Time for Big Bold Steps to Address Climate Change

Gayatri Ramanathan, May 6, 2020

As one sits down to write this piece, the number of COVID-19 cases in India is over 50,000, global infections have zoomed past 3.5 million, there is no vaccine in sight and scattered reports of new strains of the virus are emerging.

There is no denying that the pandemic poses, perhaps, the biggest economic challenge to independent India, with an estimated economic loss of Rs 32,000 crore per day, with only a quarter of the economy being functional. More than 50% of Indian businesses are expected to be affected by the pandemic and over 122 million people have lost their jobs.

The last such pandemic was the Spanish Flu in 1918, in the aftermath of World War I, when the country saw a dramatic fall in both demand and supply. India’s GDP shrunk by 10.5% and inflation hit an all-time high in 1918. Will we go the same this time around too? Current forecasts for the Indian economy range from going into negative territory in 2021, to scenarios that predict growth between two to four per cent a year.

So, what has been the government’s response? The first thing the government did was to try and put some money in the hands of the state governments and people at large, given the severe curtailment in economic activity. The finance ministry has allowed the states to borrow a cumulative Rs 3.20 lakh crore from the market, on the basis of 50 per cent the net borrowing ceiling fixed for the year 2020-21, in the first nine months of this fiscal (April-December). Most states have demanded more funds to meet the additional expenses arising out of the pandemic as most of their budgets will now be spent on caring for the infected, preventing further spread and supporting the migrant poor who’ve been rendered destitute by the outbreak and are clamouring to go home in the absence of assured food, shelter or work.

The government announced a massive Rs 1.7 lakh crore (trillion) stimulus package on 26 March 2020, which is expected to see the economic activity back on track once the lockdown is lifted. The package is targeted to provide immediate income and consumption support to the poor, women, and workers affected by the lockdown. Pending tax refunds to the tune of Rs 18000 crore were also released to individuals and businesses in the first half of April.

Is there a silver lining to this cloud? What opportunities has the pandemic thrown up?

Building health infrastructure in semi-urban and rural areas where little or none exists currently, and offering greater support to rural enterprises, including clean energy enterprises, thus advancing the country’s clean energy transition, could be two big opportunities that the government can focus on in the coming months.

In its largest ever health sector support to India, the World Bank on April 2, approved a $1 billion fast-track project to help India create a COVID-19 emergency response and strengthen its public health preparedness to combat the pandemic. The loan will enable the Government of India to scale-up its efforts to limit human-to-human transmission, including reducing local transmission of cases and containing the epidemic from progressing further. In parallel, interventions to strengthen the healthcare system will be rolled out to improve capacity to respond to the COVID-19. The World Bank loan is targeted particularly to scale up district hospitals and designated infectious disease hospitals to deal with the epidemic. This could be the big opportunity for the government to put in place a comprehensive healthcare system in towns and villages that lack adequate medical care.

The Asian Development Bank approved $2.2 billion emergency funding for India on the heels of the World Bank, targeted at alleviating the economic impact of COVID 19 on informal sector workers, micro, small and medium enterprises, among others. With India set to witness a massive migration back to the villages as migrant workers with no jobs and money head back home (unemployment has risen to 26% from around 6% pre-COVID-19), this could be the chance to turn a probable health and economic disaster into an opportunity. By supporting rural enterprises – both new and existing ones, the government will be able to inject some new life into the rural agriculture-based economy which for the past several years has been stagnating, growing at less than two percent.

Already MGNREGA work, with priority for irrigation and water conservation, has been allowed, while food processing outside municipal limits and production of packaging material, jute industry, brick kilns have already been permitted. By extending the mandate of MGNREGA to building and maintaining healthcare centres and installing the necessary equipment, the government will be netting two birds with one shot.

Time is ripe for big, bold steps that will make a tangible difference to millions of people at the grassroots. For a government that envisaged electrifying all the households in the country, this too should be achievable.

Gayatri Ramanathan is Associate Director – Associate Director – Donor Engagement and Fundraising at Shakti Sustainable Energy Foundation.