The World Bank predicts that India’s GDP will not reach 2019-20 levels until 2021-22. The coming days will be characterised by enormous economic problems. The impact will be different for the different actors in the economy. Both the political process and the policy-making process will play an important role in the recovery process. In the first part of the series, published on the 13th. On June 7, it was argued that states with a larger share of non-agricultural non-governmental organizations in the economy would suffer more. There were also calls for more data collection to enable policy responses.
What about politics? After a long slowdown, the Indian economy is entering a phase of decline. Business and government resources have already been highlighted. India’s policy response will also consist of providing very scarce resources in an environment where demand is almost limitless. In a democratic system, politics can be used to influence the politics of the majority through collective mobilisation.
The agricultural sector is expected to show positive growth despite the disruption caused by the Covida 19 pandemic. This does not guarantee an increase in agricultural income. Mass incomes outside the agricultural sector will fall significantly as a result of the economic downturn. This will certainly affect purchasing power and ultimately the demand for food.
Indian farmers have very few opportunities to negotiate prices. It is not uncommon for there to be isolated cases of poor harvests as a result of a sharp fall in prices. A fall in food prices cannot be excluded due to weak demand. Real indicators of agricultural growth will not be able to reflect this development. This is due to the fact that discounts are granted for price changes. Nominal growth statistics should be closely monitored. In the run-up to the 2019 parliamentary elections, the Indian economy experienced a decline in nominal agricultural growth.
This led to a major agricultural disaster and anger. The Bharatiya Janata Party (BJP) has paid a high price for this. It lost the most important elections in 2018 in Rajasthan, Madhya Pradesh and Chhattisgar. This was followed by a policy change. Direct transfers ₹6 000 per year have been announced as part of the PM-KISAN programme.
Earlier this month, the government announced minimum support prices (MSP) for the 2020-21 season. MSP migration for Paddi, the Harith’s main crop, is the lowest in 10 years. Rice broth SMEs increased last year by 2.9% from Rs.1815 per quarter to Rs.1868 per quarter. The last migration was lower in the years 2010-2011, when the MSP did not increase at all. This is a comparison of nominal prices, as the real USPS for 2020-21 requires year-round inflation data. Keeping SMEs in a period of low demand will inevitably lead to a headwind in farm incomes. But it will save public money. The question is whether these changes depend on the mobilisation of agriculture.
Castles are an important political divide in India. The economic fate follows the caste hierarchies. Many political parties claim to represent the interests of socially backward castes. Reserving government jobs is one of their most important demands. That’s no surprise. Public jobs are better paid and guaranteed. Historical discrimination has led to an under-representation of list boxes (SC), list tribes (ST) and other underdeveloped classes (OBC) in the public service. This is confirmed by the data from the Periodic Labour Force Survey (LFS) for the years 2018-19. Of the total number of jobs in public administration, local government and public enterprises in the period 2018-19, 33.2% were employees not from SK-FTA or VAS communities. Their share in the total labour force was 26.3%. This means that their share in government offices is 1.27 times higher than that of the Indian labour force. This relative share in public employment was 1,03 for the employees of the Polar division, 0,82 for the employees of the Polar division and 0,87 for the employees of Internal Affairs. Under normal circumstances, the primacy of rhetoric over reservations is justified. It promises opportunities for progress in the future. However, it makes sense to recalibrate this strategy for the future.
In times of recession, policies should focus on protecting current jobs and incomes rather than generating future profits. Data from the PPFS show that the share of SC-ST and CBO employees in regular employment (where redundancies are possible) is much lower than that of the higher hives. It would be useful for the parties representing these groups to pay more attention to meeting assistance needs in the sectors and areas where their bases are currently operational. The rhetoric of social justice should focus more on the vulnerability of the private sector, in particular temporary workers and the self-employed, than on redundancies.
Return migration as a result of blockades is one of the most important economic consequences of a pandemic. The Economic Review 2016-17, an annual publication of the Ministry of Finance, indicates that domestic remittances serve 10 percent of households in rural India. (See Figure 2) In households that received remittances, they financed more than 30 percent of consumption.
This income needs to be revitalized to restore growth. Providing alternative employment in villages can at best have a mitigating effect. Finally, migrant workers should be encouraged to return home.
Politics can play a role in this. The vast majority of migrant workers are not unionised in their workplace. They have very little opportunity to negotiate with employers. The fact that they are an outsider also makes them more vulnerable to the apathy of the local government. However, there are indications that these workers are closely linked in the area of migration.
The greatest evidence of this is the collective return of workers to their country of origin. Politicians in their country could seize this opportunity to defend their interests. State governments can be put under pressure to protect the interests of migrant workers.
This can be done by organising better vehicles to bring them back. This may include guarantees to the governments of the countries in which they work to improve working conditions or social security, such as a food ration card on arrival.
It could be useful to require that migrant workers be allowed to vote in their country of origin, even if they work on the streets. In the 2016-17 economic report, 31 of the most importing and 73 of the most labour-exporting Indian shipments were reported. These places could become the epicenters of a new form of trade union movement in India. (see figure 3).
(This is the second in a two-part series on the role of politics and policy in solving the economic problems raised by Kovid-19. The first part focused on the need for differentiated and more empirically based policies).