Why there is no Urban India in covid relief, the need to rethink the framework

Another stimulus package is being talked about for the agriculture sector and the rural poor, but not for the urban poor. In such a situation, there is a need to rethink the framework of Kovid relief to revive the economy and sustain growth.

Electoral arithmetic has been a major driver of economic policy in India. This politically pragmatic approach has undermined urban India – especially the lower to the middle-income group.

The fact that urban India contributes more than half of the GDP is of less importance to the political class, as the total number of rural voters is higher. This bias is also visible in the preparation of the Kovid relief programme.

There is talk of another stimulus package for the agriculture sector and the rural poor. While this is necessary, welcome and commendable, there is no sign of a similar initiative for urban India.

Rural poor have rural employment scheme MNREGA, but there is nothing to help the urban poor. The relief package is an urgent issue for urban India – especially for small businesses and self-employed in the informal sector like restaurants and shops.

Every day hundreds of daily wage labourers stand at the crossroads of cities in search of a day’s income. Intervention is necessary to prevent his family from falling into abject poverty.

Well, they have been allotted free ration, but more needs to be done for sustenance. Urban poor can be identified – The National Food Security Act considers 25 per cent of the urban population to be poor.

Cash transfers in a phased manner for at least two quarters will act as a healer for the aggrieved and battered urban poor. Some state governments have indeed launched schemes.

Maharashtra has a cash transfer of Rs 1,500 for registered street vendors/ Rs 2,000 for rickshaw pullers; The monthly assistance scheme for the unemployed in Tamil Nadu is; Jharkhand and Telangana have announced unemployment allowance, And there is a program for street vendors in Odisha.

But these programs are not enough. A national crisis requires a national response. Hundreds of micro and medium enterprises are struggling to survive. Their life expectancy is affected by the partial and phased operation.

Their burden will be reduced by getting financial assistance on the electricity bill or rent front. Wage protection programs have done a good job everywhere in the world.

Construction has the biggest impact on the economy. The wage protection program for contract workers through contracting agencies will ensure the survival of enterprises and individuals.

These measures will keep borrowers off the bad debt list and boost consumption and growth. The second wave of the pandemic devastated countless middle-class families—many had to sell jewellery, spend their money to save lives.

A recent study by economists Mudit Kapoor, Shamika Ravi and AK Shiv Kumar show that while the first wave of the pandemic hit poor families the most, the second wave hit the middle class the most.

Those who earn daily wages will have to face an uncertain future as long as the pandemic persists. An SBI report said that the pandemic has definitely hit the labour markets.

The biggest drop in employee spending has come from the smallest companies that provide the largest number of jobs. EPFO data shows that the economy which ideally needs to create 10 lakh jobs a month or 12 million jobs annually, created just 44 lakh jobs for the first time in 12 months.

Expectations are hampered by fears of a third wave, inadequacy of vaccinations and economic woes. Although no national lockdown was imposed this time, the fact is that every major urban centre and more than 90 per cent of the country has been under the shadow of lockdown in some way or the other.

The Center has an opportunity to do more. The funds allocated to the states for the purchase of vaccines to save lives can now be spent on saving lives. In its bi-monthly policy statement, the Reserve Bank of India has underlined that ‘the dent in urban demand poses downside risk’.

RBI’s Consumer Confidence Survey (on general economic condition, employment, overall value, own income and spending) across 13 major cities gave a serious message.

Consumer confidence ‘has gone to a new all-time low.’ Worse yet, the Futures Expectations Index ‘moved into pessimistic territory for the second time since the start of the pandemic’.

The ‘State of Work in India 2021’ report released by Azim Premji University reflects the broader picture of the crisis. It states that ‘the number of people living below the national minimum wage limit increased by 23 crores during the pandemic.’

Specifically, the report shows that while the poverty rate increased by 15 per cent in rural areas, the rate was more than 20 per cent in urban areas. Government data shows that more than 75 lakh families have withdrawn from EPF to meet their daily needs.

The imperative to revive the economy and sustain growth demands a re-look at the COVID relief framework.

In good and bad times, economic growth rests on the fundamental principle that income drives consumption and investment and demand stimulates economic growth.