The second Covid wave has had an adverse impact on the micro, small and medium enterprises (MSMEs) and the informal sector, which are among one of the biggest sources on employment in the country
We all remember the time migrant labourers traversed hundreds of kilometers by foot, in a desperate attempt to reach home amid the peak of the first Covid wave. And while the second Covid wave might not have brought back those heart-wrenching visuals to our TV screens, migrant labourers continue to face the difficulties they faced earlier.
With the focus currently fixed on providing medical oxygen and hospital beds to those infected by the virus, the issue of rural livelihoods does not seem to be on anyone’s mind. But we can’t afford to overlook this. Non-governmental organisations (NGOs) working on the ground have been increasingly highlighting the need for food and basic necessities for those in the countryside.
The second Covid wave, riding on the back of a brutal first one, is wreaking havoc on Micro, Small and Medium Enterprises (MSMEs) and the informal sector. In many cases, they have eaten into their reserves and even their risk-taking ability (to restart their businesses) is in question. And these are among the biggest sources of jobs in the country. To compound it, six economists we interacted with are predicting that demand, which seemed to have bounced back after the first wave, will be affected once again. In other words, with demand being subdued, livelihoods will continue to suffer.
However, it is noteworthy that the situation was already dire. While many might seem to have bounced back after the first wave, a large number didn’t (of the 100 million jobs lost in April - May 2020, 15 million remained out of work) and even those that did, had 17 per cent lower income (per capita incomes of Rs 4,979 per month instead of Rs 5,989). Given this precarious situation, our interaction with NGOs indicates that the sentiments have changed this time - families don’t even have the resources for rent - and many are heading back to rural India, once again.
Further, since non-agricultural work is likely to decrease even more and demand for jobs is increasing, wage rates may fall, and the rural poor simply won’t have enough to sustain their families.
There are three aspects to consider when thinking about supporting the rural poor. Basic sustenance that will allow them to manage in the immediate term; near-term livelihood support to ensure continuation of their livelihoods and long-term improvement that will lead to sustainable income levels in the future.
On the basic sustenance front, the government needs to significantly increase PDS allocation, boost the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and cash transfers schemes. Cash transfer tools like Jan Dhan accounts might not reach all of those affected (420 million accounts of which 48 per cent are active), but they will definitely reach many of the poor and will also increase spending and boost demand. Once we get past basic sustenance, we must then turn the focus on helping those who have exhausted their savings to get back on their feet. For small and marginal farmers, this would mean money for seeds and fertilizers for the Kharif season followed by funds for pesticide and nutrition. A larger Pradhan Mantri KIsan SAmman Nidhi (PM-KISAN) with a greater amount front loaded would be a solution.
The reason these families are sinking further into poverty is because the earnings from their livelihoods has not been enough. We must leverage near and medium-term support to build long term sustainability. For agriculture, market linkages present a key opportunity. Even a 10 per cent increase in prices is a 30 plus per cent increase in income. Further, a number of private sector companies are starting to reach small farmers, and they must be encouraged. Innovative solutions by private companies that offer the farmer a chance to bypass traditional traders to get more value, should also be given support to succeed.
(The author is president, The/Nudge Foundation. He has over 25 years of experience in consulting and finding implementable scalable solutions to complex business/market problems. Views expressed are personal and do not necessarily reflect those of Outlook Magazine.)