The Impact of Covid-19 on Punjab’s Economy

Golden Temple, Punjab
Credit: Ken Wieland / CC BY-SA

According to a study by the United Nations, the Indian Diaspora is the largest in the world with more than 17 million Indians living globally. The desire to move overseas is no longer restricted to a few states like Kerala, Tamil Nadu and Andhra Pradesh, Gujarat and Punjab, but has now become a Pan-India phenomenon with increasing linkages, not just through travel, but also awareness as a result of the mushrooming of higher education consultants and most importantly the internet. As a result, residents of many Indian states are keen to explore greener pastures overseas.

The Diaspora has contributed to the economic growth and progress of the country. Remittances have been accelerating sharply from 2005, and accounted for 2.7  percent of the total GDP of India in 2017 according to World Bank’s Migration and Development Brief in 2018.  The rise in remittances is strongly reinforced by the point that in 2005, India received a little over $54.4 billion, while this number went up to a whopping $83 billion in 2019. As per RBI’s 2016-17 survey, Kerala accounted for 19 percent of remittances sent to India (these remittances were largely received from Blue Collared workers in the Gulf). 

Remittance and Punjab

While a lot of attention is focused on the diaspora from states like Gujarat, Maharashtra, Tamil Nadu, Andhra Pradesh and Kerala — the Punjabi Diaspora is amongst the most vibrant with Punjabis excelling in different spheres in the U.S., Canada, UK and Australia. As a result of their economic and political clout overseas, Punjabis have also sought to shape the social, political and economic milieu of Punjab — a state which along with Bengal bore the brunt of Partition.

As of 2016, Punjab accounted for 1.7 percent of India’s total remittances. In spite of faulty policies and the upheavals the state faced in the 1980s and 1990s, remittances kept the state afloat. The state was able to achieve a growth rate between 4 percent and 6 percent in the past decade, which was not outstanding, but not dismal either.

A number of non-resident Indians (NRIs) have also been involved in philanthropic causes, with some having contributed towards upgrading the infrastructure of villages and others having contributed towards the setting up of hospitals. Some of the charities, such as Khalsa Aid, which are now recognized globally for their charity work and relief provided during crisis situations, have also been founded by individuals from the Diaspora. 

Increase in outward remittance

What is often missed out, is the trend of outward remittances or money going outside Punjab. A report published in 2015 highlights this point. According to a study sponsored by Centre for Research in Rural and Industrial Development (CRRID) and Institute National d’Études Démographiques, INED, Paris, a large chunk of this outward remittances (nearly 1/3rd) go overseas for higher education. 

Over the past decade, there has been a sharp upturn in the outward remittances towards countries like Canada, Australia and New Zealand. The increasing craze for overseas education has led to the mushrooming of International English Language Testing (IELTS) centres. According to estimates, there are more than 5000 IELTS centres in Punjab, of which over 90 percent are unregistered. The IELTS industry is estimated at Rs.  1100 crores. More than five hundred thousand students appeared in IELTS examination in 2019.

Post-coronavirus remittance

Reports have estimated a sharp dip in inward remittances in the financial year 2020 due to COVID-19, states like Punjab heavily dependent upon inward remittances from the diaspora will have an additional challenge apart from the impact of the pandemic.

As a result of the economic slow down and rising unemployment, Punjabis in countries like Canada and Australia who were sending remittances will not be in a position to do so. Outward remittances on the other hand are unlikely to stop. This will be a double whammy for the state’s economy.

While the post-coronavirus world and the dip in remittances will pose challenges to Punjab’s economy, it would also give the state to think of a new economic paradigm. This includes a focus on strengthening small scale industry, reviving some of the sectors which have been strong points in the past, and drawing investment in new sectors like pharma and bio-technology. The border state also needs to pay greater attention to areas like Health and Education.

Diaspora’s role in Punjab’s development

The state of Punjab should seek to reshape its relations with the Diaspora, which should not be driven by remittances. The expertise and intellectual capital of overseas Punjabis should be suitably channelized for bringing the economy of the state back on the rails. The state has set up a panel for the revival of the economy, headed by former Head of the Planning Commission Montek Singh Ahluwalia. The services of successful Punjabis should be used not just for drawing FDI, but also for improving the state’s health and education sectors. 

Apart from the above steps, it is important that political parties from Punjab urge the central government to revive bilateral trade with Pakistan through Wagah-Attari border. If goods from Afghanistan can enter India through the Wagah-Attari land route, then there is no reason for not reviving bilateral trade (Pakistan had decided to end bilateral trade after India’s decision to revoke Article 370 of its constitution). 

Revival of trade will benefit not just traders of the border belt of the state (Amritsar’s local economy suffered losses of an estimated Rs.30 crore after trade was ended in 2019), but also help in giving a boost to the tertiary sector, and benefit dhaba owners and porters — many of them have lost their jobs after the disruption of bilateral trade between India and Pakistan. 

There is absolutely no doubt that the border state of Punjab does face a myriad of social, economic and political problems, and outward remittances will only exacerbate the state’s challenges, but through imaginative policies and efficient governance these problems can be overcome. The state’s primary aim should be to create a robust economy and a sound social fabric. The lack of vision of  the state’s policymakers, and New Delhi’s tendency to view the state from the lens of security has resulted in serious economic and social problems. The post pandemic world offers a chance to rectify the same.

Tridivesh Singh Maini is a New Delhi based Policy Analyst associated with OP Jindal Global University, Sonipat, India. One of his areas of interest is the India-Pakistan-China triangle.

Varundeep Singh is a final year student of Panjab University, Chandigarh, India.