Creation to preservation

by May 7, 2020 0 comments

Millions of Indians are out of work. We must not let them get out of hope as well. It’s time for some big-bang reforms

A survey by an independent economic think-tank, the Centre for Monitoring Indian Economy (CMIE), for the week ended May 3 has estimated that unemployment rate in India surged to a staggering 27.11, up from just 8.7 per cent in early March. Unemployment has always been a slow-burn crisis in India but what’s worrying is an urban flare-up ever since the lockdown. According to the latest CMIE data, unemployment rate was the highest in urban areas, which include a majority of the red zones. As against 26.16 per cent for rural areas, it stood at 29.22 per cent in urban India. In the previous week ended April 26, the urban unemployment rate had stood at 21.45 per cent and the rural unemployment rate at 20.88 per cent. The impact of the shutdown on small businesses and manufacturing facilities has been brutal. Several previously viable, even profitable businesses have been laid low due to the COVID-19 shutdown. And with it, all hopes and dreams of not just thousands of entrepreneurs but also accountants, clerks, secretaries and more have been shattered. Companies have had to slash wage bills significantly in order to ride out the storm and “orders” to pay salaries cannot possibly be met. We understand that several unions have approached the courts, asking them to order companies to pay up. Firms, too, have retaliated saying that they cannot possibly pay and that there needs to be a sense of rationality here. It is true that some companies have used the pandemic as an excuse to shut down parts of their business or to get rid of recalcitrant employees and are just shrugging their shoulders. That said, unions should also realise that several firms have seen their cash flows drop to zero and normal salary payouts to all employees will be impossible. Instead of fighting fruitless cases, which will only succeed in shutting down companies, unions need to rally the troops and raise money from their employed members to support those who are jobless. Of course, only good ones do that and in India, unions have been in a political morass for decades. 

It must be agreed that we had no other option than go for a complete shutdown in a bid to contain the disease. But this does not absolve the Government. When the scale of disruption has been such that unemployment is becoming the norm, it calls upon the Government to intervene and respond with all the resources it has at hand to alleviate distress. Statements by the Chief Economic Advisor KV Subramanian, saying that there will be “no free lunch” for a stimulus, are extremely unhelpful and insensitive. Further, the situation conveys that this Government is not getting the correct advice. Maybe these words were made in response to Nobel Prize-winning economist Abhijit Banerjee’s comments on a call with Congress leader Rahul Gandhi, where he had argued for a massive stimulus. But prima facie, it is impossible to see what choice the Government has if the economy is to revive. It will be expensive and will mean the suspension of some big-ticket projects and investments. Possibly even a pay cut for the Government itself. But if revenues are to rise again, the Government has to spend instead of doing public relations exercises around “Make in India.” The need is to sustain incomes and that calls upon the Government to save the weakened parts of the economy. The need for a fiscal package cannot be denied. This is the start of the seventh year of the Narendra Modi Government and the COVID pandemic cannot be blamed on prior actions. India has a once in a lifetime opportunity to attract investors and make some truly dramatic reforms. We are letting that opportunity as well as any job of preserving jobs slip through our fingers. We cannot allow that to happen. If for nothing else, at least for the sake of the millions who are now unemployed.

(Courtesy: The Pioneer)

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