Amartya Sen, Raghuram Rajan, Abhijit Banerjee Stress on Poverty, Hunger

Amartya Sen, Raghuram Rajan, Abhijit Banerjee give simple ways to revive the economy while helping the poor during the global health crisis.

New Delhi| Sen, a Nobel laureate in economics, is professor of economics and philosophy at Harvard University; Rajan, former RBI Governor, is professor of finance at University of Chicago’s Booth School; Banerjee, Nobel laureate in economics, is a professor at Massachusetts Institute of Technology, they write how India could help herself out of this health crisis which has resulted into a social and economic crisis:

In India, we usually worry a lot about the likely missteps that can happen in the enforcement of large-scale transfers; the cash (or the food ) may end up in the wrong hands, some mediator may get rich at the cost of the taxpayer. In some ways, this is a pleasing shift from the see-no-evil confidence that gave us government-run hotels and “luxury” river cruises. But in the middle of a highly infectious pandemic and the downfall global economy, with the country in lockdown and with lives and livelihoods at stake, in times like these, it is the wrong set of concerns.

By far the biggest worry right now is that a huge number of people will be pushed into dire poverty or even starvation by the unification of the loss of their livelihoods and interruptions in the standard delivery mechanisms, as it becomes clear that the lockdown will go on for quite a while, in a total or a more localized version.

That is a struggle in itself and, moreover, opens up the risk that we see large-scale disobedience of lockdown orders — starving people, after all, have little to lose. We are obliged to do what it takes to convince people that society does care and that their minimum well-being should be secure.

We have the resources to do this; the stocks of food at the Food Corporation of India stood at 77 million tons in March 2020 — higher than ever at that time of the year, and more than 3 times the “buffer stock norms”. This is expected to grow over the next weeks as the Rabi crop comes in. The government, acknowledging the disturbances to the agricultural markets from the lockdown, is more than usually active in buying the stocks that the farmers need to get rid of. At a time of national emergency, giving away some of the existing stock makes perfect sense; any rational public accounting system should not define it as inordinately costly.

Indeed the government already has shown a willingness to use the stocks — it has offered a supplementary PDS provision of 5 kg/person/month for the coming 3 months. However, it is very likely that 3 months will not be sufficient since even if the lockdown is lifted soon, the process of resuming the economy will take time. More importantly, a large fraction of the poor are omitted from the PDS rolls, for one reason or another (such as identifying barriers to get a ration card that turns out to be hard to overcome), and this supplementary provision only applies to those who are already on it.

For example, we are told that even in the small state of Jharkhand there is 7 lakh pending applications for ration cards. There is also proof that there are a lot of bona fide applications (for example of old-age pensioners) held up in the verification process, partly because the responsible local authorities try to avoid letting anybody in by mistake to avoid any aspect of malfeasance.

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This kind of punctiliousness has its benefits, but not in the middle of a public health crisis. The right response is to issue temporary ration cards — maybe, for six months — with minimal checks to everyone who wants one and is willing to stand in a queue to receive their card and their monthly allocations. The cost of missing many of those who are in dire need vastly exceeds the social cost of letting in some who could perhaps do without it.

Once recognized, this principle has a number of significant implications. First, the government should use every means at its disposal to ensure that no one starves. This means expanding the PDS but it also means setting up open canteens for migrants and others who are away from home, sending the equal portion of the school meal to the homes of the children who are now stuck at home (as some states are already doing), and making use of reputed local NGOs that often have a way to reach the most marginalized groups of the society which the governments can’t reach.

Second, even if the meals are secured for now the unexpected loss of income and savings can have serious consequences: to buy seeds and fertilizer for the next planting season, farmers need money; shopkeepers need to ascertain how they will stock up their shelves again; many others have to worry how they would repay the loan that is already due. As a society, there is no reason why we should ignore these concerns.

The government has partly recognized this in the cash transfers it has promised to certain groups; but the amounts are both small and narrowly targeted. Why only farmers and not landless labourers, especially since MGNREGA is hobbled by the lockdown? And help needs to be extended to the poor in urban areas. Once again, the priority should be to err on the side of being inclusive.

The idea by P Chidambaram of using the MGNREGA rolls from 2019, plus those covered by Jan Arogya and Ujjwala to identify the poor families and to send them 5,000 rupees each to their Jan Dhan accounts, appears like a good measure. But we must acknowledge that none of these lists are perfect and moreover the recent work of Rohini Pande, Karthik Muralidharan and others have revealed the many gaps in the JAM system in context to reach the very poor. Therefore, as a part of the commitment to not omit the needy, funding needs to be available that state and local governments can use to find effective ways to help those who suffer from extreme deprivation.

If there was ever a challenge that requires brave and imaginative action, this has to be it. We need to spend wisely given the enormous likely demand for the fiscal resources in the coming months, but skimping on helping the truly needy is the surest way to lose the plot.