The Corona Virus Impact on India: Some Political Economy Dimensions

Surajit Mazumdar

It is of
course a truism that the Coronavirus is a highly ‘social’ pathogen which can
use the conditions created by the socialized nature of human life and the
relationships among human beings that this involves – irrespective of whether
these are unequal or equal, friendly or antagonistic, exploitative or
cooperative – to quickly transmit itself and threaten members of all classes
and social groups.  Therefore, notwithstanding
the inequalities and antagonisms among and within countries, collective
responses however imperfect have had to be forged in the battle against the
pandemic at global and national levels. However, in addition to the challenges
posed by the need to reconcile social solidarity with ‘social distancing’, the
imperfections resulting from the contradictions in human social reality imply
uneven effects of the ‘collective’ response across the social spectrum – with
regard to the distribution of its benefits as well as of its costs.

The health
crisis and its economic fallout imply that in addition to the human lives that
are lost to the epidemic, there is a cost or a price to be paid in the effort
to minimize such a loss. In a society characterized by inequalities, this
burden does not automatically distribute itself between different social
classes and groups in proportion to their ability to bear it. It in fact most
certainly has the exactly opposite character, but the degree is variable
depending on the politically determined nature and effectivity of
counteracting redistributive measures. However, the same context which
increases the need for such measures in comparison to more ‘normal’ times also
tends to alter the balance of forces in the opposite direction. India, whose
cheap labour capitalism and secular democracy were both facing crises even before
the Coronavirus impact struck, confronts these contradictory impulses in a
particularly sharp way.

fundamental propositions can be accepted as having general validity across the
world and in India too. Firstly, that extreme restrictions on human activity
for a period of time, including measures like lockdowns, are an inevitable part
of the arsenal that has to be used in the battle against the coronavirus
epidemic and these may need to be around for some time if the epidemic is to be
conquered. Secondly, since the epidemic has caused widespread fear among people
across all classes, such restrictions do have a general social acceptance
despite the inconvenience and hardships that they cause, and people are willing
to accept a sacrifice for its sake up to a point. It doesn’t follow though that
implications of the restrictions are fixed and invariable.

The Contractionary
Effect of the Coronavirus: Economic, but also Political
The Coronavirus
and measures against it have the effect of reducing the level of economic
activity worldwide and a resultant income loss. This contractionary effect works
through the adverse demand, supply and financial consequences produced by the social
response to the Coronavirus threat – including voluntary actions by people as
well as those enforced by the State. All economic activity involves one or
other kind of physical proximity, sharing of spaces, or social interaction
between human beings. If constraints are imposed on these or their frequency considerably
reduced, motivated by the desire to reduce the spread of the infection, reduction
or suspension of many economic activities is inevitable. Since costs and debts
are incurred before their corresponding revenue streams result, the hit on the
latter can have implications beyond the period of suspension of activities as
enterprises can go under as a result. This also tends to spill over to the
banking system in the form of greater default in debt servicing. As production
and income losses affect large parts of the economy – the linkages between its
different parts mean also that there are negative multiplier effects of these. In
an unplanned economy, it is also more than probable that these contractionary
effects are in excess of those that are needed from the point of
view of dealing with the virus.

In India, the
Coronavirus shock is being inflicted on an economy which has several important
specificities. India’s is not just an unplanned economy but one which has a
large unorganised component – millions of enterprises providing self-employment
or informal wage employment which co-exist with a relatively smaller number of
typically corporate controlled larger enterprises with both formal and informal
wage employment. It is a low- income economy in which the significance of a
mainly peasant agriculture is still very important – the sector’s products have
a large share in the consumption basket of most Indians while almost half the
households depend fully or partially on that sector for their livelihood. Agrarian
distress, large scale underemployment and unemployment, high levels of
inequality and their eventual effects in terms of a slowing down of Indian
growth – were already features of the Indian economy before the Coronavirus hit
the country.

The nationwide
lockdown in India has now been extended by 19 days after the three-week first
phase was completed. However, restrictions and ‘distancing’ were part of the
reality even before the lockdown began on 25 March 2020. Moreover, given that
the numbers of the infected continues to be on an upward course and the general
experience worldwide, several restrictions are likely to remain well beyond 3
May 2020. So, we are therefore likely to experience a severe contraction of
production and income generation due to the Coronavirus and its containment
measures alone. A simple back of the envelope would show that if we assume that
50 to 60 per cent of all economic activity is shut for 40 days of the lockdown,
that alone will mean a loss of 5.5-6.5 per cent of the annual
GDP. Added to this would be the effects of restrictions both before and after
the lockdown, and those due to the fact that return to normal level of activity
after a shock episode takes time even in the best of circumstances. In India’s
case many parts of the economy were already in a fragile state due to the
crisis. The recessionary tendencies created across the world would also be
reinforced by their transmission effects across economies and India will not
escape its consequences. Since the Indian GDP was expanding at less than 5 per
cent per annum according to the official estimates, and at a much lower rate
than that, even zero, according to many economists, the prospect of an
unprecedented shrinking of the income base of the Indian economy in the current
financial year is very real. This of course means a deepening of the already
existing crisis and makes any spontaneous recovery from it much less likely.

The direct and
immediate implication of the shock for those whose labour produces the aggregate
production and income is to split them into two categories, or in a sense
change their distribution between two categories. On the one hand are those who
have to work perhaps more, and in more adverse and riskier conditions, than is
normal. These are those who work in the essential and permitted activities
which have to continue to operate despite and also due to the Corona virus
threat. On the other hand, there are those who are forced out of active labour
because of the disruption in the economic activities which would have engaged
them. For some of the latter, it might mean forced leave from work but for the
larger number it means losing their jobs and earnings, or crippling effects on
the own account and tiny enterprises which employ them, with more uncertain
prospects of any future restoration of these. This would mean a swelling the
already large ranks of the labour reserve in India. Given India’s peasant
agriculture and high levels of self-employment, there would also be a large
category of people in an intermediate category – who may work but receive much
less than normal as their earnings. In many cases, like migrant workers who
have to live in cramped quarters in densely populated slums, their inactivity
does not even necessarily come with the benefit of lower risk of contracting
the Coronavirus infection. That several slums of Bombay and Pune, the worst
affected region in the country, have become hotspots of the infection stands
testimony to this.

All situations
mentioned above actually together imply that in a period of drastic reduction
in the generation of aggregate income, the part which goes to those who labour
must increase. Those who continue to work must receive directly
or indirectly more than the normal levels of remuneration to compensate them
for their extra work and greater risks, for the inconveniences and harassments
caused by the general restrictions, and for the extra safety measures they need
to take. Those who cannot work or cannot earn have to still maintain themselves
and their households, for which they must either receive their wages despite
not being engaged in actual labour or must receive transfers from the state
that ensures adequate compensation for their loss of income – whether this loss
is in wage income or income from self-employment. In a cheap labour economy
where earnings from labour of so many are pegged at very drastically defined
minimum subsistence levels and most households have little reserves, the level
of this compensation relative to normal earnings has to be much higher perhaps
than in conditions where floor wage levels and general welfare provisioning is
higher. At least in relation to the Coronavirus, they also have to be provided access
to healthcare facilities that may have been denied to them if the illness were
different. Moreover, if there are shortages in the availability of essentials
because of the economic disruption, then these also have to be rationed so that
the better off do not corner and stock them.

The implication
of all the above is that the economic crisis created by the Coronavirus
necessitates a redistribution in favour of the labouring classes.
However, the ability of either segment of this large group in society to compel
their employers or the state to do what is needed for this is also severely
restricted by the Coronavirus threat – and the distancing and lockdown measures
it calls forth. Those who are doing ‘essential’ work cannot easily go on strike
or slow down their work. No group can ‘demonstrate’ its discontent, anger or
resentment in traditional ways – even the May Day rallies would not be possible
this year. Their organizations and those that represent their interest are also
hampered in terms of their functioning, and all grievance redressal mechanisms
including institutions like Courts are almost non-functional for ‘ordinary’
matters. All of this circumscribes further their already limited ability to
influence what makes ‘headlines’ and much greater control on that comes into
the hands of the purveyors of news. Add to this the fact that the epidemic
conditions also result in the State and its coercive apparatus acquiring
exceptional powers – in the Indian context when an exceptionally authoritarian
regime is already in place at the Centre, and the restricted federal structure
of government has been further emasculated by the legal provisions applicable
at times of epidemics and disasters.

accompanying the economic contraction is also an exceptional contraction of
democratic space, as the ability to exercise political rights is effectively curtailed.
This is by no means class-neutral in its effect. Some of the recognizable
expressions of this of this shrinkage of democracy are the recent arrests of
Anand Teltumbde and Gautam Navlakha in the Bhima Koregaon case; or of Safoora
Zagar and Meeran Haider of the Joint Coordination Committee for Movement
Against CAA, in the midst of the pandemic; and the UP Police’s actions against journalists
Siddharth Varadarajan. There are in addition more hidden expressions in the
form of the greater silencing and invisibility of the working people and their
distress at a time when that distress has increased manifold. Of course, the
plight of the urban migrant workers still makes some headlines and even evokes
‘public’ sympathy and governmental ‘concern’ – but that is only when they
resort to desperate measures like walking miles to get back home or breaking
the law restricting large assemblies of people. The question to ask is – how
much of the actual scale and magnitude of that distress has actually come out? We
do know that apart from the deaths on account of the epidemic, a number of
distress related deaths have also occurred and there are no prizes for guessing
the class composition of that category[1].
The hunger that is stalking so many and the longer-term damage to their health that
is being inflicted may never even make it to the statistics unless hundreds of
them start dropping dead. Even in relation to healthcare, the focus on the
Corona virus is also impeding the access to treatment for other health issues.

The silence and
invisibility of the labouring millions creates greater scope for the
articulation of the ‘voices’ of the propertied classes and the privileged,
which rely on different mechanisms. The empowering of the state, never a
‘neutral’ arbiter between different classes, strengthens their position too. Of
course, the propertied and privileged also suffer from the economic impact of
the Coronavirus as they do in any crisis – a drastic reduction in employment
must also mean a reduction in the surplus component of that labour and the
earnings these would have generated. Some business enterprises, even larger
ones, may also go under or suffer long term damage because of the crisis. These
effects, however, are not the same as the one experienced by the working
people. More specifically, it doesn’t reduce but increases the power they exercise
in the domain of production over those who labour and the power they as a class
exert in society as a whole. This can and will translate into shaping the
‘collective’ response to the crisis – a glaring example of which is the stand
taken by the Government in the Supreme Court regarding the charges for
Coronavirus testing by private labs. Unless neutralized soon, this power will
also exert its influence on the trajectory of ‘recovery’ after the immediate
health crisis is over.

The Fiscal Dimension:
Is it too “Taxing” to Spend More?
One area where
the balance of forces comes into play in determining the response to the crisis
is by its influence on the approach to fiscal policy. The economic contraction
represents one part of the aggregate cost resulting from the Coronavirus
threat. There is also the more direct cost of the additional resources that
have to be devoted directly to dealing with the medical side of the problem. While
the former tends to reduce the aggregate income base of society and reducing
what it produces, the latter makes for an exceptional demand on that income and
requires greater production of at least some things. In a context where less
income is generated, more has to be spent on healthcare. In an economic context
where less is to be generally produced and traded, more beds, medicines and
testing facilities, more personal protective equipment for medical personnel,
more quarantine facilities, more ventilators, and other medical equipment, etc.
have to be found.     

The spread of
the infection, even if slowed down, imposes exceptional demands on the health
system that are beyond its normal capacities and capabilities. The
characteristics of the Coronavirus are also such that these expenditures have
to be socialized to a much greater extent than is the case
normally, and therefore it creates an impetus for public health expenditure to
expand. It is also true that if any effective redistribution to the working
people has to happen, a large part of it would be through welfare transfers by
the state to the working majority. In combination these imply a significant
increase in public expenditure at a time when the revenue side of the
government budgets would also tend to be hit by the economic contraction. 

In India, the
slowdown had produced a crisis in revenue collections of central and state
governments even before the Corona problem emerged. 2018-19 had seen a
significant slowing down of revenue growth which became only worse in the
subsequent year. The gross revenues from Central taxes for the April-February
of 2019-20 were lower than in the same period the previous year,
with the share given to the States reduced by 6%. GST revenues till March-end
have not even increased by 4 per cent in nominal terms compared to the previous
year. Adhering to the ‘fiscal prudence’ norms – the focus of which is to keep
the deficit in check even while maintaining low taxes – was therefore already
proving to be impossible. These norms have to be completely abandoned now if health
expenditures and relief transfers from government have to be ramped up without
making significant cuts in other routine expenditures. Moreover, as long as
restrictions impeding economic activity are in force, this increase in
expenditure and the fiscal deficit does not constitute a way of ‘stimulating’
the economy as were such measures when taken in response to the global crisis.
In conditions were restrictions are in place the multiplier effects of
expenditures would be weak and therefore any stimulus measures would actually have
to be rolled out later. Moreover, unlike a ‘stimulus’ in response to a general
crisis of demand, where much of the transmission of benefits to working people
could be made to work through businesses and the creation of employment by them
in the process of expanding profit making activities, the transfers required in
the present situation require benefits being provided directly to working
people, without any obligation on them to perform labour in exchange. In
addition, while a stimulus can include tax cuts as opposed to expenditure
increases, the present crisis requires expenditures.

In these
circumstances, the abandonment of fiscal prudence in response to the current
crisis inevitably comes up against the resistance from corporate and financial
interests. Whether financed by higher government borrowing or by higher
taxation, someone ultimately has to pay the taxes currently or the taxes in the
future that will be needed to service the debt. Alternatively, someone has to
forgo some of the benefits from current or future public expenditure to release
resources for these. The abandonment of fiscal prudence today will not be short
term if it has to be followed by stimulus measures when normalcy returns – and
there will be so many claimants to such support from the state. A greater
degree of deviation today would thus mean a reduction in the ‘room for manoeuvre’
tomorrow – on the taxes side by reducing the scope for concessions as well as on
the expenditure side. An expansion of welfare expenditures in a time of severe
crisis would also ‘reveal’ the potentialities of these and make it politically
more difficult to cut down tomorrow when more normal conditions are restored.
This is particularly because distress will not completely disappear then, only
its degree might not be as extreme as today. Any durable establishment of a larger
guaranteed minimum welfare system would, however, also have significant
implications for cheap labour capitalism – creating conditions that would tend to
push up wages as well as the bargaining power of workers.   

circumstances of today are therefore very different from that at the time of
the global crisis both on account of the general economic background
immediately preceding it (in 2008, the crisis marked the end of an
unprecedented boom which had pushed up tax revenues significantly) as well as
the future implications of a temporary departure from ‘fiscal prudence’. It may
be recalled that in India a large part of the post-crisis stimulus was in the
form of tax cuts and the stimulus itself was short lived – within a few years
there was a shift to ‘fiscal consolidation’ which relied more heavily on expenditure
compression to bring down the fiscal deficit. The relentless pursuit of this
came to be the defining feature of Indian fiscal policy for the entire 2010s
decade – a trend that was started by the UPA from 2011-12 and was continued by
the BJP after 2014. Even the dramatic slowing down of investment and
accumulation compared to the boom preceding the global crisis, of which the
slowdown was only the most recent expression, produced no deviation from this

Therefore, not
only a grim present but a grim future awaits India’s working people if the more
spontaneous impact of the Coronavirus is not neutralized. Today it will and is
expressing itself in the form of limits to the relief provided to ameliorate
the distress of millions of Indians. It is also showing up in the extreme
reluctance of the Government of India to step up expenditures on Coronavirus
related measures and to extend financial support to State Governments which are
the main agents of state action on the ground. The relatively heavier reliance
on ‘cheaper’ and more extreme containment measures, whose costs are borne by
working people – for instance the combination of a nationwide lockdown but
limited testing – is also one of the contemporary expressions of the reluctance
to go too far on the expenditure front. This reluctance is visible even at a
time when many economists who otherwise are more prone to having a conservative
position in such matter are saying fiscal prudence should be set aside for now.
Once this phase of containment of the virus has passed, however, one can
anticipate that concerted attempts will be made to place the burden of economic
‘recovery’ and restoration of the fiscal balance also on the working people.

It might be
argued that the Coronavirus pandemic is an exceptional historical episode which
would change societies so deeply that a return to the world earlier may be
impossible – especially the extreme inequalities and erosion of public health
systems it gave rise to. No doubt the crisis has forced deeper questioning of
neo-liberalism the world over. However, such questioning had happened even
after the 2008 crisis without producing the durable change some had expected to
follow. Even today, the picture is hardly one sided the world over. If
solidarities and mutual empathies that would be weaker, less likely, or even
impossible in ‘normal’ times have been strengthened or awakened, the existing
prejudices, antagonisms, conflicts, and polarizations have also been reinforced
and new ones created. What will be the eventual balance between such opposing
tendencies and therefore the more lasting effects of the epidemic on the
social, political, and economic life of the world or of individual countries is
still to be determined.

In India also a
very obvious and prominent concern is the impact of the context created by the
Coronavirus on the spread and intensity of the other extremely dangerous
‘virus’,  prejudice and bigotry against
Muslims, and the effect this will have on their sense of oppression and
alienation. The discovery of a large spread of the infection among participants
at the mid-March Tablighi Jamaat congregation in Nizamuddin has hardly seen any
sympathy being expressed for the suffering it has caused to so many of them,
and it has barely been noticed that a number of them have died. Instead, it is
the danger that they have exposed everyone else to that has been the uniform emphasis
in otherwise varied responses to the incident. The implication that the entire
Muslim community constitutes a threat has not always had to be stated
explicitly for that sentiment to be created and spread – in this case too, like
what is true for the Coronavirus epidemic, there have been asymptomatic
carriers of the virus along with those showing clear symptoms. As a result even
the economic distress has acquired communal dimensions – other things being the
same, Muslims are less likely to be able to engage in economic activity or
secure relief and assistance from the state and more likely to face the
coercive element inherent in the lockdown measures. A ruling party whose political
fortunes have been built on the active promotion of such intolerance has not
hesitated to actively milk this opportunity, even misusing the power of the
state for that purpose, instead of shutting it down decisively as the proper
response to the epidemic would demand. It is unlikely to have a change of heart
on its most effective weapon; one it needs even more as it seeks to conceal its
failures on dealing with the health emergency as well as the economic fronts. Given
the structural conditions in India, there will also be parallel caste and
gender dimensions to the uneven impact of the Coronavirus threat and the costs
of dealing with it.

The point is that while a collective and
relatively unanimous social response to the Coronavirus threat is one dimension
of what is happening, this does not either mean that the inequalities in
society are not at work or that they are being weakened. Indeed, a renewed
thrust from India’s ruling classes in the direction of a more unequal, more
authoritarian, a more communalized and more oppressive structure of
exploitation is what should be expected as the challenge being confronted in an
India afflicted by the Coronavirus. Acknowledging that challenge along with a
recognition of the fact that the contradictions inherent in that process are also,
and will be, creating new potentialities or opportunities for the development
of the struggles of the working people is important. It means that these
struggles, perhaps needing to take shape in a new terrain, become doubly more
important because of the implications of the Coronavirus. The ‘politics’ of the
pathogen is therefore by no means automatically egalitarian and progressive, or
even benign – it can only be made so.

The author is Professor at CESP, JNU, New Delhi 

[1] See ‘Are Distress Deaths Necessary Collateral Damage of Covid 19
Response?  The Experience of First Three
Weeks of Lockdown in India” by Vikas Rawal, Karthick A. Manickem and Vivek
Rawal published in Vikalp earlier.