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By AbhijitDoshi

The Covid-19 pandemic has brought into focus inherent weaknesses of the Indian economy. Lack of financial stability, inadequate healthcare facilities and inhuman conditions of migrant labour, for example, point at policy failures at large or tardy implementation of some policy measures.

The challenges faced by the financial sector are plenty, but largely clear. The banking system is flush with liquidity, but banks are unwilling to take the risk of lending. RBI cut repo rates by 115bpson top of the 135bps cut delivered by the MPC last year. Yet the extent of transmission of these cuts by banks leaves everyone unhappy. MSMEs are one of the worst hit by the unwillingness of banks to reduce lending rates in keeping with the state of the economy.

A recent paper by Tobias Adrian and Fabio Natalucci on the IMF website (COVID-19 Worsens Pre-existing Financial Vulnerabilities) notes that much the same way Covid-19 hits people with pre-existing health conditions strongly, so is the pandemic-triggered economic crisis exposing financial vulnerabilities built up during a decade of extremely low rates and volatility. The authors warn that vulnerabilities in credit markets, emerging countries and banks could cause a new financial crisis. This statement has a lot of relevance to India.

The situation in healthcare is similar. India has always faced shortage of hospitals, doctors, health workers, medicines and other inputs. These shortages are more acute in rural areas. Despite government spending and policies to assuage the shortage, and despite the increase in the number of hospitals, doctors, etc, the demand seems to constantly outstrip the supply. Covid-19 brings out this reality starkly.

The issue of migrant labour is more complex. India is a democratic country and people are more or less free to work anywhere. But the reality is harsh. At the level of manual labour, they mostly migrate for economic necessity, than out of choice. Away from home and family, they mostly live in pathetic environs, and have small and irregular income.

The heart-wrenching photos of migrant labourers walking miles to reach their villages, with old parents and children, without food, money or shelter on the way, in the peak summers, are reminiscent of people crossing borders during Partition. While walking long distances, many died, some because of fatigue while others due to accidents. Who could blame them if they feel like refugees in their own country?

The issue of migrant labour points at a basic infirmity in our economic policies and growth process that yield imbalanced regional development. That leads to strange results. Consider this: While workers want to go home, industrialists express concern they may not come back and it would be difficult to find labour to run factories. Some states do not want them to go for similar reasons. It is not that India has limited manpower in the working-age group. So, why this worry?

The lopsided development model followed for many years ensured that industries are concentrated in a few pockets, while many towns and cities have little industrial activities, and therefore employment potential. This model draws hordes of people from one region to another all the time.

To remedy this imbalance, the government had, in the 1960s and 1970s, started incentivising industries that would be set up in the so-called backward areas. Concessions were granted in sales tax, excise duties were reduced, and transport subsidies were announced. However, a few states went overboard and compromised their finances.

In post-reforms era, the emphasis shifted to infrastructure development, where the government was expected to play a major role. Considerable ground has apparently been covered in road, water, power, but a lot remains to be done in housing, particularly affordable housing, slum development and cleanliness. Equally important, availability of manpower with appropriate skills seems to be a huge challenge.

The government needs to focus on these missing infrastructure gaps. That would ensure more balanced regional development and minimise the need for internal migration for economic compulsions. Had that been achieved, we probably would not have seen people undertaking such long trips home. No doubt, balanced regional development takes time, but an early start even now would be welcome. We have wasted enough time. Seven decadesthe span of Independent Indiacould have taken us a long way.

The author is Media consultant

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Housing, slum, cleanliness: Govt needs to focus on these missing infrastructure gaps to deal with migration crisis - The Financial Express