COVID-19: Fear factor, supply uncertainty can make second wave worse for rural India, warns Pronab Sen

Down To Earth spoke to economist Sen, India’s former chief statistician and programme director for the International Growth Centre - India Programme on the pandemic and its effects; edited excerpts:

By Snigdha Das
Published: Friday 04 June 2021

Snigdha Das: The pandemic’s curve never really ‘flattened’ for working people in rural India. Now, there is a sense of panic for both lives and livelihoods. How do you think will the novel coronavirus disease (COVID-19) pandemic affect India’s rural economy during the second wave?

Pronab Sen: It’s spreading really fast across rural India this time.

During the first wave last year, rural areas were not as badly affected. Most rural activities — agrarian and non-agrarian — continued quite smoothly: Farmers harvested bumper rabi crops (usually cash crops) and could market those smoothly. Problems did crop up a little later, after the rabi harvest when farmers took up inter-harvest crops (short-season crops between kharif and rabi).

Amid the nationwide lockdown, they suffered losses due to restricted transportation and marketing of these essentially horticultural produce with short shelf lives. Due to reverse migration, some states like Punjab faced labour shortages.

But the impact was limited and not felt across the country; South India was pretty much spared. Kharif crops too went off very well.

This year too, the production of rabi food grains has been good and has, by and large, been marketed. I am rather concerned about the inter-harvest crops, which has begun in April, and kharif crops, whose sowing is about to begin.

With COVID-19 spreading really fast across rural India, the availability of labour may soon become a serious concern and productivity may not stand up to last year’s level. Maybe farmers will manage to sow, but productivity is still likely to drop sharply.  

Non-agricultural activities (carpentry, metalwork, auto / bicycle repairs, construction, transport, storage, etc) will also experience a lot of damage as these require high human contact. The sectors that did relatively well last year on the basis of rural demand, mainly the fast-moving consumer goods (FMCG) sector, are not going to do that well this time.

The extent of the damage, however, depends on how quickly the fear factor spreads and grips rural India. This time, the fear levels are much higher, particularly in rural India where medical facilities are not adequate. If the fear factor becomes strong and persistent, then the damage is going to be substantial. So we should not expect rural India to hold up the Indian economy the way it did last year (when the agriculture sector kept the rest of the economy buoyant). And this is the real problem.

SD: Will the economic impact of localised, sporadic lockdowns, being imposed by states this time be any different from that of the nationwide lockdown last year?

PS: The national lockdown, imposed last year to curb the spread of the COVID-19 infection, lasted for a little more than two months. All economic activities, other than essential services, remained suspended. This time around, it is not the case. Now, that sounds a lot better. Unfortunately, this time the uncertainty is huge.

Last time, the damage was large but limited for a fixed period. Economic activities bounced back very quickly as soon as lockdown restrictions were eased. This time, the damage is going to be partial but will continue longer.

Think of an integrated production system or a transportation system, in which people need to plan in advance. If you are not sure when the lockdown is going to be imposed and where, it leads to uncertainty and affects your decision making. This will have a rippling effect on investments, which will seriously suffer.

SD: How will COVID-19 impact India’s food security and rural poverty?

PS: As of now, we have plenty of food stock and the delivery and food supply chains are working fine. We do not know what’s going to happen in future as a lot depends on the production in post-rabi seasons. Horticultural products are definitely going to get severely hit. The sowing data will tell us how bad the situation is going to get.

But yes, the country’s rural poverty is going to get worse. There are primarily three ways how COVID-19 is going to impact India’s rural poverty. First, because of reverse migration, a lot of urban poverty is now being exported to rural areas. Last year, we saw a mass exodus of labourers from urban areas to their villages after the nationwide lockdown was announced. This year it is not just the lockdown but also fear of the virus that is driving a lot of workers back to their villages.

The second is due to damage to horticultural crops and kharif crops. A lot of farm houses, which used to employ landless labourers as farm hands may not do so this time due to fear factors. This means a lot of landless labourers, who already are poor, are going to become poorer.

The third reason is, a lot of non-agricultural activities (carpenter, blacksmith, construction, transport, storage, etc) are going to be seriously impacted this time. Studies already show that rural salaried employment has fallen during the past one year of pandemic.

SD: What will be the pandemic’s impact on wealth distribution?

PS: Changes in wealth distribution actually began with demonetisation. The problem has progressed continuously since then, but has accelerated since the lockdown last year when non-corporate and the unorganised sectors were hit much worse than the corporate sector.

So now we see a massive change in wealth distribution. It will continue to happen as even during the second wave, the non-corporate and the unorganised sectors are bearing the burden. Unfortunately, there is hardly any policy measure in place to correct this wealth distribution change.

All that we have is essentially the food security programme, the public distribution system. But that does not change income distribution. It does not change earnings. It just changes people's cost of living.

We have to accept that a large chunk of people in the country derive their livelihoods from MSME [micro, small and medium enterprises] and unorganised sector. The situation is not going to improve until these sectors revive and start growing strongly.

How soon these sectors are going to revive, depends on a lot of factors, including the progress of the pandemic as well as policy interventions. At the moment, state governments are in no position to help revive the sectors because their resources are completely tied up in pandemic management. And the Union government has not really done much in terms of policy support for these sectors.

SD: The central government has not initiated any social assistance in 2021, except for reinstating supplementary food rations under PDS. How much can such measures help alleviate the livelihood crisis?

PS: Some of the important measures introduced by the government last year were free food, Rs 500 in cash transfer for three months for all women Jan Dhan account-holders and increased wages for works under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).

Free ration under PDS should continue for long. Some studies show that cash transfer to vulnerable households through Jan Dhan accounts did help people, but it worked only to a limited extent. It’s not a bad idea to continue with it; but since PDS has a better reach, it should be considered for such cash transfer.

Then comes MGNREGS. We know that the demand for such works has gone up enormously. The question is once MGNREGS sites start operating, will the fear factor prevent people from going to those? Will we be able to manage them in a way that is COVID-appropriate?

SD: Will the pandemic impact inflation?

PS: Till a few weeks ago, I was not expecting such an acute spread of the pandemic in rural India. My fear was related to only the supply chain.

But now there is a threat to production. The supply of food products, other than food grains, to urban India is going to be affected both due to supply chain disruption and rural production loss, which is very soon going to fuel inflation, food inflation in particular.

India may also need to import food items like vegetables. India has traditionally been the exporter of horticulture products like potatoes and onions.

This will also have huge disruptive effects on the global markets; first we will stop supplying to the international market, and then we become a buyer. The international markets are going to go through the roof.

SD: Do you think that COVID-19 is the first rural pandemic in history?

PS: Cholera was very much a rural pandemic. It took a lot of lives and caused illnesses for a very long period. This was also true for typhoid.

What is new about the current pandemic is that it is an airborne disease. Since the infection is spreading from person to person, the fear factor is much higher. It is also socially much disrupting.

SD: How should India plan its way out, to save its rural economy and ensure that it does not slip on hunger, poverty and income-equality indicators?

PS: In the immediate short-term, focus on making the supply chain work better. We know what went wrong last year; there was a total lack of clarity; there was total lack of coordination; at least fix that.

This time, it can be done relatively quickly by doing two things. One, the Centre, state and local authorities should be on the same page on what is allowed and what is not allowed, and the message goes down to the law-and-order machinery in very clear, specific terms. It should also be made clear that any violation of these instructions will invite punishment.

Our long-term hope is vaccination. So far we have botched up the process. The quicker we roll out vaccines, the better off we are as vaccination is the only way to address the fear factor.

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