Uploaded on July 22, 2020

Short Takes

Case for cautious optimism

Dr Mohammad Manzoor Alam

Earlier last week the Prime Minister delivered an encouraging, optimistic message to the country. He said green shoots had begun to appear in the economy, vaguely suggesting that the shoots would soon turn into saplings, which would grow into huge banyan trees in no time. 

The Prime Minister’s exuberance was occasioned by an uptick in the sensex, which in no case is an indicator of the state of real economy that is not merely about share or bullion markets. It is more about our livelihood, social security, health, education, nutrition profile, the wellbeing of mother and child. It includes a large number of indicators like wages, earnings, savings, demand, consumption and investment. 

We welcome the Prime Minister’s talk, but we have to approach it with guarded optimism. Things that politicians say do not always mean what is generally understood by ordinary citizen like us. Recall what he had said at the time of announcing note ban. At the end of the note ban “Bharat soney ki tarah chamkega” (India will shine like gold at the end of note ban). Was it what happened? 

For us, the people of India, it is time for more sobre stock-taking. One of the government’s favourite economists, Manish Sabharwal, has clearly said the FY 2021 is going to be a complete wash out, and the real economy’s revival will begin in FY 2022. This is the opinion of stock exchange watchers also, even though stock exchange’s  relevance to people’s wellbeing is only marginal.

It is better for us to be cautious and realistic rather than filipant. We must keep in mind that unemployment was at a 40-year high even before Covid-19 kicked in. The rural wages have further come down because of oversupply of labourers returning from cities. 

There is a real fear among economists that 10 to 35 crore people might slip back into poverty again because of the disruption in the economy. That will wipe out the economic gains of two decades of development that had pulled the largest number of people out of poverty anywhere in the world. 

The villages are particularly vulnerable as millions of rural migrant workers in cities used to send home 30-40 per cent of their city earnings back in their villages. With the city jobs gone, there is no remittance to families and the average wage of these people in the villages is only one-fourth of their city wages. 

A substantial number of villages are being covered under a modified version of MNREGA, which ensures Rs 1,500 income per week, subject to frequently changing policies of government. For us as a country and as a people it is time for some serious thought and firm action to limit the damage and overcome our difficulties.