Daily Editorial Analysis for 23rd March 2020

Government measures for most vulnerable

Paper: II

For Mains: Government Policies and Interventions for Development in various sectors and Issues arising out of their Design and Implementation.

Context of News:

• With several parts of the country under lockdown, it is difficult at this juncture to gauge the extent of the economic fallout from the corona virus. It is likely that the disruptions in economic activity will continue well into the upcoming financial year.
• The Covid-19 pandemic may have struck prosperous, consumerist nations disproportionately hard. But the crisis has outlined, more sharply than ever before, the digital divide and differential access, which are pushing the poor to high-risk behaviour.
• Corona virus has outlined growing Digital divide in the wake of various corporate companies and government offices has asked its employees to work from home. In this situation, there is larger possibility of people who will be effected most will be peoples working daily wages and daily earnings.

COVID-19 impact on Society’s most vulnerable:

• Spike in Poverty:
• The economic impacts have dramatic effects on the well-being of families and communities. For vulnerable families, lost income due to an outbreak can translate to spikes in poverty, missed meals for children, and reduced access to healthcare far beyond COVID-19. With cases confirmed in many low- and middle-income countries, these impacts may affect the world’s most vulnerable populations.
• Loss of Loved ones:
• What are the channels of economic impact we can expect from COVID-19? Beyond the human tragedy, there is a direct economic impact from lives lost in an outbreak. Families and loved ones lose that income and their in-kind contributions to household income such as childcare.
• Rise in Digital Divide:
• Cutting long story short, digital divide van be seen at extreme level in the backdrop of outbreak of covid-19.In fact, only people working in sectors with completely dematerialised products are able to work from home in a sustained manner. People have no access of digital technologies has been  limited to television, which has a dynamic and compulsions of its own, while the educated can rely upon websites tracking the pandemic, which offer broader and more detailed information.
• Service Sector at receiving end:
• The immediate pain is being felt by the services industry. But as household discretionary spending starts falling, the manufacturing sector will also feel the pain. And even when the spread is contained domestically, with the virus spreading across Europe and the US, exports will also take a hit.

State Measures for Vulnerable Section of Society:

• Some state governments have announced measures. They are a combination of cash transfers for workers in the informal economy, and provision of food. For instance,

1. Uttar Pradesh government has announced direct cash transfers for daily wage labourers in the construction sector, and self-employed cart owners, small shop owners and rickshaw pullers, in addition to one month’s stock of food grains for vulnerable sections.
2. The Delhi government has announced the provision of meals for the homeless, and enhanced rations and pensions for vulnerable socio-economic groups.
3. The Kerala government has announced a Rs 20,000 crore financial package, of which Rs 14,000 crore is for clearing pending arrears, and Rs 500 crore is towards a health package.

• The state’s move aims to cover loan assistance, pensions, and subsidised meals. Other states could adopt similar measures. Jan Dhan accounts could be used for targeted cash transfers, while excess stocks maintained with the FCI could be disbursed though the public distribution system.

Possible Impact of Lockdown:

• These short-term economic impacts due to covid-19 can translate into reductions in long-term growth.
• As the health sector soaks up more resources and as people reduce social activities, countries invest less in physical infrastructure.
• As schools close, students lose opportunities to learn (hopefully only briefly) but more vulnerable students may not return to the education system, translating to lower long-term earning trajectories for them and their families, and reduced overall human capital for their economies.

Way Forward:

• The policy response to deal with this public health crisis requires coordinated action at both Central and state levels. It should aim to limit the immediate economic fallout through some forms of targeted income support, especially for those in the more vulnerable segments of the informal economy, ensure continuity in supply chains for essential items, and easier financing conditions.
• As demand collapses, firms’ cash inflows will fall, impairing their ability to service their loans, pay their employees, suppliers. Thus some sort of regulatory forbearance, relaxation of classification norms of loans as NPA, a moratorium on interest payments, and a sort of a bridge loan to help the more vulnerable businesses will be required. The funding of such measures should be borne jointly by the Centre and the states even as they continue to implement measures to limit the spread of the virus, and mobilise and strengthen capacity to treat the infected.
• The most vulnerable households are those most likely to be affected economically. Low-wage workers are often those most likely to lose their jobs if they miss work due to an extended illness. They are often the least able to work remotely to avoid contracting the virus. And they are the least likely to have savings to survive an economic downturn.
• Making sure there is an economic safety net in place – cash transfers, sick leave, subsidised health coverage – helps the most vulnerable survive and provides support to enterprises that serve those populations.