By Prem Das Rai & Sarath Davala
The prime minister’s appeal for a nation-wide ‘self-imposed Janata curfew’ has been a success. It has demonstrated that people can go beyond their political leanings and cooperate with the government to face the challenge posed by the coronavirus pandemic. Similarly, crossing all political boundaries, a broad consensus is emerging about how to provide relief to millions in the informal economy who are staring at an uncertain future without their daily wage. Even as the central government is preparing a strategic plan, which includes cash transfers, Congress and communist parties have made an appeal to the government to provide a basic income to people. Confederation of Indian Industry has joined this view and announced that a one-time cash transfer should be given. They went a step ahead by pointing out where the money should come from—the savings from the global crude oil price fall.
All this is in the backdrop of how the western world and China have stepped in to pour billions of dollars as stimulus to shore up their economies. In fact, they are going to do more. They understand the imperative.
Drawing the big picture, British economist Guy Standing likened this crisis to the 1918 Spanish flu that killed about 40 million. He writes: “That tragedy hopefully dwarfs what will happen as the coronavirus pandemic unfolds. But paradoxically the economic crisis that is accompanying it will be far greater. The reason is that a global economic crisis has been waiting to happen for several years. The global economic system that has taken shape over the past four decades is much more fragile than in 1918…”
What further distinguishes the current crisis from earlier ones, including the 2008 financial crisis is that this one is not just economic but also a social one, instantly affecting the lives of everyone in more ways than one. It also has the potential to escalate into a social disorder crisis, if we fail to arrest it immediately. Millions are going to lose their incomes and will not be able to get daily necessities for survival, will default on repayment of loans, and resort to borrowing more. This indebted precariat would be a much larger section of our population than all the farmers who committed suicide over the last decade.
Official data confirm that a thousand farmers committed suicide each month in the last decade nationally, and the causality obviously points to chronic indebtedness. The current crisis is going to unleash serious mental health issues arising from the fear of destitution and death. Can we imagine burying the dead without the kin being present? There is, thus, a grim scenario that is emerging and getting compounded daily. Panic and anxiety have gripped the nation.
Government of India needs to act immediately, or face dire political consequences. The more the delay, the more we will witness distress enveloping the lives of the precariat. The coronavirus fallout is a natural calamity, and we need to reach out to people with urgent support. There is large body of scientific evidence to show that giving cash is the best way of providing support. In an article that shares World Bank experience of using cash transfers during natural disasters, the authors say, “Cash confers dignity and choice and tends to have lower transaction costs and higher value to beneficiaries than in-kind support.” Cash transfers were used in India, too, during natural disasters such as earthquakes, floods, and tsunamis.
We need to focus on immediate and urgent support through cash transfers, and discard plans that are difficult to implement at the pace that is required now. Some states have announced enhancement of rations under the Food Security Act. While providing additional foodgrains is useful, with broken supply chains and crumbling logistics, this may be difficult to implement.
Small and medium enterprises that are at the forefront of this tsunami will immediately start laying off their workforce. Mild moral appeals to them not to do so, or to give paid leave to their workers is unlikely to work since during a crisis like this, it is difficult to monitor. Employment arrangements in these enterprises are mostly invisible to the public eye, and are impossible to effectively track.
Apart from the government, there are two other key actors that should join this rescue operation—the corporates (CSR), and the local community. The challenge before us now is to design how these transfers have to be made—fool-proof, and leak-proof.
We advocate that an emergency basic income be provided through the direct cash transfer mechanism that Government of India has implemented. This will not only arrest potential social unrest but also ensure that there is continued aggregate demand to sustain our economy.
We cannot be caught flat-footed. This is the political imperative which will be a crucial test for many a public representative. They will face the brunt of people’s problems and frustration as they grapple with the situation on the ground. It is already happening as state governments start addressing a situation way out of their control.
The political imperative has just become that much greater for unleashing the power of the universal basic income.