India Needs a Second Wave of Relief Measures: Jean Drèze Explains

It’s for both humanitarian & economic reasons that a second wave of relief measures is in order: Jean Drèze

Image of economist Jean Drèze used for representational purposes.

(Photo: Altered by The Quint)

In the haze of the summer heat, it is easy to lose track of time – are we in 2020 or 2021? Things were much the same last year: COVID-19 was spreading fast, we lived under lockdown, the economy was in the ditch, and poor people were struggling to survive. The focus of attention, however, has changed. Last year, harrowing images of stranded migrant workers invaded our TV screens. The crisis of livelihoods was visible and the central government had to roll out a major relief package.

Today, the focus is on oxygen shortages and the struggle of even privileged people to secure basic healthcare for COVID-19 patients. Their pain is harrowing too, and every life counts. Meanwhile, however, the livelihood crisis is off the radar and relief measures are not even being discussed.

The Crisis Never Really Ended For Working People

Macroeconomic statistics tell us very little about what is happening to people’s living conditions. However, multiple household surveys conducted by independent research institutions in recent months clearly show that the effects of last year’s lockdown and economic recession were both dire and lasting.

The latest survey, conducted in January-March 2021 by the Centre for Economic Performance at the London School of Economics, found that 40 percent of the respondents (informal workers in Bihar, Jharkhand and Uttar Pradesh) had not earned anything during the week preceding the survey, either because they were unemployed or because they were yet to be paid.

The crisis never really ended for working people – they were still struggling with the after-effects of last year’s lockdown, when a second wave of COVID-19 infections hit the country a few weeks ago.

Livelihood Crisis: Why Has Central Govt Not Initiated Relief Measures in 2021?

The livelihood crisis may or may not be worse in 2021 than in 2020. The terms of lockdown are perhaps less drastic this time, at least for now. In some respects, however, things are worse today. People’s reserves are depleted and many are in heavy debt. The fear of infection has grown, making it harder to revive the economy. A national lockdown may still happen. And the crisis could last longer this time. It is important to prepare for the worst, even as we hope for the best.

It is also useful to remember a common feature of food crises in rural India: it is when drought strikes for two years in a row that there is a serious crisis. That is what happened in large parts of the country in 1966-67, 1972-73, 1987-88 and 2001-02. In each case, it took extensive relief measures to avert a humanitarian disaster. The next pair of crisis years in the series, alas, is likely to be 2020-21 — not because of drought, but because of COVID-19.

The central government, however, has not initiated any relief measures this year, except for reinstating supplementary food rations under the public distribution system (PDS) for a limited period of two months. The state governments, for their part, are desperately short of money. Unlike the central government, they have a ‘hard’ budget constraint — they cannot spend more than what their revenue and borrowing limits allow. As it is, they are struggling to fund critical health services including mass vaccination. Some of them did announce relief measures, but the bulk of India’s working class has been left to its own devices.

Immediate Relief Measures

A national relief package may seem unnecessary when lockdowns are localised. But state-specific lockdowns of varying intensity (some very strict) are now in force across most of the country. Further, state-specific lockdowns affect other states too. When restrictions were introduced in Maharashtra, migrant workers from Bihar and Jharkhand started leaving en masse, worsening the livelihood crisis in those states. Local economies in India are closely interconnected, and multiple local lockdowns are bound to have crippling effects on the economy as a whole.

By way of immediate damage control, the simplest thing to do would be to replay the 2020 relief package, Pradhan Mantri Garib Kalyan Yojana (PMGKY), or something like it. The system is in place, this can be done without delay. Some modifications, however, would be useful. For instance, food assistance should not be limited to those who have a ration card. Excess food grain stocks are huge, and still growing – there is more than enough to cover many of those who have been left out of the PDS so far. More importantly, PMGKY is a limited and short-term relief package. It was initiated at a time when it looked like the crisis would be over relatively quickly, and perhaps followed by a V-shaped recovery.

Today, despite a glimmer of hope in the form of mass vaccination, there is a real possibility that intermittent crises will continue well beyond 2021, perhaps for two or three years. This calls for durable social security measures that can be expanded whenever the need arises.

Need for Durable Social Security Measures

India already has useful elements of a comprehensive social security system, including the PDS, the National Rural Employment Guarantee Act (NREGA), social security pensions, maternity entitlements, school meals and the Integrated Child Development Services (ICDS). Most of these programmes, however, have been neglected if not undermined under the Modi government. This is the time to revive and consolidate them, and also to introduce new measures that will help to plug the gaps in this array of interventions.

A well-designed, reliable cash-transfer system would certainly help in this regard. The PDS does not take people very far, beyond a modicum of food security. NREGA earnings are more substantial, if you get a job, but work on demand remains an elusive entitlement. Cash transfers could be a helpful fallback. They have low transaction costs. Cash-based assistance, once in place, can be quickly activated in times of distress. And cash offers some valuable flexibility in a situation where people have diverse needs – some for food, others for medicine or oxygen or transport.

The infrastructure of cash transfers is still far from adequate, contrary to the tall claims of JAM (Jan Dhan, Aadhaar, mobile) enthusiasts. But surely there is enough know-how around to devise a functional cash-transfer system in the reasonably near future.

Need For a Sound & Reliable Programme of Cash Transfers

Oddly, the best cash-transfer schemes (social security pensions under the National Social Assistance Programme) are the most neglected and underfunded. Expanding pension schemes, with enhanced benefits, would be one simple and useful step towards a wider cash-transfer net.

PMGKY transfers to women’s Jan Dhan Yojana accounts, on the other hand, are shot through with problems, as are PM-KISAN transfers. In both cases, and also in many other Aadhaar-based ‘DBT’ (direct benefit transfer) schemes, technical glitches abound — up to one third of the official recipients deny having received any cash. The beneficiary lists, in both cases, are also prone to inclusion and exclusion errors. These ad hoc and unreliable schemes are begging to be converted into – or replaced with – an inclusive and effective cash-relief programme. The forthcoming Socio-Economic and Caste Census, if it happens, may provide a useful starting point for a fresh list of cash-transfer recipients. Meanwhile, there is no alternative than to build in one way or another on available lists such as those being used for PMGKY, PM-KISAN and (better perhaps) NREGA job cards.

Aside from this, the technical flaws and vulnerabilities of cash payments need to be fixed. In the case of NREGA, it took years to understand and address some of these flaws, with only partial success so far. Similar work needs to be done across all DBT schemes. Avoiding or even disbanding the byzantine Aadhaar Payment Bridge System (APBS) would probably help. If a sound and reliable programme of cash transfers can be put in place, it is likely to serve India well in the next few years, and perhaps, beyond that too.

How 2021-22 Budget Abandoned People-Oriented Relief Measures While Supporting Businesses

Any relief package would be incomplete without special measures for children. Schools and anganwadis have been closed for most of the last 12 months. Another ‘wasted year’ could have devastating consequences for child health, nutrition and education.

All this will cost some money, but government spending in a situation of mass unemployment and excess capacity is also a form of economic stimulus. Last year, stimulus measures were partly based on helping business, and partly on helping people. Too little was done to help people, but the central government did not completely let them down at least. The 2021-22 Budget, however, abandoned people-oriented relief measures even as it continued with generous business support. In fact, there were drastic cuts in critical welfare schemes such as ICDS, school education and maternity entitlements. This bias is not only unfair but also poor economics. Generating purchasing power among low-income consumers is a good way of fighting a post-lockdown economic recession.

Business concessions have a role too, but they tend to be badly aimed and prone to abuse, especially when the banking system is in bad shape. For instance, debt relief often helps zombie firms and wilful defaulters as much as healthy businesses. Income support for the poor, by contrast, indirectly helps enterprises that have real potential and respond to people’s needs. Thus, it is not only for humanitarian but also for economic reasons that a second wave of relief measures is in order.

(The author is an economist and Visiting Professor at the Department of Economics, Ranchi University. This is an opinion piece and the views expressed are the author’s own. The Quint neither endorses nor is responsible for them.)