The lack of oxygen, hospital beds, it’s impact on our cities, people and healthcare workers are witnessed by all and sundry, and to have a look at the impact it’s having on the economy is significant. The government has made a series of decisions, and it’s important to also understand whether these decisions are the right ones, or we have made faulty decisions as a country. For example, the government has decided not to call for a nationwide lockdown this time at 3.79 lakh cases per day, whereas it had called for the one last year at 500 cases altogether. Many states are still reluctant to call for a lockdown, and we hear stories of complete desperation coming out of states like Uttar Pradesh, Delhi etc.
What impact will this have on our economy in the long term, given the decisions that have been made by the government? An article that came out on 22 nd April on the chief economic advisor to the government of India, Krishnamurty Venkata Subramaniam, who while speaking at an event said, “The second wave of Covid19’s impact on the Indian economy will not be very large.” He said, “Given the predictions that have been made by the researchers that the pandemic shouldn’t extend beyond May, based on that we have some internal assessments and I don’t think the impact will be very large on the economy.” He further said, “All of us economists actually have to say these things with enormous dose of humility because not only in India, for every other country predicting the pandemic has been extremely difficult.”
I am flabbergasted by that statement – the fact that the economic advisor, as of last week, believed that this second wave, which is the worst health crisis India has ever seen in the history of the country will not last past the month of May. On what basis does he believe that a crisis as massive as this won’t have ‘a very large impact’ on our economy? To remind the readers, this is the same financial economist who told us that the demonetization stunt in 2016 by the Prime Minister was a wonderful decision made for the economy. This is an economist who in last year’s economic survey wrote that our small enterprises were not creating that many jobs, and that it was the larger enterprises that were creating it. He doesn’t even seem to be aware of the existence of an unorganised sector providing 80% of the jobs and 40% of the GDP in exports in the economy.
The central government, well into the month of April from January, ignored what experts said about the emergence of the second wave, continued to assure the lay people that everything was perfectly fine. People are dying left, right and centre; they are falling ill at a phenomenal rate. What impact it would have on labour productivity is known and understood by all, (except for this government). Labour is a factor of production; workers won’t and can’t turn up for work. This economy isn’t run by people who work from home, but by 90% of the people who, actually, have to land on the ground in order to work. They are ill, and so being their families, causing a major impact on their labour productivity. If people aren’t turning up for work, regardless of whether it is factories or service enterprises, supply channels are going to break down; they are, anyway, getting disrupted as we speak. The chaos in the system is already causing a massive decline in demand, since incomes have or will be collapsed, jobs will be lost on a massive scale as supply channels break down.
All of the economic activities will eventually reduce tax revenues of the government. In other words, the government’s capacity in the rest of the financial year to actually undertake government expenditure to help people (which anyway they don’t) will be disrupted. The system of ‘personal savings’ is on the verge of collapsing; it was already falling sharply under this government – when household savings stood at 24% of the GDP in 2013, it had fallen to 17% by 2019. In other words, there was 7% decline in household savings even before this crisis has hit the country. Jobs and incomes plummeted, poverty has increased, and now personal or household savings is on its way to collapse, leaving negligible amount of money available for investment when the economy divides.
On being as if he is arguing for or against a lockdown, Prof Santosh Mehrotra, Economist said, “I am not arguing for a lockdown. There were four major problems with the lockdown last year, and several of those can happen again, given the proclivity of this government. Firstly, it was too sudden, unplanned an action when there were less than 600 cases altogether in the country; we today have 3.79 lakh cases in a day. Secondly, the lockdown, in the previous year was unnecessarily national in scope. Thirdly, it was needlessly stringent; it was the tightest lockdown in the world which was kept going for several weeks to destroy the economy.”
According to him, the impact was that of the worst contraction in the major economy in the world, because of two vivid reasons – the nature of the lockdown which destroyed too many livelihoods, and the way the government didn’t respond with a fiscal stimulus which was necessary.
Central government has not called for a lockdown, state governments are reluctant to do so, even the ones who have called for it such as Karnataka, Madhya Pradesh are not terming it as ‘a lockdown’, rather terms like ‘closed down’, ‘covid19 curfew’ have been in use. No State wants to use the term ‘lockdown’ for the fear of receiving backlash and because of the distress caused last year. With 3.8 lakh cases a day, there is a huge cost to this if it isn’t controlled. It is expected to reach one million cases a day in the end of July. Ramanan Lakhminarayan, H.D, M.P.H, economist and an epidemiologist say that there will be one million deaths by mid-August in the country.
On being asked if there is an economic price to pay for not making active decisions by the government, Mohan Guruswamy, Economist said, “There is a huge cost to pay now and, in the future, as well; our systems are already collapsing, we mightn’t have enough people to work if this trend continues. Where and how will the labours, the workers come from? Companies will have to shut down because of unavailability of workers. We inflicted an economic cost last year when there was no cost with merely 500 cases all throughout the country. And here we have crossed well over a million of total cases. The government has to act, not the kind with a strict lockdown as earlier without preparation and helping people with cash on their hands or accounts, without providing rations.” He asked the government not to pile on to the problems, but to act sensibly, and according to him, PM Modi is driven by grandstanding and not by practical, economic realities.
I don’t want to believe that it’s ever too late to fix this crisis. If the government were to set up war rooms that were working day in and out in fixing the problem arising with the unavailability of enough oxygen, more than half the lives would immediately be saved. When we understand that the US is now sending over a hundred million dollars’ worth of equipment, if this equipment is equitably distributed to the state governments based on the requirements, if vaccines are distributed enough, the country will be able to get on top of this crisis soon. Firstly, a coordination across the states with the centre is utmost important, which isn’t the case now, since people are busy playing politics, blame-games etc. It has to STOP.
Secondly, there isn’t an ounce of doubt in the fact how massively testing must be rammed up. If we are to try and control the situation in the short run, the crisis of hospitalisation, beds, oxygen etc. must be made adequately available and accessible to the patients. ‘Vaccines’ will only talk about the medium or long and not the short run, People making the decisions must realise the dire need of extreme measure in order for the country to be back on track. We are in this together. Hoping and Praying for the world to heal as early as possible.