on macro data like GDP, investment ratios, corporate profits, or even ‘high-frequency’ data such as car and tractor sales, PMI, freight traffic load — able to gauge how a large section of India’s population is affected by economic changes.

The government has consistently tried to target this section, which is largely unaffected by what happens in the marketplace. In the absence of jobs, the best option is for various government schemes to provide direct support to the poorest Indians. What is more, it doesn’t cost much. India’s poor earn very little, and are used to surviving on just a few thousand rupees a year. Government support — in terms of cheap foodgrains and direct cash transfers — also reduces their dependence on local moneylenders.

So, the coronavirus pandemic is a perfect opportunity to strengthen the reach of the mai-baap sarkaar. One should not forget that India has more than 400 million WhatsApp users and the government’s financial inclusion survey of 2017 says 87 per cent of rural housholds own a mobile phone. It is not too tough to use this network to promote the idea of the government as the sole benefactor of the poor. It is a perfect opportunity to earn political brownie points from this massive economic disruption.

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