The world is in a deep crisis with no parallels to draw lessons from. India in particular is in a catch-22 situation. The infection curve hasn’t really flattened. So if the lockdown, without an alternative, is prematurely withdrawn, India stares at a potential health crisis. And if the lockdown continues in its current form, it is looking at an economic crisis as well as a food crisis. There are instances globally where food supply chains have broken down already as a result of the prolonged economic shutdown. Can the global economy be kick-started while keeping the health crisis under reasonable control? A possible way out, till the COVID-19 vaccine arrives, is providing personal protective equipment (PPE) to all the workers in sectors which need to be opened up on priority. We take India as a case in point but the argument holds true for any economy.
How deep is the crisis?
Countries which have flattened the COVID-19 curve have either relied on mass-scale testing to segregate the infected from the uninfected (South Korea) or have had a carefully monitored, micro-managed region-specific quarantine strategy (China). India has adopted a strategy of a national lockdown without extensive testing which is neither here nor there, the result of which is we do not seem to be sure when to lift the lockdown.
As far as the food crisis is concerned, the world is staring at the possibility of the supply of essentials running out when the existing stocks of food and other essentials is used up since their production has slowed down or stopped. It is only a matter of time before a full-fledged crisis of food hits India (unless the lockdown is lifted to allow their production). For example, in India, while there is good Rabi yield this year, there are severe labour shortages as workers who specialise in harvesting have been forced to return home. As a result, many farmers, particularly those producing perishable crops, will face difficulties in harvesting, transportation and sale of their produce.
One obvious way out is the early arrival of a vaccine/cure but that normally takes about 18 months to become publicly available. Even if it takes only half that time, the economy cannot possibly be under lockdown for that long. One may be tempted to argue that at least the production of essentials can be revived even if the lockdown is maintained elsewhere but that would mean putting these workers in harm’s way. Moreover, this will only aggravate the health crisis as it may result in mass spread of the virus through community transmission.
An employment option
A mass-scale production of test kits, PPEs, etc. will have two effects, apart from the healthcare dimension, on the economy. One, it will increase direct employment in the test kits and PPE production industries while creating safe employment conditions in the essentials and other priority sectors. Two, since the essentials sector is at the core of this strategy, which has direct backward linkages with the agricultural sector, it will prioritise the ones worst affected by the lockdown currently. All this would require expenditure over and above the current stimulus since these test kits and PPEs would have to be provided gratis for it have any meaningful effect. Public sector units would have to produce it apart from the private sector through subsidies given for their production.
It is true this will still not absorb all those who got displaced during the lockdown. For those who cannot be, the state will have to provide for basic subsistence requirements, both as basic income and in kind. The in-kind transfer in the form of free ration will be met by increased production of these commodities facilitated by this policy.
One may, however, object to this mass scale production of PPEs as wastage of resources in the long term. But that’s not necessarily the case. Since these equipment are consumables, they will not leave a trace of unused stocks in the long run. Two, this does not require capital to be ‘locked in’ in the long run, which means the readjustment after the crisis will be less involved. In fact, as the workers have themselves proposed in the U.S., this could be done even by the automobile sector with its existing equipment.
But if essentials can be revived, why not revive the entire economy in this manner? It can be, but other questions will arise. As a result of a sudden halt in the economic activity, a large part of which caters to the elite, carbon emissions have declined. There is no point wasting resources on these activities in crisis situations such as these. The policy objective must be to protect the people and not necessarily the profits in these industries. Workers in such industries will be protected through the proposed unemployment allowance. In fact, an economy functioning in the way that is proposed here in the medium run may give us time to reflect on how to confront issues of climate change.
Rohit Azad teaches at JNU and C. Saratchand at Satyawati College, University of Delhi
