The impact of the new coronavirus has been pervasive. But those in the lower income groups are the worst affected as they tend to have poorer health, limited access to resources and little savings, if any at all. And they constitute a large proportion of the informal sector.
India’s informal sector also constitutes over two-thirds of its working population. Not surprisingly then, measures that ease the burden on the informal sector will help the nation.
It is critical to incorporate into those measures what is known about the economically marginalised as well as about the coronavirus. Only then will any option make sense.
However, as of now, there is incomplete information about both.
Decisions under Uncertainty
Nonetheless, decisions have to be made. And the decision-making process has to recognise the inherent trade-off. Although economists and epidemiologists seem to be at logger-heads over choosing between saving lives and saving the economy, that is a false dichotomy.
The real choice is not between saving the economy and jobs, but rather between saving lives now and saving lives in the future. Health professionals, much as they desire to, cannot attack the Covid-19 disease with full force while at the same time fight existing diseases. The emergence of the novel coronavirus is derailing vaccinations to eradicate measles, for example. Every decision, including partial opening of the economy, must be cognizant of such hard trade-off.
Coronavirus related death projections change frequently. The infection rate of Covid-19 changes dramatically and the related data are messy; models that forecast death rates are also unpredictable. All this is complicated by factors such as the asymptotic time-lag between the infection and the onset of the disease.
What is known is that the virus is extremely dangerous for the elderly. Those 60 years old and above have a substantially higher fatality rate while those under 30 have an extremely low rate. And it is agreed that various voluntary steps such as wearing masks and washing hands are important. This information makes it possible to make decisions with respect to the informal sector that will ease the pain of the lockdown.
The Informal Sector
The informal sector includes activities related with the primary production of goods and services. Construction, mining and quarrying, retail trade, accommodation and food service activities, and transport are some of the broad categories of informal sector activities. More generally, it includes persons engaged in very small-scale or casual self-employment activities.
According to the latest economic census in 2013, the informal sector comprised 45.36 million establishments engaged in non-agriculture activities. These economic units grew at the rate of over 28 percent in the previous eight years.
The same growth in the last seven year implies that there are at least 58 million establishments in the non-agriculture informal sector alone. And much of the informal sector is, arguably, economically poor. The well-to-do entrepreneurs are part of the formal sector.
The 58 million excludes the agriculture-related informal sector establishments. Furthermore, that number represents only “establishments.” The number of people employed in these establishments will be substantially greater.
A blanket ban on all non-agriculture informal sector activity deprives the poor with the means to a livelihood. Those employed in these informal establishments may well include numerous migrant workers, who are voicing protests against the lockdown.
But economic and nutritional deprivation is not the only danger. The poor are likely to have poorer health. If they have asthma or TB, they are at greater risk of dying from the COVID-19 infection. With fewer resources and limited transportation, any illness is extremely dangerous.
Limitations of Ban on Economic Activity
A ban is problematic for another reason. It needs to be implemented. For example, trucks are allowed by law to ply but there has been confusion and problems with implementations.
A total ban is extremely restrictive. Bans on construction mean that a site that can operate with, say, one-third of the workers working at safe-distance will not operate at all. Retailers who could safely serve one person at a time and earn maybe a quarter of normal earnings won’t serve anyone now.
Ban on the auto-rickshaw means that the owner cannot use their vehicle to offer other services. Transport services could be provided while maintaining social distance and wearing a mask. For instance, auto-rickshaws can be used to transport goods – maybe even fodder and ease the pain of the suffering dairy farmers.
States could begin by taking baby steps. For example, districts with a low proportion of elderly people can open up. And local and government officials could focus on communicating measures such as hand-washing and social distancing to ensure safety. The elderly, and families with those at risk, must be unambiguously aware of the serious dangers.
Individuals, whether in the informal sector or outside of it, are not immune to incentives to preserve their lives and avoid the coronavirus. Increasingly many are wearing masks and maintaining social distance. So self-preserving voluntary activities could happen even when “enforcers” are not watching.
Freeing the shackles of restrictions will ease the pain of the lockdown not only for those in the informal sector. Humans are susceptible to coronavirus but also remarkably ingenious at adapting to constraints when free.
The author teaches Economics at St. Joseph’s College (Autonomous), Bangalore