The COVID-19 pandemic is not only a health crisis but an economic crisis too. In particular, the anxiety and fear COVID-19 has created among the poor is unprecedented. It has also created a double burden for this group; loss of income now and loss of hope, or aspirations, for the future. Here, Dr Ravi Nandi and Dr S. Nedumaran from Flagship Project 1 at ICRISAT examine the evidence for policies to improve aspirations in times of crisis.
In India about 91% of the total 465 million workers work in the informal sector. These groups have irregular incomes and are highly vulnerable to economic slowdown and health crisis. In the past two years, the Indian economy has been slowing down and the current COVID-19 pandemic crisis is compounding the impact. Millions of people now fear losing their jobs due to the extra pressure COVID-19 is placing on India’s economy.
The crisis is affecting different regions of India disproportionately due to regional differences in resource endowments, unemployment levels, and agrarian distress. Currently, of the 739 districts in the country, around 300 districts are unaffected by COVID-19 and another 300 reported only a few cases.
Notably, in rural areas, seasonal migrants, smallholder farmers, the landless, and daily wage labourers are being severely affected as most of them depend on additional income from the informal sector. Many of these workers take on jobs in construction, as taxi and auto rickshaw drivers, or in petty shops etc. The central and various state governments have announced relief to support the poor, but the measures are not adequate. To make matters worse, many of the millions of migrant labourers who returned back to their villages from major cities have not received any relief at all, and have started competing with local daily wage labourers for work amidst uncertainty of returning back to cities.
Untold economic damage
During the extended country wide lockdown many medium and small industries were closed. Employees do not know whether these businesses will reopen and if so, how many of them will then lose their jobs. Due to the wider global economic crisis, several industries and multi national companies in India have scaled down their operations, meaning many development projects may not take off or may be delayed due to budget reallocation to manage the pandemic.
Assessing the economic damage is very difficult as no one knows how long the lockdown will last. Several predictions suggest that the pandemic may last for few months to a year in many countries, and that there could be one or a series of waves of infection. The lockdown has already created a lot of pressure on India’s economy. Prolongation of lockdown may further accelerate economic slowdown and so push the poor into a vicious cycle of poverty. It is this uncertainty that is causing a sense of no hope for the future among the poor.
Communities are losing hope
Amid the COVID-19 pandemic the TIGR2ESS team at ICRISAT spoke with many people in our research site villages over the phone. We spoke with people engaged in the informal sector who had returned recently to their village from urban areas and asked the following two questions:
What is the most important thing that you wished to attain in the next two years?
Will you able to attain what you had planned? If no, why do you think you could not attain it?
Our interviews with the villagers revealed that COVID-19 shocks on economic activities and the labour market have led to uncertainities about the future. In response to our questions, one farmer from Warangal rural district of Telangana told us:
“I had a plan to invest in a micro irrigation system in my farm to expand the area under irrigation to grow high-value crops. However, due to the lockdown I left two acres of tomato crop unharvested and now I cannot even think of my planned investment in irrigation for next two years.”
Many newly graduated youths in the villages, who had been waiting to get their dream job, now find their dreams shattered. Many others may lose their hopes of persuing higher education altogether. A migrant factory worker who returned to the village from Hyderabad city, said:
“My son is a bright student and completing his 10th exams this year in my village. I had a plan to take him to Hyderabad for pre-university education. However, due to the current pandemic crisis and lockdown, I didn’t receive my last month’s salary. Now I cannot dare to take my son to the city as I’m not sure how long this situation will continue and even not sure I will have a job.”
Building aspirations is key
The lack of hope in the future and low aspirations are typical characteristics of poor people. ‘Aspiration’ is a psychological concept but empirical evidences demonstrate that poverty analysis is incomplete if it does not consider the aspirations of the poor and analyze the challenges they face in attaining these aspirations.
The 2019 Noble laureate Esther Duflo reported that low aspirations among the poor result in fewer investments to bring about a more prosperous future; if the poor don’t see a tomorrow in which their well-being can be better than today, they do not make an effort to improve it. As a result, they become trapped in poverty. A growing body of literature also reveals that sudden shocks such as the COVID-19 pandemic could hamper the long term economic prospects of the poor.
Evidence suggests that the development of social safety programmes could build the resilience of the poor and help people to recover from the shocks . Further, various IFPRI studies in rural Pakistan and Ethiopia suggested that having higher aspirations helps build resilience through greater productive investments in their livelihoods. When people believe that they have no control over what is happening in their lives, they aspire to achieve less. This suggests that public policies and governance aimed at boosting aspirations during times of crisis could support people to achieve better outcomes.
How to boost individual’s aspirations?
To raise the aspirations of poor who are badly affected by the pandemic, efforts must essentially focus on social protection programmes covering all those affected in the informal sector. In particular, the livelihood and material well-being of the most affected people during the crisis. The Government’s current relief schemes, which are one size fits all, do not address the underlying regional differences outlined above, instead need for programs according to local conditions.
One effective way of raising aspirations is to quickly analyze the benefits and drawbacks of existing programmes or relief schemes and fix the gaps with appropriate social protection programs. Bring the confidence and hope among the poor in their future by communicating that government is with them in a difficult time.
The Indian government, through addressing the nation at regular intervals and announcing relief measures, is making an effort to bring hope and confidence to those affected. In an unprecented move, Prime Minister Modi spoke with several Gram Panchayat Sarpach (Chairman) across the country; this never happened before in this world’s largest democracy.
But how much information from government is reaching the poor? Could more be done at a household level? Existing networks could be used much more extensively to reach households to distribute aid and create awareness about the welfare programmes available to workers during this pandemic. Such activities would bring much clarity for the poor about their future.
Policy must be evidence-based
To better inform policymakers on appropriate programmes which can build resilience in aspirations, more research within communities is needed. Such research could help create new effective development programmes and social protection policies for use during any future natural disaster.
Our work at ICRISAT, for the TIGR2ESS programme, is well placed to understand the effects of COVID-19 on the aspirations of rural communities. We are planning a follow up survey at our research sites in the rural, peri-urban and tribal areas of Telangana to understand how aspirations have changed among those who received government relief and those who did not. With this work, we are hoping to provide evidence-based policy advice to government or development agencies to design appropriate programmes to improve the well-being of the poor.
Originally published on the TIGR2ESS blog.
About the Authors
Dr S Nedumaran
Senior Scientist – Economics
Markets, Institutions, Nutrition & Diversity,
Innovation Systems for the Drylands Program,
Dr Ravi Nandi
Associate Scientist (Agricultural Economics),
Innovation Systems for the Drylands Program
Views expressed are authors own.