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Of Job Losses & Food Prices:HOW ABOUT A PACKAGE FOR THE POOR?, by Shivaji Sarkar,2 January 2009 Print E-mail

Economic Highlights

New Delhi, 2 January 2009

Of Job Losses & Food Prices

HOW ABOUT A PACKAGE FOR THE POOR?

By Shivaji Sarkar

 

When the going gets tough, it’s toughest for the weaker sections of society. Not considered creditworthy, the poor remain the worst sufferers as economic growth slows down. After all, they are the most vulnerable in terms of unemployment, homelessness and malnutrition. Worse, the present crisis has accentuated their troubles.

It is thus imperative to evolve a protection package for them this New Year. If not turned into an asset in the growth mechanism, the poor have the capacity to affect the overall well-being of the country. This crisis is seeing more poor losing their jobs. In the textile sector alone, Commerce minister Kamal Nath says that 65,000 jobs have been lost. The Chairman of the Parliamentary Standing Committee on Finance, Sudhakar Reddy, says “our information is that five lakh workers lost their jobs in the last two to three months. The situation is alarming”.

The job cuts are in both private and public sectors. In the latter, those on daily wages or contract are being denied extension. However, no unemployment figure is final. According to AITUC General Secretary Gurudas Dasgupta ten lakh workers have become jobless in the past two months. The parliamentary committee has asked the Government to come out with a report.

Fewer the jobs mean less consumption and more malnutrition. The recent Mid Year Review (MYR) projected lower GDP growth. Industrial and manufacturing production declined. It has also reduced the growth rate to 7 per cent from last year’s 9 per cent.  Clearly, this would have a more serious impact on the economy rather than just lower income. It is bound to affect the living standard of people and their consumption pattern.

As per statistics, inflation based on wholesale price index (WPI) is stated to be coming down. It is not being reflected in food prices, which remain at a very high and unaffordable level. And, when people spend more on food, it affects their spending on other necessities. This is further being reflected in the manufacturing and industrial sectors. But for the poor it is more serious. With food at unaffordable prices, the poor cut down their consumption which leads to malnutrition.  

According to the Global Hunger Index of the International Food Policy Research Institute, India is home to the world’s largest food-insecure population with 20 crore people facing hunger out of 88 countries. Both the World Bank and the Asian Development Bank have estimated that 41 to 58 per cent people live below the poverty line in India. This only indicates that the high growth rate has not benefited the poor. In addition, it also means that the market reforms have not considered the poor as its integral part and though they remain out of the market, they are not insulated from its ills.

Even the projected 7 per cent growth seems a dream for who it matters. Since it does not address the twin problems of growth and equity, it is unlikely to save the country from the morass that has set in. The Planning Commission, in its own assessment, has found the going to be tougher and may further slowdown the growth process. Would it come down to 4 per cent? Nobody says a no either.

Regrettably, the fiscal packages announced since October are not addressed to the workers but are specific to just the industry and banking sectors. The packages are supposedly expected to boost demand in 2009. But the poor again aren’t the target, at least as direct beneficiaries. This apart, the National Rural Employment Guarantee Scheme (NREGS) is learnt to have not given even seven days of wages to the rural poor in some cases.

Clearly, the Government needs to prioritize empowerment of the rural poor so that they could partake with some benefits of the market economy. The WPI has dropped to below 7 per cent, but food inflation is yet to be controlled. It has gone up to 10.43 per cent from 8.4 per cent in August 2008 when inflation was at 13 per cent. Important food items such as cereals, vegetables, fruits, eggs and meat have become more expensive.

Though the market may not feel the necessity to give a thought to the plight of the poor, it must realize that less disposable income, particularly in the rural areas, means it would sell fewer goods to them. An average poor family spends almost 70 per cent of its income on food items and higher prices have seen direct fallout on purchases of goods such as textiles and cloth. Besides, job loss in the textile sector has a bearing on higher food prices.

In sum, the situation calls for a revision in policy. The present scenario is an offshoot of neglecting food self-sufficiency and creating a policy of food imports. This apart, the Government needs to rethink its policy of doing away with the public distribution system (PDS). All through the 70s and 80s, the PDS had indirectly aided the manufacturing and industrial growth. It had acted as an interventionist system to protect the poor from profiteering of the private cartels and kept the food prices under check.

The present meltdown world-over has put governments under pressure to ensure its control to protect its people. In India too, the Government needs to not only revive the system but maintain it too. Most fiscal initiatives so far announced are for large enterprises. But the poor are mostly employed in small and medium enterprises (SME) that include construction, handicraft, gems, jewellery, handloom and small textile units. The slowdown has led to closure of most of these units and the poor have lost their jobs.

A policy for helping the SMEs is yet not in place. It is so because, in an era of multi-nationals, the SMEs are not considered good bait for investment. Thus, a policy focus and change is required not only to revive the jobs but also as a futuristic tool as the SMEs provide employment to the uneducated and less skilled people, i.e. bulk of the poor. Besides, SMEs work in backward areas. Properly utilised they could become the engine of growth in the backwaters. As a result, it would raise rural income and a proper food policy could keep the prices in check to save the poor from sliding into the trap of hunger and malnutrition.--INFA

(Copyright, India News and Feature Alliance)

 

 

 

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