The socio-economic crisis precipitated by the fallout of COVID19 pandemic and the intermittent lockdown undertaken to contain the spread of the virus has adversely impacted millions of households, especially the vulnerable and deprived households. It has pushed multiple such poor income households to further shocks of loss of income and livelihood. This deleterious impact is more pronounced in the rural economy, where employment remains highly skewed towards the informal and organized sector, without adequate social securities to absorb this economic shock.
The Central government and the state governments have initiated cash transfers, economic packages, and short-term measures to address the liquidity crunch with a view to raise consumption demand. The question that remains is whether the cash transfers are the one solution to attain the same, what are the other social securities imperative in the short-run, and long-run to generate more employment, capture the reverse trends of migration(return-migration), provide a safety net and food security? What are the policy changes that can be brought about through policy redesigning, enhanced collaboration with civil societies and NGOs at the grassroots level along with effective implementation? In this regard, this paper addresses the most crucial factors which are at the crux of revamping the rural economy; the MGNREGA and its future, Enhanced and Inclusive Food Security, Promotion of Entrepreneurship for farmers and MSME units and most importantly ensuring the last mile connectivity through the village secretariat volunteers and civil societies.
Contents
Executive Summary……………………………………………………………………… 1
Introduction………………………………………………………………………………….. 3
Andhra Pradesh: State Perspective…………………………………………………… 4
Socio-Economic Profile………………………………………………………………… 4
Roadmap to Revive Rural Economy…………………………………………………… 6
Our Approach…………………………………………………………………………….. 6
Revamping of MGNREGA for Andhra Pradesh during COVID 19……………. 7
Context……………………………………………………………………………………… 7
Enhanced and Inclusive Food Security…………………………………………….. 11
Context……………………………………………………………………………………. 11
Accelerating MSMEs…………………………………………………………………….. 15
Context……………………………………………………………………………………. 15
Steps Taken by Andhra Government……………………………………………. 16
Short Term Recommendations for Immediate Implementation………….. 16
Recommendations to Revive MSMEs…………………………………………….. 17
References………………………………………………………………………………….. 19
The outbreak of COVID-19 poses multiple challenges across the globe, the most pressing of which besides the health challenge, remains the revival of the rural economy. The rural economy was already suffering from the high levels of agrarian distress, lack of economic opportunities coupled with the cracks into the food security. However, with the sudden lockdown imposed most of the informal migrant workers are in distress and reverse migrating (from urban to rural). This has consequently also led to a shortage of labour and breakage of supply chain further evinced by the ILO which denotes that about 400 million informal sector workers will be impacted at varying degrees.
Secondly, the agrarian crisis has been further aggravated with the disruptions to the agriculture supply chain, distress selling of farm products, delay in sowing and harvesting of crops due to the unavailability of products such as seeds, tractors, ancillary support and medicines for crop protection. India has been a major exporter of crops as per APEDA in 2018-19 which was pegged to the tune of Rs 685 billion. Currently, post the lockdown, the country has just initiated the exports, leaving an immense loss during the past two months.
The next big rural adverse impact is on the MSME & SME which includes small industrial units, businesses/traders, and shops that manage a decent size inventory and employ numerous direct and indirect employees. Post lockdown, their businesses are shut owing to financial viability which also leads to immense livelihood loss. MSME units are wary of some of the interventions undertaken by the government which includes the collateral loans as its very uncertain regarding the demand for their products even when activities have slowly begun. Hence this sector faces huge losses and liquidity crunch making them highly vulnerable. At this point, it becomes imperative to reconfigure the socio-economic infrastructure and policies to make it more inclusive and ensure maximum coverage.
The Gross State Domestic Product of Andhra Pradesh, during the year 2019-20, at constant prices is pegged at Rs 6.72 Lakh Crores as per the Andhra SocioEconomic 2019-20. During the same year, the agriculture sector recorded an estimate of Rs 1.86 Lakh Crores, Industries sector Rs 1.55 Lakh Crores and the Services sector 2.63 Lakh crores. The Andhra budget for the financial year 2020-21 projects the Gross Domestic Product of Andhra Pradesh for 2019-20 (at current prices) to be Rs 9,72,782 Crore. The total expenditure for 2020-21 is estimated to be Rs 2,24,789 crore, with a 28.6% increase over the revisited estimates of 201920. This budget focuses on welfare policies including income support to women and street hawkers, vendors through the YSR Cheyutha Scheme and Jagananna Thodu Scheme, among others. These policies introduced in the current budget addresses the importance of employment generation at these pressing times.
Figure 2: Data source: Andhra Socio-Economic Survey 2019-20
The state of Andhra Pradesh has about 35,000 plus confirmed cases. The state is primarily an agrarian economy engaging a lot of its citizens in agriculture and allied industries. During these COVID times most of these tenant farmers are not able to afford the rent on land etc. and all the cash transfers go into such unseen expenditure. These push to a trend of distress selling making them all the more vulnerable. The state, which is resplendent with good water reserves also faces issues of severe water stress and exploitation as identified by the Jal shakti Abhiyan, there are about nine districts of Andhra, facing severe water stress. Along with this, there is the double burden of being flood and drought prone during the monsoons. All of these make Andhra vulnerable to climate changes and variability, impacting employment and food security. MSME, is one of the major other employers of the state. It employs around 70.69 lakh people. Most of these MSMEs (barring the ones making essential services) are deeply impacted with the lockdown. Further disruption in the supply chain and the trend of reverse migration hinders the sustenance of the MSMEs. In this paper, we lay down the roadmap to revive the rural economy of Andhra by revamping the MGNREGA, MSME and recommendations to ensure better food security amidst the crisis.
To arrive at a roadmap strategy for Andhra’s rural economy, we followed a multistakeholder engagement approach. For gauging the beneficiary perception, we interacted with the prominent FPOs, NGOs, and civil societies including the Foundation for Ecological Survey, APMAS, Rayal Seema Harijana Girijana, among others. The role of NGOs in Andhra in implementation of policies, the challenges met out by them, the importance of collaborations, farmer’s distress, infusion of best practices etc were the key topics in the discussion agenda. Some substantial case studies and key interventions undertaken by the NGOs were also discussed indepth.
Our second set of consultations and key informant interviews include the ones with the Members of Parliament from the state and key nodal persons from departments including the Rural department and Gram Volunteers dept of Andhra. Our report draws the attention of policymakers and other important stakeholders some of the challenges in reviving the rural economy with possible suggestive measures as a way forward. Our previous research experience in the State of Andhra with substantial primary research conducted in order to generate more employment opportunities and mitigate distress through MGNREGA, Enhanced PDS
Distribution for Andhra have also been incorporated in this report.
The economic dormancy created by COVID-19 has resulted in millions of laborers losing their jobs and they are forced to move back to their villages. Social distancing measures have exacerbated their misery as the local jobs have vanished too. This unusual reverse migration has affected several States and Andhra Pradesh is one such state prepping for the return of its migrant workers from Gujarat and Maharashtra. According to the NSSO 68th round, the RNFE employment is almost over 42%. However, at the same time, a significant 58% are still dependent on agriculture. In 2019 about a Sectoral Growth Rates of NonAgricultural Rural Employment 1999-2000 to 2009-2010 2 million Indians have migrated from their home base in search of employment. With the reverse migration leading to a surplus pool of labour in rural India, and given the usually inelastic demand for agricultural products, what is needed is the creation of livelihood that enables engagement of workers in the non-agricultural or non-farm sector. This is turn will help to grease the economic wheels by generating effective non-agricultural demand which is expected to put the economy back in track again. Taking the MGNREGA wage as a major indicator of return from non-farm employment, as of 2019-20, the MGNREGA wage rate remains significantly lower than the minimum agricultural wage rate (MAWR) for all states except Nagaland. Particularly, the gap between MGNREGA and MAWR is quite high in Andhra Pradesh, Goa, and the Union Territories. A revision on wages specifically in line with the MAWR becomes a necessary instrument for rural livelihood sustainability in times of Covid-19[1]. In this situation, it is imperative that employment guarantee programmes like MGNREGA should be restructured so that it can fill the gap by providing medium-term assured employment during this period.
Figure 3: Workers during NAREGA works in Vizianagaram. (Photo | EPS)
The Central government has taken some measures to extend its safety net programs and keep its food supply intact and reach out to the most vulnerable and poorest sections of the society through some of the initiatives such as the Garib Kalyan Yojana and One Nation One card. Through the Garib Kalyan Yojana additional ration of 5 kg of low-cost rice/wheat per month, free 5 kg of either rice or wheat, and 1 kg of preferred pulses per month is offered to the ration card holders. The one nation card enables the portability of food entitlements for migrants who don’t fall under the and under this scheme free food grains of 5 kg of rice or wheat and 1 kg of Chana or Pulses benefitting approximately 8 crore migrant workers. However the data from the ministry of Consumer Affairs, Food and Public Distribution shows that in the month of June only 13 per cent of 8 lakh metric tonnes of free food grains allocated for returning migrant workers under the Atmanirbhar Bharat package have actually reached migrants during May and June
The state of Andhra Pradesh too has taken many nodal frontline measures for food security which includes the one -time support of Rs 1,000 to all rice card holding families for buying essential commodities including groceries and vegetables. The government also has notified that it will be providing free ration to NGOs running old age homes and childcare institutions. It includes 10 kg of rice and 1 kg of red gram dal per resident. Some of the other governance mechanisms also include mobilizing village secretariat volunteers to ensure the delivery of food to remote areas. For every 50 households one village volunteer is placed who delivers and transfers the pension and the ration and any other benefit announced by the government. The government has set up an additional 471 temporary Rythu Bazars (farmers market) increasing its number from the existing 100 Rythu Bazar. This aims to increase the availability of essentials in abundance to citizens in every corner of the state and also ensure that farmers garner fair prices for their products and targeting to minimize the chance of distress selling. However, with the opening up of economy and intermittent lockdowns being a common phenomenon, it is essential to ensure there are no cracks into the food security to sustain lives and livelihood. Given below are such best practices and recommendations to enhance the PDS.
The state has around 28, 599 Fair Price Shops for distribution of ration in the state. Apart from the 699 Fair Price Shops in the no connectivity areas, 4847 Fair Price Shops are closed in the districts. The higher percentage of inactive shops in the district of Srikakulam has directly hampered the distribution % of ration in the district. A high number of Fair Price Shops are inactive (closed) in the district which creates issues for the beneficiaries. The beneficiaries are unable to procure the ration. From the above chart it is evitable that there is a correlation between inactive shops and distribution percentage.
The village secretariat played a role in delivering the dry ration during the first months of lockdown however with the monsoons and drought periods ahead, it is to be reviewed and looked into as to how can the last mile-delivery of these food grains can be ensured. For example as a pilot in the most climate stressed areas of Andhra of rice dispensing machines (Vietnam’s new entrepreneurship model) will enable in addressing the challenges met during the door-to-door model especially during the peak times of floods and droughts.
Mid-day meal and extension of food to lactating mothers: Another issue flagged is that the mid-day meals through ICDS are not reaching the beneficiaries and most of the Anganwadi are closed across the country; with the exception of a few states like Kerala which is ensuring the delivery of mid-day meals at home. The nutritious food intended for lactating mothers remains a concern, as specific districts of Andhra already report high levels of Anaemia and during pregnancy this remains all the more a matter of grave concern.
Horticulture: Subsidizing fruits like banana or including it the public distribution system would be good way to enable in boosting consumer demand, and recovering from the loss suffered by the banana cultivators of Andhra during the lockdown
Provide ready provisions kits16 (free or subsidised) with essential supplies at ration shops to save people from making trips to faraway markets, thereby reducing their exposure to infection, providing basic supplies without increasing their economic 10 burden, and saving them from being penalized for breaking lockdown rules. Ready rations can also be delivered as mid-day meal rations17, or, where possible, at-home deliveries18, as started by some states. This will also enable these PDS shops to be one-stop destinations for major essential items related to food.
Clear communication channels: Send automatic SMS alerts for Direct Benefits Transfer (DBT) or PDS to inform people when their entitlements have been deposited into their bank accounts, reducing the need to make extra visits to the banks to check if they have received their entitlements. Where people have not registered their mobile phones with bank accounts, deploy Bank Mitras to link them. Similarly, for PDS link them with village volunteers
Portability: The process of portability cards has brought a bigger challenge for the government as the percentage of portability cards is quite low in the state at 36.91%. Srikakulam has the least portability in the state with 0.66% cards.
Port%
In order to enhance this portability, we need to understand the reasons for low portability. The leading cause of the failure was “biometric mismatch” when the system fails to identify the beneficiary biometrically. The difficulty of bringing automation in remote areas in difficult terrain and forest areas due to nonavailability of network. The food distribution system will require flexibility to respond to sudden changes in the number of beneficiaries across district boundaries. Other patterns of migration will also put pressure on state distribution systems. For instance, distress migration from one district will put the onus on receiving districts to ensure access to subsidized grains.
Inter-state migrants: Civil Societies as well as the NGOs face challenges in tracking the inter and intra districts migrants. This data can not only enable in capturing the migration trends as done by the Foundation of Ecological Security but also aids in mapping the excluded PDs beneficiaries. Extend the eligibility for free ration from being available to only yellow ration card holders (BPL) to orange ration card holders (APL) considering the loss of income by many in the last few weeks. Allow migrants that are not in shelter homes to access rations out of their home states as well introspection of whether the quality of food grains is the deterring factor for migrants from accessing these rations.
Leverage decentralized systems of active on-the-ground organisations like NGOs, welfare boards, missionaries, local self-government, trade unions, and community volunteer groups who maintain data about persons in need and can help distribute materials (ensuring last mile delivery). Issue relief passes to volunteers, include them in control rooms, and have regular briefings between district or state administration and NGO representatives. The NGOs of the state has a critical role to play in providing the humanitarian relief measure , as per the Centre’s reply to the Supreme court of India with regard to relief centres and food provided, 84.26 lakh people have been provided meals across the country during the lockdown, of which nearly 37% people were fed by NGOs. In Andhra NGOs fed 92 percent of the people who were provided with meals. The State government has also directed the district administration to set up Special Shelter Centres in urban areas for providing food to homeless and migrant workers.
Micro, Small and Medium Enterprises (MSMEs) are the backbone of the Indian economy. Nearly 6 crore MSMEs employ approximately 11 crore people, i.e., nearly 40% of India’s non-farm workforce. These organizations are also critical to the distribution and supply chains of larger companies, contributing nearly 25% towards India’s services GDP and 33% towards total manufacturing output.
Since March this year, COVID-19 has left its impact on all sectors of the Indian economy, especially affecting MSMEs. A precipitous dip in demand, disruption in supply chains and a two-month long lockdown have together decimated cash reserves and resulted in an existential risk for the sector. To survive this crisis, 70% of India’s MSMEs have cut back on their workforce. Further, estimates suggest that 20-40% of MSMEs could permanently close.
Figure 4: MSMEs to revive economy, protect jobs
Factoring the hardships faced by the MSMEs during the Covid-19 pandemic, the Andhra Pradesh government has come up with a ₹1,110-crore ‘ReSTART’ policy boost. This is to provide some relief at a time when the economy has come to a standstill, severely affecting the livelihoods of hundreds of thousands dependent on MSME sector. In Andhra Pradesh alone, around one lakh MSMEs provide employment to more than 10 lakh people.
To give a fillip to the industries shut down for two months due to the nation-wide lockdown, the Andhra Pradesh government has offered incentives for their restart. Industrial units that were operating till February are eligible to avail the incentives, according to a government order. The units that operate in certain seasons also can apply for the support.
The ReSTART package includes the payment of all sanctioned but outstanding incentives to MSME units, waiver of three months fixed demand charges, deferment of power minimum demand charges for three months for large and mega units, and working capital loans along with preferential market access.
The ReSTART Policy also includes the release of ₹905 crore of pending incentives to MSME units in two months, waive fixed demand charges towards power for a period of three months from April 20 to June 20 for MSMEs (₹188 crore) and provide ₹200-crore working capital loans by creating a fund to meet their liquidity crisis.
The MSMEs Preferential Market Access Policy will ensure that 25 per cent of government purchases will be from Micro and small units covering about 364 items.
Improve labor availability by creating a Portal/App for two-way interface between labor and government for job matching.
Design of specialized courses from agencies such as National Skill Corp. in collaboration with industry and integrate them through online training / certification modules.
Create infrastructures such as schools, hospitals, housing facilities around industrial clusters to enable businesses to attract and retain workforce.
Simplify compliances and processes across starting and running a business to ensure effective utilization of entrepreneurs’ time and resources by:
Digitize and streamline processes to enable reduction in timelines, decrease parallelization, and ease formalization by creating six key platforms (labor compliance, EHS fillings, tax filings, Information Wizard, central inspection system and single window)
Decriminalize nearly 9K compliances with imprisonment which today deter formalization
Evaluate ease of doing business at a state level along with objective and measurable criteria, and publish annual scorecard to foster improvement
Support the sector through private and social partnerships leading to clear governance of industry associations, support network for MSMEs and compliance on payables by:
Create a pipeline of entrepreneurs by investing in education and incubation by making an entrepreneurship curriculum compulsory in schools, ITIs and colleges, and by promoting tinkering labs, entrepreneurship cells and incubators in every school and college
Introduce sector-specific initiatives to create a thriving entrepreneurial ecosystem (priority sectors to be identified for each state) by:
Climate: Shaping an entrepreneurial culture requires demonstrating and publicizing tangible growth (e.g., export contracts, new hires, etc.) among cohorts of local enterprises. It also requires mentored support and a showcase of success (and a tolerance for failure) through targeted ‘growth events/celebrations’ which demonstrate the journey of small businesses. The state could enable this while also leveraging ‘growth events’ to bring the local ecosystem of corporate leaders, the government, bankers and VCs to help support MSME cohorts.
Apart from fostering a culture of entrepreneurship, it is essential to ensure easy access to critical enablers, e.g., cost-effective access to land (alternative models such as amortization), power (tariff rationalization, open access) and infrastructure, taxation and incentives, and labor availability (digital platforms, training programs) to help MSMEs truly thrive.
Create a state logistics platform to act as a single window portal for all logistics providers for certifications and compliances, an e-marketplace for logistics services and a data bank for vehicle financing, insurance applications, etc. This would be Unified Logistics Interface Platform for hassle free domestic and international logistics utilizing 10+ data sources (e.g., UPI, Jan Dhan Wallet)
[1] Livelihood Generation in times of Covid-19 Scope and Opportunities, Panchali Banerjee, Debashree Chakraborty available at https://www.swaniti.com/wp–content/uploads/2020/06/Livelihood–Generationin–times–of–Covid–19–Scope–and–Opportunities.pdf