Covid-19 and the job crunch

Having realised that there is really no contradiction between "jaan" and "jahaan", states are gradually reopening their economies. But they are locking the stable doors after the horses have bolted

The question of a trade-off be­tween saving lives and saving the economy is an irrelevant one. It is the government’s responsibility to ensure that we do both. Unfortunately, this question was posed by the Prime Minister himself when he said that the government would concentrate on saving lives. “Jaan hai to jahaan hai,” he said. The truth dawned on him later when he said that we had to save both “jaan” and “jahaan”. In the meanwhile, because of the most rigorous lockdown in the world enforced from the midnight of March 24, the economy plunged into crisis destroying livelihoods. The four lockdowns have failed to save lives but have succeeded in destroying the economy. Now the states have gotten into their own acts and the government of India is comfortable leaving the decision to them so that it can shift the blame to them.
 
Having realised that there is really no contradiction, several states are gradually lifting the lockdown and reopening their economies. But they are locking the stable doors after the horses have bolted. The migrant workers are spreading the virus wherever they are going but they cannot be blamed because they were left with nothing; no one bothered about them and when they were left wi­th nothing, they started walking back to their villages hundreds of kilometres away. Their plight will be remembered in our history as one of its most sordid chapters. The fiscal package announced by the government is eminently forgettable as far as the present problems are concerned.
 
We are also in the midst of a global economic depression. The IMF (In­ter­national Monetory Fund) earlier ex­pe­cted the global income to grow by 3 per cent but now expects it to fall by 3 per cent. In India, the economy could shrink by as much as 6.8 per cent, if not more. Economist Prof Nouriel Roubini of New York University said that there are some jobs that will not come back after this crisis. The global financial crisis of 2008 continued for three years when output fell sharply but the Covid-19 crisis is going to stay with us much longer. All the brave talk of the economy reviving in the second half of the fiscal or even later is nothing more than pure optimism.
 
The pandemic has increased income inequality and hurt employment prospects. An IMF research shows that the pandemic has widened the gap between the rich and the poor. The IMF’s net Gini coefficient — inequality measure — has in­creased by nearly 1.5 per cent for Covid-19 duration. This is due to loss of jobs and income. The jobless claim is increasing every week in the world. The US workers had filed 33.5 million applications for unemployment claims by the first week of May. South Africa’s lockdown has seen unemployment increase to 40 per cent.
 
The Indian economy which was already struggling before Covid-19 is now in the negative territory. The recovery of the economy will neither be ‘V’-shaped nor ‘U’-shaped; it is likely to be ‘L’-shaped, which means falling very fast and staying there for a long time. The RBI (Reserve Bank of India) in its monetary policy statement for 2020-21 has also said that the GDP (Gross Domestice Product) growth in FY21 will be negative.
 
The complete lockdown has shrunk job opportunities. More than 100 million workers in restaurants, manufacturing, construction, and travel have lost their jobs. The ILO has already warned that 400 million people working in the informal sector will be forced into poverty in India. As per the survey of Azim Premji University, 67 per cent of the workers have lost their jobs during the lockdown. The average weekly earnings of non-farm, self-employed persons have dipped by 90 per cent from Rs  2,240 to Rs 218.

According to a CMIE report, the unemployment rate in the country is likely to be 24.6 per cent in May 2020 compared to 23.5 per cent in April 2020. It was 7.8 per cent in February and 8.7 per cent in March 2020, the highest in 45 years. The number of job losses in urban areas is much higher than the rural areas. As per estimates, 12 crore people have lost their regular jobs since the lockdown. The maximum unemployment rate in the month of April was in Pondicherry at 75.8 per cent, followed by Tamil Nadu at 49.8 per cent, Jha­rkhand at 47.1 per cent, Bihar at 46.6 per cent and Haryana at 43.2 per cent. The maximum unemployment is in the in­formal sector of the economy that contributes 50 per cent of the national product and employs the bulk of the workforce. 
 
The country’s workforce is a sine qua non for the revival of the economy. The India Ratings and Research (IRR) had said in January 2020 that we must increase labour productivity growth to 6.3 per cent in order to achieve 8 per cent GDP growth, and to 7.3 per cent to achieve 9 per cent growth. However, the labour productivity growth was pegged at 5.2 per cent in the current year just before Covid-19. Now, when the economy is expected to shrink and workers homeward bound, what will be the labour productivity growth rate?
 
A recent IMF research shows that more automatic fiscal support measures can be an effective and timely way to counter negative shocks of the pandemic. The announcement of 10 per cent of GDP, that is, Rs 20 trillion package of the government is not enough to protect the people from this disaster. The World Bank has already announced $1 billion social protection package for India. Brics’ New Development Bank has also disbursed $1 billion emergency assistance loan to India to reduce hu­man, social and economic losses caused by the pandemic. The government should spend at least this money for the welfare of people.
 
We are not for a moment suggesting that we should forget about saving lives. The coronavirus may survive longer than anticipated. Experts are saying that we should learn to live with the virus. Economist Steve Hanke of Johns Ho­pkins University says a robust testing programme is critical for the country. As per Worldometer, on May 28, India is testing only 2,439/per million people. Pakistan is not far behind as it is conducting 2,305 tests. Spain, Russia, Italy, the UK and the USA are doing much better. Their per million testing is 76,071, 66,480, 59,654, 55,981 and 48,211 respectively.
 
We must also restrict the area of the red and orange zones. In Ghaziabad, the authorities declared a whole complex of apartment blocks as a containment zone because one person in one of the blocks tested positive for corona. The residents protested and now the containment zone is restricted to only that block where that resident lives. This is the kind of refinement which is needed. If 60 per cent to 70 per cent of the country’s GDP is in the red zone, as defined today, no industry will be in a position to open anywhere because they can neither source the raw materials needed nor sell their products. The workers are already gone.
 
It is a tough challenge but that is what governments are meant to tackle.
 
Sinha was finance minister  (1990-91, 1998-2002) & minister of external affairs (2002-04); Srivastava teaches finance at ITS, Ghaziabad