Amartya Sen, Abhijit Banerjee, Raghuram Rajan talk on lockdown effect

Nobel laureates in economics Amartya Sen and Abhijit Banerjee, and former Reserve Bank of India governor Raghuram Rajan, while highlighting the impact of the lockdown on the economy, said a huge portion of the population will be pushed into poverty or starvation due to the lack of means to earn.

“As it becomes clear that the lockdown will go on for quite a while, in a total or a more localized version, the biggest worry right now is that a huge number of people will be pushed into dire poverty or even starvation by the combination of the loss of their livelihoods and interruptions in the standard delivery mechanisms,” a report by The Indian Express quoted them as saying.

“That is a tragedy in itself and, moreover, opens up the risk that we see large-scale defiance of lockdown orders — starving people, after all, have little to lose. We need to do what it takes to reassure people that the society does care and that their minimum well-being should be secure,” they wrote.

Analysing the availability of food, they noted that the food stock at the Food Corporation of India stood at 77 million tons in March 2020, which was higher than the stock usually kept during this time of the year. They also pointed out that this was more than three times the “buffer stock norms”.

“This is likely to grow over the next weeks as the Rabi crop comes in,” they added.

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The government, recognizing the disruptions to the agricultural markets from the lockdown, is more than usually active in buying the stocks that the farmers need to get rid of. As a result, the government has offered a supplementary PDS provision of 5 kg per person per month for the next three months.

However, the economists pointed out that a major portion of the poor are generally excluded from the PDS rolls for numerous reasons.

“For example, even in the small state of Jharkhand, there are, we are told, 7 lakh pending applications for ration cards. There is also evidence that there are a lot of bona fide applications (for example of old-age pensioners) held up in the verification process, partly because the responsible local authorities try to avoid letting anybody in by mistake to avoid any appearance of malfeasance,” they explained.

The solution for this issue, according to them, would be to issue temporary ration cards — maybe for six months — with minimal checks to everyone who wants one and is willing to stand in line to collect their card and their monthly allocations. “The cost of missing many of those who are in dire need vastly exceeds the social cost of letting in some who could perhaps do without it,” they said.

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“This principle, once recognized, has a number of important implications. First, the government should use every means at its disposal to make sure that no one is starving. This means expanding the PDS, as discussed, but it also means setting up public canteens for migrants and others who are away from home, sending the equivalent of the school meal to the homes of the children who are now stuck at home (as some states are already doing), and making use of reputed local NGOs that often have a reach among the most marginalized that exceeds that of the government.

“Second, starvation is just one of the worries; the unexpected loss of income and savings can have serious consequences, even if the meals are secured for now: farmers need money to buy seeds and fertilizer for the next planting season; shopkeepers need to decide how they will fill their shelves again; many others have to worry how they would repay the loan that is already due,” they claimed.

According to their report in The Indian Express, “The government has partly recognized this in the cash transfers it has promised to certain groups; but the amounts are both small and narrowly targeted.”

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“Why only farmers and not landless labourers, especially since MGNREGA is hobbled by the lockdown? And help needs to be extended to the urban poor,” they said.

The economists also vouched for senior Congress leader P Chidambaram’s idea of using the MGNREGA rolls from 2019, plus those covered by Jan Arogya and Ujjwala, to identify poor households and send them ₹5,000 each to their Jan Dhan accounts.

Sen, Banerjee, and Rajan stressed on the need to spend wisely, and indicated that the government would lose control of the situation if the poor and the needy are neglected in the race for survival during and after the lockdown.

“If there was ever a challenge that requires brave and imaginative action, this has to be it. We need to spend wisely given the enormous likely demand for fiscal resources in the coming months, but skimping on helping the truly needy is the surest way to lose the plot.”

(Based on a report in The Indian Express)