The Indian rulers’ response to Covid-19 has been to ‘lock down’ the entire country for at least 54 days (or more, if the lockdown is extended on May 17). This is an action without historical parallel. It finds few comparisons globally even in these times of a ‘pandemic’; the New York Times called India’s lockdown “the largest and one of the most severe anywhere”. It has been backed by punitive measures, left to the imaginative coercion of local authorities and the police in different regions.
As Jean Dreze notes, the word ‘lockdown’ does not capture what India has done: “it’s more like a curfew, or an attempted curfew.” A staggering 114 million lost their jobs/livelihoods in the month of April 2020. Locked out of their jobs, with negligible savings after months of labour, millions tried to return to their villages, many of them walking hundreds of kilometres, some of them attacked by the police on the way. Those who were forced to stay back in the cities were trapped in slum rooms or tiny tenements, starving, many forced to line up for food hand-outs. Agricultural supply chains were disrupted, agricultural markets stopped functioning and cultivators made huge losses on perishable crops. More than 5 lakh trucks were reported to be stalled at state borders. All this, and many other aspects, are now well-known.
At the same time, the Government has spent next to nothing to ease the pain of this measure. London’s Financial Times notes: “While other countries have rolled out massive relief packages to cushion families and businesses from the economic shock of coronavirus, New Delhi has largely left the population to fend for itself as it frets about its own finances, already weakened by the previous two years of a protracted economic slowdown.”
It appears that India is a global leader in inflicting policy-based pain on its citizens in response to Covid-19. This is brought out in two charts.
Chart 1 below is from the International Labour Organization (ILO). It shows the condition of informal workers under lockdown and other covid-19 containment measures. The bubble representing India is at the top of the chart, showing that the share of informal workers in total employment is much higher in India than in the rest of the world. These are low-income workers without security or benefits, who will be worst hit by any lockdown. Secondly, the size of the bubble shows that the absolute number of such workers in India is also the highest in the world. Thirdly, the bubble is to the far right of the chart, showing that India has implemented the most draconian lockdown in the world.
Chart 1: Informal workers under lockdown and other containment measures
Source: ILO
The ILO remarks:
In India, with a share of almost 90 per cent of people working in the informal economy, about 400 million workers in the informal economy are at risk of falling deeper into poverty during the crisis. Current lockdown measures in India, which are at the high end of the University of Oxford’s COVID-19 Government Response Stringency Index,have impacted these workers significantly, forcing many of them to return to rural areas.
Chart 2 is from the Economist. This repeats one measure from the above chart (albeit here on the vertical axis), namely, the stringency of Government response: India’s response is the most draconian in the world. The other axis in the Economist’s chart, the horizontal axis, reflects the size of the government fiscal stimulus, as a percentage of the GDP of each country. In other words, it measures how far different governments worldwide have increased their spending in order to cushion the terrible impact of these containment measures on their citizens. At present, the Indian government’s stimulus is among the least in the world, officially at 0.8 per cent of GDP, which is why India is to the left of Chart 2.
Chart 2: Government fiscal stimulus as a percentage of GDP, different countries
Actually, the scale of India’s proposed spending is even lower than the official estimate of Rs 1.7 lakh crore. Almost half of what is labeled ‘expenditure’ under the scheme consists of window-dressing.[1] Once we adjust for such window-dressing, the package shrinks from Rs 1.7 lakh crore to about Rs 92,000 crore, or 0.4 per cent of projected GDP for 2020-21.[2] India’s package is thus perhaps the most miserly in the world.
Further, the single most important relief in the package – distribution of additional foodgrains for free through the public distribution system for three months – actually costs the Government nothing at all, since its godowns are groaning with 56 million tonnes of excess foodgrain stocks, and more grains are to be procured in April-May from the latest harvest.
Together, the two charts show that:
(i) in India, measures such as sweeping lockdowns without warning or preparation can have a particularly devastating impact, since nine-tenths of the workforce is informal; yet
(ii) the Government imposed the most draconian lockdown in the world; and
(iii) provided the least material succour or compensation in the world to those hit by these measures.
In effect, the Government neither let people earn their livelihood, nor compensated them for their loss of earning. The effects of the lockdown were predictable, yet the Government hardly budged an inch to help those affected. N.K. Singh, BJP leader and chairman of the Fifteenth Finance Commission, proudly declares:
This current political leadership will not give in to the macroeconomic temptation for fiscal profligacy. It is quite conscious of our vulnerabilities, and how these things can get out of hand. Maintenance of macroeconomic stability must be the cardinal principle. (emphasis added)
The rulers’ conception of “macroeconomic stability” appears to be compatible with devastation of the vast majority of people.
We will not go into the details of the devastation and suffering actually caused during the lockdown. These have been widely reported. Our intention in presenting the above two charts is simply to show that (i) the suffering could have been anticipated by anyone familiar with the structure of India’s economy; (ii) it was not merely the handiwork of some lower-level functionaries, but the outcome of a considered policy of the Government, pursuing its “cardinal principle” of “macroeconomic stability”.
So extreme has been the Government’s callousness that even the IMF, the international high priest of fiscal austerity, has signalled that the Government can loosen its purse-strings a bit more than it has done. No doubt the Government will come forward with another stimulus package shortly, but it is hesitating and dragging its feet. Why? We address this question below.
[1] Several measures are sheer sleight of hand: Formal sector workers are allowed to borrow from their own provident fund accounts; payments scheduled for July under an existing scheme for assistance to farmers (Pradhan Mantri Kisan Samman Nidhi) are paid out in April; states are being instructed to make payments out of an existing fund collected for construction workers’ welfare; a long-overdue and appallingly low (Rs 20/day) increase in MGNREGA wages is dressed up as Covid relief (and even this measly benefit depends on MGNREGA works taking place during this period, which is doubtful); the existing District Mineral Fund, which is collected from mining firms, and is meant to help the desperately poor communities affected by mining, is being diverted for Covid-related expenditures; women’s self-help groups would be able to borrow more, but borrowing has to be repaid, and thus is not a benefit as such; and so on.
[2] Generously taking the Government estimates at face value, this sum includes Rs 30,600 crore as cash transfers to women via Jan Dhan Yojana accounts, Rs 40,000 crore of free rations, Rs 3,000 crore of additional pensions to senior citizens and widows, Rs 13,000 crore worth of free gas cylinders, and Rs 5,000 crore of provident fund reimbursements, totaling Rs 91,700 crore.
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