‘Coping with Shocks: Migration and the Road to Resilience’
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Context
- Recently, World Bank released its biennial report South Asia Economic Focus, titled this time as, ‘Coping with Shocks: Migration and the Road to Resilience’.
Findings of the Report
India Growth
- India will grow 6.5% in the current fiscal year (FY22-23), after having grown at 8.7% in the fiscal year ended March 31.
- The estimate for the current year was revised downwards by one percentage point since June due to persistent pressures.
Inflation in South Asia
- Inflation in South Asia, caused by elevated global food and energy prices and trade restrictions that worsened food insecurity in the region, is expected to rise to 9.2 percent this year before gradually subsiding. The resulting squeeze on real income is severe, particularly for the region’s poor who spend a large share of their income on food.
Recovery in South Asia
- With Sri Lanka’s economic crisis, the devastating floods in Pakistan, and recovery from the pandemic impacted by the war in Ukraine, recovery in South Asia will be uneven.
- Economies that are more services-led (India, Nepal, and Maldives) are expected to “maintain a reasonable recovery trend despite headwinds”.
- Afghanistan, Sri Lanka and Pakistan are more at risk and will see poverty increase in 2022.
Covid-19 and Migration
- South Asia’s migrant workers, many of whom are employed in the informal sector, were disproportionately affected when restrictions to movement were imposed during COVID-19. However, the later phase of the pandemic has highlighted the crucial role migration can play in facilitating recovery.
Silver Lining
- Exports and the services sector in India, the region’s largest economy, have recovered more strongly than the world average while its ample foreign reserves served as a buffer to external shocks.
- The return of tourism is helping to drive growth in Maldives, and to a lesser extent in Nepal—both of which have dynamic services sectors.
Way Ahead
- Labor mobility across and within countries enables economic development by allowing people to move to locations where they are more productive. It also helps adjust to shocks such as climate events to which South Asia’s rural poor are particularly vulnerable.
- Removing restrictions to labor mobility is vital to the region’s resilience and its long-term development.
- Cutting the costs migrants face should be high on the policy agenda. Secondly, policymakers can de-risk migration through several means including more flexible visa policies, mechanisms to support migrant workers during shocks, and social protection programs.
- Pandemics, sudden swings in global liquidity and commodity prices, and extreme weather disasters were once tail-end risks. But all three have arrived in rapid succession over the past two years and are testing South Asia’s economies. In the face of these shocks, countries need to build stronger fiscal and monetary buffers, and reorient scarce resources towards strengthening resilience to protect their people.
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