Time to come out from padmavyuha
Prolonged lockdown without adequate stimulus package will simply push economy into ICU; The poor will suffer the most
The novel coronavirus shows us how fragile our world is financially or otherwise. Going by the experience in the past few months, it is no exaggeration to say that the world will simply collapse and stare at a doomsday scenario if the working population takes a break for a few months.
You may have understood what I am saying. The deadly coronavirus that triggered Covid-19 pandemic originated in China and is spreading across the world faster. With lack of a proper vaccine and treatment against the virus, the lockdown has proved to be only effective way to checkmate the contagion.
But strangely, a month of lockdown seems to be more than enough for most of the countries to fall prey to another age-old contagion: 'economic virus'. It's pathetic to know that this 'virus' is now causing more damage to the world than the Chinese-born corona.
The ongoing massive lay-offs and salary cuts around the world go on to prove this. Mega global companies and most powerful countries are not in a position to pay their staff salaries even for a month of lockdown! That shows how fragile our economic system is.
So, it's no strange that people in US are taking to streets to protest against the lockdown, knowing very well that it's not safe to work outside at a time when Covid-19 deaths and cases are skyrocketing by the day in their country.
The citizens of the world's biggest economy may have realised fast that they can't survive financially if they stay at home for long. Therefore, there is an open disobedience against the lockdown.
This is despite the fact that the US government has announced a massive economic stimulus package of over $2 trillion, which is a bit less than India's total economy.
Compare that with India and its citizens. Indians largely obeyed orders of the governments at the Centre and in the respective States and stayed put at homes.
Of course, there have been violations. More so in the initial days. But it's not easy to keep 1.3 billion people indoors round the clock. But over 80 per cent of people remained indoors at any given point of time.
As this is a health emergency, 100 per cent lockdown is desirable. But that's not practically possible as people need essential goods to survive and other emergencies also crop up. That way, Indian people did their duty commendably.
But have the governments done their duty? They did reasonably well in treating the infected people. To some extent, the country's healthcare system has also been geared up to tackle the Covid-19 pandemic.
But India lags behind in a key parameter. That's the abysmally-low testing. As of now, India ranks 16th place in the number of known Covid cases. That's a good sign for the world's second largest populated country.
But when it comes to testing, India is at 143rd place among 212 countries and territories that worldometor.info is tracking for coronavirus infections.
So far, it has tested just 708 people for every one million population. The ratio stands at 20,241 - 31 times of India - in the US, the world's most-affected country. Even Pakistan fares better with 878 tests per million.
As per estimates, India is losing close to Rs 40,000 crore daily due to the lockdown which began on March 25 and now extended up to May 17.
Though lockdown norms were eased in some parts of the country from April 20 and more easing will come in from Monday (May 4), the economy will not fire at full throttle if public transport is not allowed with proper safety steps - at least within the States.
The country's economy lost close to Rs 16 lakh crore during the 40-days of lockdown till date. This bill will balloon by the time the lockdown 3.0 ends on May 17.
The governments should have used this economically-expensive lockdown period to go for extensive testing and reach the bottom of the pandemic impact.
With that not happening, the country may face its biggest challenge by far from corona when it fully opens its economy.
It may have to go for another round of lockdown if Covid-19 explodes post the easing. That will be a double whammy for the economy.
However, testing is not the only key parameter in which India lags behind. The Indian government had not announced any major economic revival package thus far. RBI came out with two rounds of monetary easing measures.
But these measures mostly act like a balm that provides some relief, but not any cure to the battered economy. Finance Minister Nirmala Sitharaman announced a relief package of Rs 1.75 lakh crore in March.
However, that package which accounts for just 0.9 per cent of GDP mostly targeted at the disadvantaged sections. Further, nearly Rs 1 lakh crore of that amount had already been budgeted for.
So, that stimulus is simply not enough. The Indian economy which may lose nearly Rs 20 lakh crore or more by the time the country scores its victory over the invisible enemy will definitely need much bigger cure - at least five per cent of GDP as additional stimulus package.
That's also far less than what other countries are spending on economic revival. Further, it should allocate lion share of the stimulus to MSME sector which employs more.
As the central government is keen on spending more than $1 trillion on infrastructure over next five years, it should accelerate these plans and spend more on infrastructure over next one year to kick-start the economy.
It can also dip into enormous wealth lying idle with India's richest temples and use the funds to build the country's modern temples of infrastructure.
The government could repay the amount on annuity basis or the ownership of these projects can be given to the temples if there is any chance of toll collection.
Further, governments should repay all the pending staff salaries at one go post the lockdown. They should also see to it that private sector also pays salaries.
More liquidity in the hands of people will lead to revival in consumption cycle which will in turn accelerate the economic revival. The State governments should also be asked to chip in with their own steps to revive the industrial sector.
Interestingly, the Andhra Pradesh government seems to be proactive when it comes battling Covid-19. Despite being haunted by a deficit budget, the Jagan Mohan Reddy-led government there expanded testing.
Currently, AP stands first among all States in the number of Covid-19 tests per million. It also announced an encouraging revival package for MSMEs including the release of pending industrial incentives totaling Rs 904 crore.
The State will also create a Rs 200-crore fund for providing working capital support to MSMEs. Such proactive steps are need of the hour.
With the imposition of national lockdown to contain Covid-19, the Centre pushed the country into a 'padmavyuha', which has yielded good results so far.
But the real test lies in exiting the padmavyuha with minimum collateral damage to the country, its economy and its people. Otherwise, prolonged lockdown without adequate stimulus package will simply push economy into intensive care unit (ICU).
If that happens, the poor will suffer the most. So, it's time to come out of padmavyuha if the country can't afford a massive stimulus package.