“A UNIVERSAL INCOME SCHEME FOR ALL”
India’s informal sector is large. So income loss is heaviest for the poor Meghnad Desai, Emeritus Professor of Economics, London School of Economics
The coronavirus is a classic black swan event. It was totally unanticipated. It is global, though perhaps more because the authorities in Wuhan did not immediately try to suppress the spread. Like all governments everywhere , they suppressed the bad news instead and allowed people who had been infected to travel. If anyone still needed proof that the world had globalised, this would be it. Someone meeting a person from Wuhan, either in China or in Singapore, travelled to a ski resort in the Alps and brought it to the UK. No doubt, others he came in contact with within Singapore or on the ski slopes carried it to Italy and Spain.
The disease has struck richer countries earlier and harder than poor countries thus far. International travel is a luxury and relatively rich people from rich as well as poor countries enjoy its pleasures. That has provided the fast global conduit for the disease to spread. The virus may be similar to others, SARS, for example, but scientists are not unanimous so far on its cure or even on strategies for slowing down its spread - mitigation or suppression. But now we have enough observations to know that its incidence takes the form of the well-known Bell shaped curve and 10 or 20 countries that have had the virus for some weeks since early January exhibit the standard pattern of a cumulative version of the Bell curve.
India has been a late arriver on the scene as it got it from travellers, many of them Indians who had got it
from Americans or Britishers. By mid- March, it had been clear to European countries that the technique of social distancing ( lockdown) is effective if it can be enforced. Though India's death count is low thus far, there is no reason to be complacent. Like many European countries India can be expected to have deaths in five figures. The US will score higher still - in six figures.
That at least is the safest assumption on which to proceed. India has launched a lockdown anyway. There is some complacency in India about the low figures for death but it is early days yet. The pandemic will not be gone this side of July at the earliest.
The difference the virus makes is in the economic impact. Not so much in the macro impact. GDP will go down by 25- 30 per cent everywhere. But in India, the size of the informal sector is large and the ratio of women's participation in the labour market is also low compared to other similar countries in Asia. This means that income loss is heaviest for the poor. As many of the informal sector workers are migrants, their first reaction has been to move back to their native villages. They find they are not welcome as they come from rich traveller infested areas and were in any case surplus to requirements, which is why they left in the first place.
All countries have thrown the principles of fiscal rectitude and monetary restraint to the winds and focused rightly on saving lives. Since physical proximity has to be reduced , economic activity - consumption, production, trade, distribution - has suffered massively. Even labour in formal and MSME sectors has been laid off. Higher up the scale, corporations relying on financial markets for funding have suffered from share price collapse. They need liquidity at low cost.
The government has already begun to act on these fronts. The ` 500 was a great idea (credited to Jan Dhan account holders for three months). A bolder step would be to extend it for six months for all women. My favourite recipe is a Universal Income scheme for all voters at ` 1,000 per month for six months. It will be easy to implement. The better off can give up the claim like they did for the gas subsidy but it should not matter. It is a universal catastrophe. Let all be covered.