There has been growing concern over the prospects of an increase in poverty and inequality due to the economic implications of Covid-19. Migrant labourers find themselves out of jobs and people have also faced loss of employment in the service industry. It is evident that there will be an impact on the most vulnerable sections of the population.
The government will have to provide adequate policy support over the coming months to alleviate the stress faced by the bottom 50% of the population that is directly vulnerable to the prospects of falling back into poverty—if not already poor. Those who are already poor may find it difficult to sustain their present levels of consumption and may find themselves relying more on the PDS system to meet their calorie requirements.
Luckily, the government has provided adequate support to address the consumption of adequate food grains through various parts of its `20 trillion stimulus package for the most vulnerable sections. While government support will help alleviate the immediate stress, there is a severe resource constraint and the sustainability of such support is questionable. So what is needed is to revive the level of economic activity back to the pre-Covid situation as quickly as possible.
This, of course, seems to be the intent of the government as it unveils its stimulus package that combines fiscal, monetary and macro-prudential policy interventions. The success of these measures will determine what happens to poverty and inequality over the coming months as economic activity returns to normal over time. However, an advantage of the Covid crisis has been in the form of an improvement in the quality of environment. This has been witnessed across the world and it reveals the extent of externalities that human production produces on the environment. The global disruption caused by the pandemic is leading towards a decreased energy demand, which in turn reduces global greenhouse gas emissions. For the first time in four decades, India’s carbon emissions fell by 1% or 30 million tonnes of CO2 in the fiscal year ending March 2020.
Further a monthly fall of 15% in carbon emissions was noted during March, followed by a 30% drop in April. Measures taken to combat the impact of Covid-19, an economic slowdown, falling consumption of coal and oil, and increasing renewable energy generation have all contributed towards this fall. History is witness to the fact that emission reductions caused by economic slumps tend to be temporary and can be followed by emissions growth as economies strive to bounce back. After the global financial crisis of 2008, CO2 emissions from fossil fuel combustion and cement production grew by 5.9% in 2010, counteracting the 1.4% decrease in CO2 noted during 2009.
An early lesson we learnt is governments have the ability to take urgent and drastic steps to tackle a crisis like the one caused by Covid- 19. As we attempt to emerge from the ongoing crisis, clarity is needed towards the way we respond to it. Bad long-term investments to offset the short-term economic slowdown do not make sense. The growing body of evidence shows a low-carbon and climate-resilient growth would yield lasting benefits. Sustainable infrastructure should receive the required attention and investment from governments. It would help in creating more jobs and augment socio-economic benefits in the long-term.
We all have a role to play as we look for appropriate measures that would help boost economic growth after Covid-19 in a way that curbs air pollution and helps address the underlying climate crisis concerns. The finance sector is in the process of getting its act together as it realises the risks associated with investments made in high-carbon activities. Major asset management owners and companies are increasingly committing to transition their investment portfolios to net zero emission investments by 2050 and move away from fossil fuel investments. Leaders in both business and government sectors across the world are looking for ways to get their economies back on track in a sustainable manner. Developments in the clean energy space has increased accessibility to new technologies at lowered costs.
The way leaders respond to this unique opportunity will dictate the climate trajectory for thousands of years to come. As we try to fight and emerge from the crisis, it gives us the needed moment to rethink and learn from our past behaviour. The key issue is whether a growth strategy that puts environmental issues at its core is possible after Covid. Sustainable growth means sustaining growth over time and there is a resource constraint in the form of natural inputs.
Environment degradation only worsens the resource constraints, and this can have serious long-term economic implications, including a structurally lower level of growth due to lack of inputs. The argument that stresses the need for growth ignoring the environment as a means to reduce poverty is unable to capture the intergenerational impact of resource constraints. While economic activity will perhaps revert to the pre- Covid situation, we must revisit our economic systems and have a genuine multilateral dialogue about the perils of climate change and its implications on global poverty and the sustainability of economic growth over time. (Views are personal)
JHOOMAR MEHTA
New Delhi-based public policy and development finance researcher
KARAN BHASIN New Delhi-based economist