THE BANGLADESH REFUGEES
Some Frightening Economic Implications
By SARWAR LATEEF
In Calcutta there is undoubtedly a growing sense of uncertainty and helplessness as the refugees from Bangladesh continue to pour in. The threat to West Bengal’s already battered economy is slowly being understood, although there is as yet no discernible impact on the availability and price of essential commodities or on living standards.
By contrast there is an air of total unreality in New Delhi. True, the newspapers are weighed down with Bangladesh and Refugees. True, the Government is spending much of its time on this one issue. The Prime Minister has even called for austerity and sacrifices. But so far it is all talk, and a Martian should be forgiven if he were to decide that it is very much “business as usual” in India’s capital. Mr. C. Subramaniam has with his usual nonchalance, rejected any idea of a cut in the Fourth Plan to meet the cost of the refugees. Mr. Chavan has cheerfully, and in the narrow context of his Budget perhaps wisely, given away Rs. 15 crores in tax concessions. The City Fathers continue to discuss the pros and cons of the Capital’s beautification programmes. Local gossip records the curious spectacle of Ministerial delegations that have been abroad to convert the world to India’s point of view on Bangladesh returning loaded with foreign goods. And New Delhi’s society women rush around collecting money through endless elegant concerts and exclusive soirees in aid of Bangladesh. Commendable though these private efforts are, they foster the illusion that the resources problem can be licked if you and I contribute our mite. Yet the entire amount collected by private organizations in this country to date will not maintain the 7 million refugees for more than one and half of one day.
There are two possible explanations for this apparent complacency. Either the size of the economic burden imposed on India has not yet been fully understood or, if it has been, there is a deliberate attempt to underplay it. If the first is correct, then the consequences will be disastrous. If the second is true, then the Government is inviting a major political backlash. The sooner public opinion is educated on the price the country may have to pay the better.
IMPACT What is the precise impact on the Indian economy? The obvious immediate impact is the burden on the central exchequer. There are no estimates as yet on how much has been spent. State Governments have been given a blank cheque for refugee expenses and no information is available on the rate at which they have been utilizing funds.
But an informed guess is possible, based on the estimated expenditure of Rs. 3 per refugee per day which covers most costs, direct and indirect and on the average number of refugees in camps for each of the four months since the influx began. Actual expenditure up to the end of July on this basis will probably be of July on this basis will probably be of the order of Rs. 100-110 crores. In August the expenditure will probably reach Rs. 50 crores and assuming that the refugee level then tapers off at around eight million – and this assumption may be proved hopelessly wrong – the average expenditure per month will be of the order of Rs. 60-70 crores. If the refugees stay on for the entire financial year, the total expenditure on them will be of the order of Rs. 580 to Rs. 650 crores.
As against this the resources in sight so far are the Rs. 60 crores provided in the Central Budget in May and foreign assistance totalling $151.5 million (Rs. 113.6 crores). The real value of foreign aid is considerably lower. Most of it is in the form of commodity aid whose value in dollar terms may reflect higher production costs. Some cash assistance through the U.N. will also be diverted to the administration costs of the programme. No details are available on actual disbursements, but these are quite slow. By the end of August, the Central budgetary allocation and the foreign aid (in money terms) will have been spent. Any money spent after that will increase the size of the Central budgetary deficit, unless (a) foreign aid levels are raised (b) the Annual Plan for 1971-72 is slashed and (c) more domestic resources are mobilized.
If the somewhat optimistic assumption is made that India will get roughly twice what it has already received in terms of foreign aid, this would still leave a budgetary gap of Rs. 300-350 crores. It can be argued that the deficit could be widened from the present Rs. 235 crores, given the comfortable food supply position. India is extremely fortunate in that it appears to be having yet another good monsoon and the economy is in a fairly sound position. But the Central deficit cannot really be widened further without boosting inflationary pressures. Prices have been rising after the Budget and taking into account the vulnerable supply position of essential raw materials like raw cotton, groundnuts and now, after Roukelan, steel as also the large budgetary deficits left by State Governments, a larger Central deficit would be distinctly risky.
RICE CONSUMPTION
Besides, the refugees are beginning to make inroads into India’s food stocks. A rough estimate would suggest that rice requirements for 1971-72 would be of the order of one million metric tonnes. This would gobble up almost all of India’s rice stocks, given normal requirements of the public distribution system. Britain, Japan and Russia are committed to “rice aid” of 130,000 tonnes. Small amounts of PL 480 rice imports could be made. Larger PL 480 wheat imports would also help to ease the supply position generally and provide a budgetary cushion. But the restraining factor here would be storage capacity after a bumper crop year.
To the extent that the food situation deteriorates because of the refugees, it reduces the permissible limits of deficit financing, The Finance Ministry’s understandable temptation will be to cut down on plans being pruned to the “core”. There is precious little fat on the present Fourth Plan. Cuts in public investment which not only affect the country’s economic growth but also affect such high priority programmes as the Calcutta Metropolitan Development plan. The impact on private investment and on the heavy industry sector of a cut in public investment would be very severe and conceivably trigger off a mini-recession.
If the plan is to be saved, an additional dose of taxation combined with a sharp cut-back in non-development spending will become inevitable. An exercise on where the expenditure cuts can be made is long overdue, and this is the time surely to prepare contingency plans. Additional taxation would present Mr. Chavan with a difficult problem. With the massive taxdose in his May Budget, he has already shot his bolt, and there is little room for further taxes on the same narrow urban base. However, Bangladesh does provide the Center with an excellent opportunity to push and eagle State Governments into taxation of agriculture incomes. A thorough resources exercise now needs to be undertaken and the results placed before Parliament so as to encourage a public debate and enable the country to realize the enormity of the present crisis. But to ask for this is perhaps to ask for too much in a financial year in which several States go to the polls.
The resources compromise that is likely to emerge is a little more deficit financing, larger PL 480 imports, some cuts in the plan and some more taxes.
The cost of this compromise in terms of inflation and development can be safely predicted to be extremely high. These costs can be measured. But there are a large number of indirect costs that do not lend themselves to any precise measurements but which cause enormous strains all the same. As one senior official put it, the Bangladesh problem is “absorbing a great deal of the Government’s energy and taking a heavy toll on our administration”. The Major economic issues have not received the kind of attention they ought to be getting. Ministries have been unmanned for weeks, with Ministers away on world jaunts. In the atmosphere of uncertainty, the bureaucrat has a first class excuse for inaction. And there is little evidence as yet of any concerted attempt to make the additional effort needed to cushion the economy from the cost of indecision and uncertainty.
Fortunately, the Indian economy has a great capacity to withstand such blows, While it would be unwise to draw comfort from this resilience, one wishes that similar consolation were available in the case of West Bengal. Although the impact of the refugees has yet to show up in any of the economic indicators, the dimensions of the crisis in that state are truly frightening. The refugees now constitute 11% of the population of a State whose population density at 507 per square kilometer is the second highest in the country and contrasts sharply with the all-India average of 182 per square kilometer. The refugees have probably pushed West Bengal up to first place in population density, and this is a distinction the State could well do without. Within West Bengal the burden is unevenly distributed, with the eight border districts taking the main brunt. In West Dinajpur there is one refugee for almost every local citizen in Cooch Behar the ratio is one to two, and in Nadia and Jalpaiguri one is the three. All development work Family planning and health programmes have gone by the board and schools and colleges have closed down to accommodate the refugees. And this is a state that can ill afford even a moment’s neglect. A parallel refugee administration is now being set up and the first priority for dispersal of refugees is being given to those occupying schools and Government buildings. But the process of moving refugees is pathetically slow.
TRANSPORT PROBLEM
The movement of foodgrains to West Bengal which is a deficit State and the movement of refugees out of West Bengal is proving an enormous strain on the transport system already paralysed by lawlessness and sabotage. The cost of traditional West Bengal industries like coal which are consequently deprived of adequate wagons is very high. The pressure on prices and availability of essentials has yet to develop. But a shortage of rice will probably emerge as the months pass. The bamboo crop which usually meets replacement needs has been harvested to build the refugee camps. A shortage of rural building material is, therefore, equally inevitable as time passes.
But the biggest threat is from those refugees, some 1.3 million of them in West Bengal, who are not living in camps but have sought shelter in what is euphemistically described as “friends and relations”. These refugees are already competing in the job market with local citizens and offering themselves at distress wages. Some of them are probably already in Calcutta, which is also threatened by the refugees in Salt Lake camp who could presumably decide to move in at any time into the city in search of jobs. If this were to happen as one West Bengal Government official put it, “the city would explode”, and the tremors would even shake the fair garden city of Delhi.
Reference: Hindustan Standard, 29.07.1971