In 1896, the ship named Mandarin arrived from British Hong Kong to Bombay and within a short time the city was in grips of the bubonic plague epidemic. By October 1896, hordes of migrant workers left the city and in no time the city population was reduced to half from a strength of 8.5 lakh. The economic impact of the epidemic was devastating – textile industry was technically insolvent till 1906, shortage of labour crippled production, pushing those unemployed deep into debt just to survive.
Some of the legacies of the 1897 bubonic plague that survive to this day are the Epidemics Act of 1897 which saw its first amendment by an ordinance in 2020 and the Provincial Insolvency Act 1907 and Presidency-town Insolvency Act, 1909, still waiting to be replaced by the Insolvency and Bankruptcy Code, 2016.
Fast forward to today. What is happening before our eyes is a repeat of what happened a century ago but on a larger scale. The plight of the migrant labour and their journey back home on foot is a humanitarian tragedy that cannot be described in words. The issue being discussed in this write up, however, is not the humanitarian or social one but the economic dimension of the problem.
Migration is not new to the subcontinent. But we never gave it the attention it deserved. And so, the economics aspect of this phenomenon has not been appreciated and even not factored in the plan to revive growth post-COVID-19.
Chapter 12 in Economic Survey 2016-17 titled India on the Move and Churning: New Evidence. Based on Census 2011, the chapter provides various facets of labour mobility between the Census 2001 and 2011. The migration in India can be categorised in two – one long-term (inter-state) and two short-term consisting of circular flow of labour between destinations (intra-state).
– the annual inter-state labour mobility averaged 5-6 million people between 2001 and 2011, yielding an inter-state migrant population of about 60 million and an inter district migration as high as 80 million. By analysing sales of the Indian Railway’s unreserved ticket the study estimates internal work-related migration for the period 2011-2016 at an annual average flow of close to 9 million people between the states. There is also a doubling of the stock of out-migrants to 11.2 million in the 20-29 year-old age-group alone.
Sex composition of migration population has also undergone substantial change. In long-term trends, males accounted for 80% but by 2011 share of females has increased indicating, now whole family is migrating instead of the primary breadwinner. Migration of females for jobs and education and work has also increased. This explains the poignant scenes of infants and toddlers in the long migrant queue on highways.
Districts with high net in-migration tend to be city-districts such as Gurugram, Delhi, Surat, Thane, Mumbai Suburban and Pune also the centres for high COVID-19 infection.
A detailed report on migration by the ministry of housing and urban poverty Alleviation in 2017 examined the trends in rural urban migration. Pattern of absorption of the migrant labour in various sectors is also different. The urban origin long-term migrant is absorbed in services while the short-term migrant is absorbed in construction, manufacturing and services in equal proportion. The rural origin long-term migrant mostly gets absorbed in primary sector and short term migrant in construction and, to some extent, in agriculture.
In a nutshell, the COVID-19 hotspot urban centres will face labour shortage of seasonal migrant affecting the local economy in construction and manufacturing. This supply shock of the pandemic has not been addressed in the economic package. Rather steep cut in cost of capital may push companies to employ labour substituting technology (AI and others) thus rendering this displaced labour unemployed in long-run. This may push them to borrowing just for subsistence.
The experience of 1897 pandemic tells that pandemics are classic demand-supply shock. The dislocation of the migrant labour in key urban centres will create a supply shock in these pockets. The estimated loss of income and reduced remittances (amounting to Rs1.5 lakh crore) will lead to fall in consumption of the same amount. But the ability of the urban centres to adapt by using technology is much higher than displaced labours ability to acquire new skills.
Thus success of recently announced revival package will be tested in UP and Bihar, two states accounting for highest out-flow migration.
In conclusion, the economic aspect of the labour migration in the sense that they are embedded in production and consumption process of major COVID hotspots has not received the attention it should have received, particularly in chalking out the revival package. The cost of moving for people is about twice as much as it is for goods in India. In a country which is so dependent on migration to sustain production and consumption, migrant labour issue should have been at the centre.
To this end, the revival package for all its merits lacks one count that is its indecision to pass on the benefits of fall in crude oil prices which impacts the poorest and migrants the most. The policy has been unable to arrest the deprecation in rupee thus sucking the purchasing power of those at the margin. The number of people who have been pushed below the poverty line due to this is pandemic is worth investigating.