Prime Minister Narendra Modi while addressing the ‘India Ideas Summit’ organised by the US-India Business Council (USIBC) emphasised that India is an open economy with no shortage of opportunities and options. He also stated that this is the best time to invest in India. But this optimism contradicts the claims made by leading economists and research organisations.
We have come across such a contradictory state of affairs when the Minister of Commerce and Industry, Piyush Goyal announced that India in the month of June 2020 has turned out to be a ‘trade surplus’ economy thereby breaking the record of the last 18 years, wherein our export earnings have exceeded import payments. This declaration was immediately lapped up by social media as a success of the ‘Atmanirbhar Bharat’ mission.
Such farcical messages and announcements are beyond explanation keeping in consideration the fact that proposals and feasibility reports of ‘Atmanirbhar Bharat’ projects are awaiting approval of the Parliament. The Indian economy was rendered ‘trade surplus' on account of a sharp fall in the level of imports. Outbreak of the coronavirus pandemic and the lockdown led to a sharp decline in the demand for crude oil, gold and other imported goods. The entire economic structure has crippled, demonstrating catastrophic consequences instead of being a subject matter of merriment.
Statistically, where trade exports declined by 12.4% in the month of June, imports declined by 47.6% thereby bringing the momentary trade surplus to the extent of $790 million. Even before the pandemic, we were in a recessionary phase and fundamental economic variables like GDP growth, investment, consumption, and savings were underperforming. Now clogged economic conditions due to the prolonged lockdown (partially or fully) has pushed the economy into dire straits in terms of unemployment, poverty and inequality.
Problem of unemployment
Even before the outbreak of the pandemic, unemployment in India was at an all-time high. Data released by the National Statistical Office highlighted that the unemployment rate (6.1%) was at its highest in 45 years in 2017-18. In the years 2018-19 and 2019-20, the unemployment rate remained unusually high at 7%. Ironically, the GDP growth rate is declining day by day, whereas the unemployment rate is scaling new heights.
In the next six months or so, the unemployment rate is likely to remain high owing to the reverse migration of workers from cities to villages. Persistent lockdown in urban areas will lead to prolonged joblessness and fewer job options in rural areas (vis-a-vis urban areas). Surveys carried out by the leading newspapers state that workers are reluctant to come back to cities, since many state governments are declaring full or partial lockdowns in different phases. This ambiguity in decision making is not letting businesses function at their full potential and they are operative at less than their usual capacity with limited number of workers. Tough job market conditions are coercing workers either to adopt work under MGNREGA and Garib Kalyan Rozgar Yojna or indulge themselves into the sowing of kharif crops on their ancestral land holdings, thereby promoting disguised unemployment.
Increase in poverty
A report released by the International Labor Organisation (ILO) in April 2020 revealed that 90% of the people working in the informal sector in India have been affected by the unplanned and severe lockdown. The same report also mentioned that about 400 million people are in danger of falling into poverty due to the lack of work. Pertinently, the migrant workers who used to work as peddlers, hawkers, jobbers or small shopkeepers in cities and earned Rs 12,000-15,000 a month have now lost their occupation. Nonetheless, these petty sellers used to remit 60-70% of their earnings to their villages which has now stopped. Further, the amount they used to remit to their villages stand equal to the petty amount which they earn today either by working under MGNREGS or by tilling the soil. This decrease in income is transpiring into a sustained decrease in consumption. Much of the consumer spending is now restricted to essential items like flour, rice, pulses and healthcare. Again, the units which were involved in the manufacturing and trading of ostensible goods are constantly incurring losses and are unable to re-employ their original workforce.
History stands testimony that recession in a country is followed by the propping up of monopolies. India is no exception. Even before the pandemic, we were passing through a recessionary phase. Innate monopolies were getting created both in case of trivial products like milk, bread, butter, cheese, or giant tech-companies like taxi services, mobile recharge, online trading, and aviation companies. Indian consumers were brazing with fewer options and mounting monopolies. Many companies in the organised sector are on the verge of closure and hence, mergers and acquisitions are going unbridled. It is eventually culminating into the operation of businesses by few big corporate houses with limited employment opportunities and growing inequality in all areas.
In anticipation of the emerging catastrophe, the Indian government needs to redesign its policies in favour of the common man and shun the use of hollow sloganeering. Only pro-people policies can help the government tackle the monstrous problems of unemployment, poverty and inequality. Even a capitalist country like the US is taking concrete steps like pay-check protection programmes to curb unemployment by offering restaurants, hospitals and retailers a monetary help of up to $10 million at the rate of interest equal to 1% and with the option of deferred payments for six months.
The writer is Associate Professor in the Institute of Management, DAV College, Chandigarh.