It will be more damaging to economy than demonetisation
INDIA IS amidst an unprecedented crisis. First there was the outbreak of novel coronavirus disease, or COVID-19, and then Prime Minister Narendra Modi announced a nationwide lockdown. Ever since, people have been trying to make sense of what’s happening around them.
Thousands of migrant workers hit the road across the country to return to their native places. With poor health facilities and infrastructure in rural India, this can be calamitous. Those stranded in cities are hungry and unable to earn a livelihood. The Union government’s initiative to send money in their bank accounts is not really helpful as many of them do not have Jan Dhan Yojana accounts; many others have their passbooks and debit cards back in their village.
Even if they do manage to get the money, how does the government plan to make grocery available in shops? It seems to have forgotten that the total distribution chain from the wholesale market to the local grocers and green grocers is labour-intensive. The government just announced lockdown and promised to ensure food and other essentials. There was no discussion on how it would be ensured. At the centre of it all are the wholesale markets. If they are left open, the government will have to be careful about a number of things. Buyers, sellers, farmers and traders, all visit wholesale markets. To what extent can normalcy be maintained there? And, if the wholesale markets are shut down, the entire system will collapse, which will have a massive impact on agriculture.
One of the biggest worries is that the country is right in the middle of rabi harvest—it is over in some parts while it’s still on in other regions. The lockdown may devastate the farming sector. Economically, it can be more damaging than demonetisation. When it was announced in November 2016, economic activities were still on. The problem was access to money: people worked but did not get paid as employers did not have cash. But workers could negotiate that once cash was available, they would get paid. They could also negotiate informal credit with shops. Payments were made when cash started coming in. It’s different this time. Production activities have stopped. This means zero income. So workers will use up all their savings.
The effects of demonetisation was long-lasting as the government did not do what it should have, right from day one: repayment of bank loans should have been postponed until remonetisation was complete, continued credit unless people paid cash, etc. Remonetisation took almost a year. In between, small and medium enterprises (SMEs) were labelled nonperforming assets, many had to shut down. The lower-middle class, such as small shopkeepers, were wiped out. This is impacting economy even now.
So would India have absorbed the shock of lockdown had demonetisation not happened? The economy had, sort of, started normalising essentially on the strength of Mudra loans. SMEs took loans to start new ventures, though not at the same scale. Now even that is shut.
Down To Earth
TILL A month ago, Dhaniram Sahu was not aware of the word virus or the concept of social distancing. “These days, almost everybody seems to be talking about coronavirus and how to stay protected,” says Sahu from Shankardah village in Chhattisgarh’s Dhamtari district. Just like the scientists and epidemiologists worldwide, Sahu does not understand much about the virus. But on March 24, he came face to face with its ferocity. That morning, along with some 1,500 daily wage labourers, he was waiting at Ghadi Chowk in Dhamtari town to be hired by rice millers, shopkeepers, builders or well-to-do families. Suddenly, the group was approached by the police and local officials who asked them to go back and not to venture out of their villages for the next three weeks. “They informed us that the government has announced a nationwide lockdown to contain the coronavirus. Most of us did not know how to react,” he recalls. Sahu is the sole breadwinner of his family of five and the menial job would have earned him `150-200, sufficient to buy rice, pulses and vegetables for two days.
A week later, he received two months of free ration in advance. “It was a package of 70 kg rice, 2 kg sugar and 4 packets of salt,” says Sahu, wondering how to now arrange daal and vegetables for his children.
VIVEK MISHRA, JITENDRA, KUNDAN PANDEY, K A SHAJI, AJIT PANDA, GURVINDER SINGH AND PURUSHOTTAM SINGH THAKUR