Sanit Kumar Rout
COVID-19 has paralysed economic activities across the globe. The growth prospects for India are gloomy and the rating agencies predict it to be falling to zero level this fiscal. Indian states will observe varied impacts of the downturn based on their resilience to respond to the crisis. The impact could be far-reaching in Odisha, Bihar, and Jharkhand compared to states like Punjab, Tamil Nadu, Maharashtra and Gujarat.
Most of the low income states located in the eastern region have inherent challenges of transforming the rural subsistence economy to a more vibrant economy. The economic disparity has widened between the leading large states and laggard sates since after 1991 when the economic reform programmes were introduced. The historical spatial inequality and higher concentration of poor in the eastern region followed by divergent pattern of growth across states will see a further worsening now.
Odisha has maintained its growth momentum due to pro-growth policies and state’s GDP has grown more than the national average. During 2019-20, the Gross State Domestic Product (GSDP) growth was 6.16 per cent compared to 5 per cent at the national level. A structural transformation has been noticed in the economy of Odisha where the shares of industry and service sector in the GSDP are growing. During 2018-19, the share of industry in the total GSDP was 39 per cent, service was 41.6 per cent and agriculture was 19 per cent. The changes in the sectoral composition in Odisha follows a standard growth trajectory observed in growth literature wherein the share of subsistence sector reduces gradually and the share of industry and service becomes dominant over the years.
One of disquieting facts in Odisha is that the reliance on agriculture has not dropped despite the fact that its contribution to GSDP is shrinking. The structure of employment (The periodic labour employment survey 2017-18) shows the agriculture sector employs 56 per cent of the workforce in rural areas. Overall, agriculture, forestry and fishing account for 48.76 per cent of the total employment in Odisha compared to 44.14 per cent at all- India level.
Moreover, another nerve-wracking statistics is that only 15 per cent workers are regular wage earners or the salaried class and 27 per cent are causal labourers while 57 per cent are self-employed in agriculture, fishing and small business.
Approximately, 84 per cent of workers, barring a few big farmers and enterprisers, are the worst-hit during the lockdown due to a grinding halt to the economy. Besides workers, most of whom are not covered under any social security measure; the higher unemployment rate in Odisha compared to the national average poses an additional pressure on the rural economy.
The economic and social fallout of COVID 19 will be enormous on these workers. The immediate wage loss and uncertainty painted by the gloomy economic prospects further impairs their situation. Similar is the fate for a large number of construction workers. Most of them have no work and no money for more than one month and have been facing exceptional misery in this ultra health emergency. Despite the fact that there is a construction workers’ welfare board to provide safety and social security, the benefit does not reach many actual beneficiaries.
Fig: Employment Indicators of Odisha and India (%)
After an easing of the lockdown, there will be a surge of workers to rural economy who had earlier migrated to other states faced as they were with prolonged deprivation at their native places. Offcial statistics on outward migration is not robust and the state is expecting a return of 5-7 lakh workers. Except for an immediate health threat due to the spread of the virus, the economic consequence is humongous because of a lessening of the remittance income and inadequate job opportunities in rural areas. When the farm income is dwindling, can the rural economy absorb these surplus labourers?
Except for a resort to the immediate health needs, as the state has been introducing taking major steps to contain spread of the virus, a combination of social and economic policies should be pursued in the short run as also the long run. The immediate social assistance programmes announced by the government to provide a financial support of Rs1,500 to each of the 22 lakh construction workers, advance food ration to 94 lakh families apart from distribution of cooked meals to thousands of daily labouers are in the right direction. Given the swelling of cases, full scale economic operations may be halted for another six months.
The state may do well to continue the social assistance programme for the next four months for the most distressed families after meticulously identifying them through the Panchayats. The actual beneficiaries should be less than a whopping 94 lakh families, out of the total 99 lakh families here. Further, given the influx of skilled, semi-skilled and manual labourers, the MGNREGA could provide temporary consolation to the poor. However, in the medium term, policy should address restructuring rural economy through the small and medium manufacturing sector which is low capital intensive and takes a short span of time. Several sub sectors – food processing, textile, electrical and electronics, plastic and rubber, glass and ceramic — are potential areas for expansion.
Financial support through concessional loans from nationalised banks and the SIDBI and subsidies through state budget can promote the expansion of this sector. We have prudently managed our state finance and deficit indicators are well within the limits set by the Union Government. In this exceptional situation, the fiscal deficit can be slipped to 4.5 per cent of the GSDP from 3.5 per cent now and the extra money should be utilised to galvanise the rural economy.
- The writer is an Additional Professor at Indian institute of Public Health, Bhubaneswar and specializes on health economics and financing.