Addressing joblessness in the face of the lockdown

The first fortnight of the lockdown had itself seen a severe adverse impact on urban employment. The CMIE had estimated that the urban unemployment rate had soared to 30.9 per cent. According to the former chief statistician, Pronab Sen, as many as 50 million jobs may already have been lost in the country, most of them in towns and cities. Industry bodies have estimated job losses at 40 million.

To address the issue of job loss, the government has sought business continuity plans from its ministries. Industry bodies are also giving a host of recommendations. Fiscal stimulus of a high magnitude is required; several independent experts have suggested that Rs 10-16 lakh crore may be required to bring back the economy to rails.

In this situation, the government needs to announce immediate relief measures. Nobel laureates Abhijit Banerjee and Esther Duflo have suggested that the relief measures should largely be universal and simple to apply. The important questions are: What should be the central focus of relief and stimulus? Should it be universal or targeted? Should sections and sectors which have lost jobs get priority?

To answer these questions, we need to understand the main drivers of the economy and of jobs. Urban areas account for 70 per cent of India’s GDP growth, and urban economic services have seen the hardest hit. The situation is likely to worsen. Cities and towns will probably see prolonged lockdowns as they have emerged as hotspots of the coronavirus. There is need to quickly address this unprecedented situation.

There appears to be strong logic that fiscal relief should have a conscious urban bias. Jan Dhan accounts of all households residing in urban areas could thus be provided additional relief.

There could also be targeted relief to the self-employed and small businesses in towns and cities. Many of these are easy to identify—restaurants and their causal staff; rickshaw, Ola and Uber drivers, construction laborers who can be reached through builders and contractors, petty shop owners selling non-essential items, such as garments, who have been compelled to shut down. In this digital age, it should not be difficult to identify these households. The worry is that if these sections are not provided immediate relief, several of these businesses would permanently shut down—business continuity will not be an option.

There is justified dilemma and the government faces a Hobson’s choice, as no segment has escaped the economic wrath of the current crisis. However, clearly dealing with urban joblessness has to be the topmost priority. The government has gone on record that it promotes innovation. One possible way is that the government considers an expanded MGNREGA for urban areas for the next three-six months. This could include, for example, repairs of roads and repairs, construction of pedestrian pathways, and works that can quickly absorb construction labor. Beside providing income, such temporary jobs would also provide much need psychological relief to the affected.

Another important priority is to address the agricultural and food supply chains as rural livelihood as well as the livelihoods of all citizens are intricately connected to them. The agri-food chains have faced disruptions despite the wide-ranging exemptions. Problems of labor shortage, unavailability of packaging materials, such as jute bags for grains and pulses, have begun to surface.

There have also been reports of bans on several food-processing units, restrictions on the movement of harvester combines, and several components that have adversely impacted the agri-food supply chain. The value chain in its entirety needs to be reviewed thoughtfully and suitably modified.

With the fiscal deficit already projected to rise because of the shortfall in tax revenues, the government is left with little space to operate. It needs to swiftly put together a well-calibrated economic relief plan and implement it NOW.

<em>(The author is Chairman, National Collateral Management Services Limited)</em>.