Why is Urban India Missing in Covid Relief?Agenda

By Shankkar Aiyar | Published: 13th June 2021 07:26 AM |

Electoral arithmetic has been a dominant influencer and driver of economic policy in India. This politically expedient approach has led to the relegation of urban India — particularly the low-to-middle income class — as a people of a lesser God. That urban India contributes, depending on who is telling the story, between half and two thirds of the GDP counts less as the sum total of rural votes count more.

The inherent bias is evident in crafting of Covid relief programmes. There is talk about another stimulus package for the farm sector and for the rural poor. While this is necessary, welcome and applause worthy, the fact is there is no sign of a similar initiative for urban India. The rural poor have MGNREGS, the rural employment scheme, but the urban poor have nothing to fall back on. There is a strong case for a relief package for urban India — particularly those in the informal sector, the small businesses such as restaurants and shops, and the self-employed.

Every day, at specific intersections of city centres, hundreds of casual/informal wage earners are huddled seeking a day’s income. Intervention is necessary to prevent their descent into debilitating penury. Yes, they have been allocated free ration but sustenance requires more. The urban poor are identifiable — the National Food Security Act specifies coverage of 25 per cent of the urban populace. A phased cash transfer, at least for two quarters, would serve as a balm for the bruised and battered urban poor.

It is true that some state governments have initiated schemes. Maharashtra has cash transfers of Rs 1,500 for registered street vendors/Rs 2,000 for rickshaw drivers; Tamil Nadu has a monthly assistance scheme for unemployed; Jharkhand and Telangana have announced unemployment dole; and Odisha has a programme for street vendors. However these programmes are far from sufficient. A national crisis requires a national response.

Hundreds of micro and medium enterprises are struggling to stay afloat. Their viability is hurt by the sub-optimal conditions, of partial and phased operations. Subvention of costs — whether it is electricity bills or rent — will lessen the burden of staying alive. Elsewhere in the world payroll protection programmes have served well. 

An interest cost subvention subsidy based on jobs sustained/saved/added can help the enterprises navigate the crisis. Construction has the biggest multiplier effect on the economy. A payroll protection programme via contracting agencies for contract workers will ensure survival of enterprises and individuals. The measures will keep borrowers off the bad loan charts and prop consumption and growth.

The second wave devastated many middle-class families — many had to sell family silver/spend savings to save lives. Those in the face-to-face economy must face an uncertain future till the pandemic persists and the rising cost of living. The urban educated must ward off the virus and navigate a shrinking job market.

 A report by the SBI (EcoWrap May 28/2021) states: “The pandemic has created a definite scar in labour markets.” The largest decline in employee expense was in the smallest firms which host the bulk of jobs. EPFO data shows that the economy which ideally needs to add 10 lakh jobs a month or roughly 1.2 crore a year, created 44 lakh first-time jobs in 12 months.

Hope and optimism are deterred by the spectre of a third wave, inadequacies of vaccination rollout and ergo poor visibility of where the economy is headed. While this time round there is no national lockdown, the fact is every major urban centre and over 90 per cent of the country has been and continues to be under some shade of lockdown. The Centre has the headroom to do more and the funds the states allocated for procuring vaccines to save lives can now be deployed to protect livelihoods. Consider the data points available in public which effectively argue the case for intervention and stimulus.

This week in its bi-monthly policy statement, the Reserve Bank of India underlined that “the dent on urban demand poses downside risks”. RBI’s consumer confidence survey (on general economic situation, employment, overall prices, own income and spending) across 13 major cities carried a grave message. Consumer confidence “fell to a new all-time low”. Worse, the Future Expectations Index “moved to pessimistic territory for the second time since the onset of the pandemic”.

The macro picture of distress is reflected in ‘The State of Work in India 2021’ report of Azim Premji University. It observes that “the number of individuals who live below the national minimum wage threshold increased by 230 million (23 crore) during the pandemic.” Specifically, the report points out that while poverty rate rose by 15 per cent in rural areas, it was higher at 20 per cent in urban areas. Indeed, government data shows over 75 lakh households have made withdrawals from EPF dipping into retirement savings to meet with day-to-day needs.

The ambition to revive the economy and sustain growth demands a re-think on the contours of Covid relief. In good and bad times economic growth rests on the fundamental thesis that income drives consumption, propping up demand to nudge investment and propel growth. The anecdotal and the empirical picture calls for a sense of urgency in devising ways to mitigate misery. The time for intellectual engagement and quibbles about the need to intervene has long since passed.

Shankkar Aiyar, political economy analyst, is author of ‘The Gated Republic –India’s Public Policy Failures and Private Solutions’, ‘Aadhaar: A Biometric History of India’s 12-Digit Revolution’; and ‘Accidental India’. You can email him at [email protected] and follow him on Twitter @ShankkarAiyar. His previous columns can be found here. This column was first published here.