Economy

COVID-19 aftershocks: This is an economic collapse triggered by a health crisis

Mehrotra is visiting professor, Centre for Development, University of Bath, UK, and former economics professor, Jawaharlal Nehru University, Delhi

 
By Santosh Mehrotra
Published: Thursday 24 June 2021
Lockdown second wave Delhi. Photo: Vikas Choudhary

Shockingly, the Union government has reduced the actual allocation for health in the 2021-22 Union budget. That’s outrageous in the second year of the novel coronavirus disease (COVID-19) pandemic. So we have serious problems in all kinds of health infra-structure and the crisis becomes even deeper in rural areas.

This health crisis has an economic impact.

We already have far too many workers in rural areas and not enough work. So this is a return to the situation that was prevailing last year, but in worse circumstances. People this time have less money because they are spending on health. This is out-of-pocket expenditure; in many cases, it is spent on frauds.

So they do not even recover. Some might also risk getting long COVID-19 and may not return to work soon. As a result, people have become poorer than last year.

I have estimated that poverty had increased since 2019 because joblessness had risen and wage rates had fallen. On top of that, we have had two waves of COVID-19. Rural poverty in any case in 2012 was about 26 per cent.

What we are seeing now is a 10 per cent increase of the 2012 number, contributed primarily in rural areas, because two-third of our population lives here. When poverty increases at this rate, then aggregate demand in economy collapses. When that happens, the organised sector is impacted.

As told to Down To EarthThis first appeared in DTE’s print edition (dated 1-15 June, 2021)

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