“THIS TIME, THE RURAL ECONOMY WILL NOT BE A SAVIOUR. THE IMPACT OF COVID-19 IN RURAL AREAS WILL BE MORE SEVERE THAN IS CURRENTLY BEING ESTIMATED”

— Pradeep Kashyap, founding member, Rural Marketing Association of India and founder, MART Global Management Solutions

WHAT ALSO DISTINGUISHES THE SECOND WAVE from the first is that its impact will be felt strongly in rural areas. The first wave was largely an urban phenomenon, but with cases now appearing in rural districts with already-compromised infrastructure, the impact could be serious. Nearly 70 per cent of India’s workforce lives in rural areas, according to an estimate by the Niti Aayog. Moreover, the rural economy accounts for 46 per cent of the country’s national income. In 2020, the rural economy offered some hope in the face of broadbased economic chaos.

Pradeep Kashyap, founding member of the Rural Marketing Association of India and founder of MART Global Management Solutions, says though the agriculture sector is expected to grow this year, it won’t be the saviour it was last year. He reckons that the farm sector could grow about two per cent, but says that during this round of lockdowns, migrant workers have returned to their villages without savings, which means there will be no boost to rural demand, unlike last year. The direct impact of Covid—with family breadwinners also falling sick—will be felt despite job guarantee schemes like MGNREGA. This is a double whammy since it impacts both savings and health. Making matters worse, rural areas are lagging when it comes to vaccinations. “This time, the rural economy will not be a saviour,” argues Kashyap.

Entrepreneurs say the fear of Covid is palpable among their workers, who worry both about falling ill and losing their jobs. “We regularly talk to our workers and assure them that we will stand by them in this hour of crisis,” says Vipul Dawar, MD at Dehradun-based Indo German Brakes. They say the uncertainty and unpredictability of localised lockdowns is also adding to their stress. “If the government wants to impose a complete lockdown, let it do so,” says Rahul Ahuja, MD of Ludhiana-based Rajneesh Industries. “That clarity would allow us to plan much better.” (Punjab is partially locked down till May 15.) Hospitality is again among the worst hit sectors. Business owners in Uttarakhand and Himachal Pradesh say the past 15 months have been the worst in recent memory. “We got our renovations done, got our staff back. And [because of the second wave and lockdowns] we are back to square one,” says Manu Kochhar, promoter of Madhuban hotels in Uttarakhand. The state government, already in the dock for permitting the Kumbh Mela, which turned into a super spreader event, has cancelled the Char Dham Yatra, which was scheduled to begin May 10. Businesses are trapped between saving lives and livelihoods. “We can’t let go of our staff. If the government does not come up with an assistance plan, many in the hospitality industry will go bust,” says Vikram Bisht, owner of a resort in Nainital.

LAST YEAR, IN RESPONSE to the jobs and savings lost during the first Covid-19 wave, the Centre announced relief measures worth over Rs 20 lakh crore, including steps by the RBI to ease the terms of credit and loan repayment. This time, it has been more careful. “Economic management has been better this time,” says former finance secretary Subhash Chandra Garg. “There is no panic. Interventions have been nuanced and several economic activities have been exempted from lockdowns [because] the cost of not doing so was also high (for instance, in e-commerce).” From a sectoral perspective, Kashyap says agriculture will probably grow at about two per cent this fiscal, electricity data is suggesting higher consumption than in 2019 and that IT, e-commerce and pharmaceutical companies are seeing increased demand. Another economist explains that the second wave’s impact on the formal sector could be muted because systems are in place to adapt to the changes. “No state has imposed restrictions on manufacturing—it is the consumer demand that I am concerned about,” he says, requesting anonymity.

This time, the challenges facing the economy (and especially rural areas) are different. Experts say that providing rations and direct benefit transfers could soften the blow. In terms of stimulating demand, many middle-class Indian families have recently spent lakhs of rupees on medical treatment and safety measures against Covid. Experts say the government defraying these costs somehow could go a long way. Sources also say that the RBI, with officials from the finance ministry, are working on new relief measures for stressed borrowers in case the lockdowns are prolonged. “We are keeping a close watch,” says a top official in the finance ministry. Further, with GST (goods and services tax) collections going up, the government should also consider lowering tax rates, says an economist. Sources say the government will wait and see how the storm progresses before announcing relief measures. For now, it has to focus on strengthening its vaccination drives, especially in the rural towns and villages, which look highly vulnerable.

—with Anilesh S. Mahajan