Cost of ignoring reality

News of folks from Sudurpaschhim heading back to different cities of India in search of economic opportunities is beginning to make rounds again. As unfortunate and as risky as that may sound, this was, sadly, expected. So where did we go wrong?

In fact, a proper question would be, what have we done right? At a time when global heavyweights have been struggling to manage the Covid-19 pandemic, it would be ignorant to claim that Nepal could have handled the situation better than the rest of the world. But the least we could have done is looked into the structure of our own economy and communities and tried to manage as per our ground realities.

So what structural insights did we overlook in dealing with the pandemic the way we are doing? We know that remittance is a mainstay of our economy. As per the last living standards, bottom 80% of income earners’ families spend more on consumption than they earn. This means that they either rely on remittances or the shadow economy for their livelihoods. By now, we already know that as much as 80% of the migrant labourers stranded abroad wish to return to the home country. Many have already lost their jobs. Furthermore, more than 60% of the workforce is engaged in the shadow economy. These people have been rendered unemployed since the first innings of the lockdown. If we turn to the formal economy, then the NRB just recently suggested that 61% of enterprises could not operate their business at all, and another 35% could only operate partially. FNCCI, the private sector umbrella organisation, on the other hand, is suggesting that 400,000 MSMEs are in the verge of collapse; in fact, they say that businesses with capital less then 20,00,000 have already collapsed. This already paints an ominous picture of the extent of economic crisis we are looking down the throat of.

Let’s square that with what the government could do in terms of helping these businesses. Well, given the limited fiscal capacity of our government to support businesses to stay afloat, there isn’t really much. Even if the government announced a number of support packages through the budget, the transmission rate (i.e. programs reaching the folks on the ground) and accurate penetration (programs reaching the real needy ones) of government programs in Nepal suggest that they could have never really acted as a resort for these individuals, historically speaking. In other words, the government was neither in a position to, nor acted like it really wanted to, support the ones who were losing their livelihood to the state-enforced lockdown.

Therefore, the only thing the government could have done, practically speaking, is enable these individuals who were losing jobs to earn their own livelihoods by themselves. And that is where we have failed miserably. Considering the aforementioned practicalities of our economy, the government should have focused on securing a safe environment for the people to go about earning their livelihoods instead of going for lockdowns. Additionally, since so many are being rendered jobless, the government should have relaxed legislations that bar people from starting and operating their businesses regardless of the size and nature, instead of creating hindrances in the garb of health crisis. At least, the people would have done whatever little they could. What use is it to claim (at every single one of our forums) that Nepali people are highly entrepreneurial if we cannot trust their entrepreneurship?

The public sentiment on the ground is that the government is sacrificing the lives of the poor and the lower middle class in favour of the upper middle class and the rich by continuing with lockdowns. In ways more than one, they are right in interpreting the situation as such.

 

Image Credit: Gorkhapatra Daily

Akash Shrestha

Akash Shrestha

Akash Shrestha is a researcher at Samriddhi Foundation where his focus areas are investment laws, public enterprises and education.