And they are making recovery much more difficult
The ongoing pandemic has caused huge economic losses for the world. In 2020, growth in South Asia contracted by 5.4 percent, which does not capture the whole story of how terribly its people have actually suffered—but it is an indicator of how the region has struggled over the last year.
In late last March, the World Bank said in a report that South Asia is expected to grow by 7.2 percent this year and that the expansion will be driven mainly by Bangladesh and India. This expectation was predicated on the “success of South Asian nations in containing” the virus. Less than a month after the WB’s bold prediction, both India and Bangladesh are now again struggling to contain the spread of the virus, making the WB’s prediction look premature and optimistic at present.
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Despite that, the report does include some useful information. For example, according to it, the pandemic has caused some 5.5 million children in the region to drop out of school, which could translate into more than USD 1 trillion in lost earnings. South Asian countries already score low when it comes to Human Capital Index—an index measuring which countries are best in realising the economic and professional potential of its citizens and how much capital each country loses through lack of education and health. Therefore, according to the WB, this index could decline for South Asian countries, even if GDP growth bounces back. South Asia, which grapples with high stunting rates among children and accounts for more than half of the world’s student dropouts due to Covid-19, needs to bump up investments in human capital to help new generations grow up healthy and become productive citizens.
Another key vulnerability highlighted in the report is the fact that the pandemic likely resulted in a sharp fall in incomes of informal workers, who account for over 85 percent of South Asia’s workers. And this has already been proven to be the case in Bangladesh, where out of the 61 million people who are employed, 52 million are in the informal sector, which contributes more than 40 percent to GDP. According to a previous WB report, cleaning workers or housemaids (who make up a significant portion of the informal economy) received the biggest blow last year, as 54 percent of job losses were reported in these fields. In order to provide support to this large group of people and also mitigate any further damage, the report recommends that governments develop universal social insurance to protect informal workers, increase regional cooperation and lift customs restrictions on key staples to prevent sudden increases in food prices.
What is interesting is that the report says that returning to high growth, which is already proving difficult enough, will be the easy part for South Asian economies, as the region is facing much harder challenges in the form of increased inequalities and reduced access to education as a result of the pandemic. In the case of Bangladesh, however, it can be argued that these aren’t problems that have developed as a consequence of the pandemic—even though they have been amplified by it—but these were existing problems that have made recovery from the pandemic much more difficult.
Despite the rise in the number of children going to school in recent decades, the quality of education for the majority has consistently remained poor, posing a major challenge to the expansion of a skilled workforce. It has been obvious for quite some time that not everyone has benefited satisfactorily from Bangladesh’s impressive growth. As noted economist Rehman Sobhan explained to Deutsche Welle, “Per capita income has increased in Bangladesh. But income and wealth distribution could not be made equal and fair.” As a result, “the income disparity between the top 5 percent and the bottom 40 percent” has been “increasing day by day.” The pandemic has made it more extreme. But the fact that this was a major problem from before has simply made things worse.
Because so many people were already struggling economically, the number of people who have been pushed into poverty has exploded during the pandemic. According to a recent survey by the Power and Participation Research Centre (PPRC) and the Brac Institute of Governance and Development, economic shock induced by the pandemic has pushed 2.45 crore people—or 14.75 percent of the country’s population—into poverty in one year. And remember, this is on top of the previous 20.5 percent of the population who had already been poor, which makes this spike more significant.
Even though the pandemic itself could not have been foreseen, black swan events like this are expected to occur every once in a while. History is filled with examples that confirm this. That is why the fundamentals of the economy must always be reinforced and made strong—something we had failed to do. While laying bare South Asia’s deep-seated inequalities and vulnerabilities, the pandemic has also provided an opportunity to stop us from repeating this mistake.
In that regard, we must learn to invest our scarce resources more wisely in order to “set a foundation for a more inclusive and resilient future”, as recommended by the WB. Chart a path towards a more equitable and robust recovery, instead of the present K-shaped recovery trajectory.
For the long run, the government must recognise that the current spending on healthcare and education—the two sectors that are so vital for developing a healthy and dynamic workforce—is simply not good enough. And so experts recommend increasing them substantially.
In the short run, the government should provide direct cash transfers to the poor and vulnerable sections of society, and must reduce the amount of corruption and misappropriation that is often associated with aid meant for them. It should also set up soup kitchens for cooked food distribution in various points of major cities, as the urban poor are struggling particularly badly at present due to the ongoing lockdown. To avoid future difficulties in providing aid, a proper national database of the country’s ultra-poor should urgently be established—for this, the government should reach out to the NGOs in the country for help.
Eresh Omar Jamal is a member of the editorial team at The Daily Star. His Twitter handle is:
@EreshOmarJamal
