The stimulus package must correct imbalance in the labour market
OF the many challenges that India faces after the Covid 19 lockdowns, two are turning out to be especially thorny: (i) how to revive the economy, and (ii) how to address the problems confronted by ‘migrants’. Migrants here comprise those (i) who have fled the cities that had been their home, place of work, of education and entertainment for a number of years, (ii) who were part of a massive uprising in Mumbai that followed lockdown 2.0, carrying placards that read ‘allow us to go home, we do not want to stay here’, and (iii) who happen to be stranded and are held up in shelter camps and roadsides. An important addition to these groups of migrants is a privileged class that has been lifted out of Kota in special buses since this group consists of ‘our people’, shedding all canons of cooperative federalism. A divide between ‘our people’ versus ‘the rest’ is now the newest feature in India’s demography.
For the first challenge, a mega-stimulus package equal to about 10% of GDP has just been announced. A somewhat simplistic recipe involving transportation of migrants to their native places is under implementation as a response to the second challenge, in order to help erase the indignities they were subjected to in recent weeks. It has now been supplemented with a credit line for street vendors, an affordable rental scheme for the urban poor and a two-months food support for migrant labour.
Nothing has so far been said about be overall approach to migration. There is absence of clarity if the central and state governments consider this issue as settled, having arranged to bring migrants to their native places to fend for themselves and to, possibly, put them at some stage in MNREGA or MNREGA-type folds. Nothing has been said about the possible fallout of outmigration on cities they have fled from—after all, migrants were an integral and a vital part of the work force and income-generating activities of cities such as Mumbai, Delhi, Ahmadabad, Pune, Indore, Jaipur, Bhopal, Surat and many others. How rural economies will make do without the benefit of remittances from migrants they have depended on for years, and how will they take on and absorb the load of incoming migrants does not seem to be a matter concern at this stage. Meanwhile, as lockdown 3.0 with a menu of relaxations comes into effect, industry and businesses have set out alarm bells for recalling migrants in order to enable them resume their operations. Karnataka, Haryana and Telangana have openly appealed to migrants ‘to not leave’.
In order to get a broader grip, let me place this issue in the context of the structure of migration and its role in the Indian economy. The Census of India defines a migrant in terms of the place of birth and place of last residence, and provides important details in respect of (i) the duration of residence of migrants in place of enumeration, (ii) migration from place of last residence to place of enumeration, and (iii) reasons for migration. The last Census held in 2011 counted 141.9 million persons having been added to India’s population as migrants during the 2001-2011 decade. Of these, there were 29.9 million persons, 22.2% of the total migrants, who moved from rural to urban areas and another 22.0% moved between urban areas—mainly from the relatively smaller towns to large cities. According to the Census, rural-to-urban and urban-to-urban migrations are driven by economic factors, job opportunities, education, and similar developmental prospects. On the other hand, rural-to-rural and urban-to-rural migrations are led by social factors, marriage being one of the dominant ones.
Rural-to-urban and, to a significant extent, urban-to-urban migrations, have historically been a ubiquitous feature of the world economy. These have formed an integral part of the process of economic development and structural change—releasing surplus labour from agriculture and putting them in high productivity industrial and services sectors that every country pants for. There is enough in literature that speaks of the economic benefits of such migrations. Migration has played a similar role in India where the evidence of its economic impact is unambiguous: states that have a higher proportion of rural-to-urban and urban-to-urban migrants such as Maharashtra, Gujarat, Karnataka, and Punjab have a higher per capita income and those that have a low proportion of such migrants, Bihar, Rajasthan, Odisha, and Uttar Pradesh being the principal ones, continue to remain stuck in low income traps.
The Covid-led lockdown, involving stoppage of economic activities, has disrupted the established pattern of migration, reversing rural-to-urban migration into urban-to-rural and likewise, reversing town-to-city migration into city-to-town migration. This is no ordinary disruption. It presents an unusual situation where labour is migrating in huge numbers from areas that have a potential productive use for them to areas that have neither a demand for such labour nor likely to have a demand outside of the MNREGA frame. Globally, barring a few instances of short-duration displacement of population caused by tsunamis, there is no evidence of ‘reverse migration’ that India could benefit from or look up to. Urban literature too does not shed any light on ‘reverse migration’ of the kind that the country has now been exposed to.
How should then the issue of ‘migration’ be approached? An honest answer is: No one knows. India’s experience with lockdown 1.0 that triggered an exodus of people from cities, the mayhem that followed lockdown 2.0 and the mishmash in respect of what is open and for how long being the hallmark of lockdown 3.0 is adequate to suggest that, irrespective of what action is taken, some unintended consequences will occur. So, one option is to rely on market forces. Migration in India, in any case, has not been a part of any planned exercise; it has occurred in response to demand as posited in Harris-Todaro model.
If it sounds too liberal, a second alternative is to rework the stimulus package that, on the one hand, may continue to aim at supporting the sectors most affected by the closure and add a new component that may focus on correcting the imbalance in the labour market on the other. The former is necessary for revival but insufficient without a functioning labour market. A third alternative is to replace the six urban missions including Housing for ALL, Smart Cities, a Livelihood mission and several others with a mission that is sensitive to the urban informal sector that provides over 70% of the urban work force and which serves as a lifeline for a large part of the day-to-day city functioning. The evidence from the lockdown-led migrations is loud and clear: None of the missions benefited any of the migrants or else, they will not put their lives at high risk as they have done now. IMF’s Kristalina Georgieva recently said: “Covid-19 is a crisis like no other”—let the response to the crisis be “like no other”.
The author is former director and distinguished professor, National Institute of Urban Affairs. Views are personal.