P Chidambaram writes on economic impact of coronavirus

Written by P Chidambaram

Updated: March 22, 2020 3:30:26 pm

The government has been busy with video conferences; repatriating Indians from affected countries; and issuing advisories on hand washing, covering one’s nose and mouth, and wearing masks. (Express photo: Amit Mehra)

When you read this on Sunday, it will be clear if India is ahead or behind the curve in the battle against coronavirus (COVID-19).

The government has been busy with video conferences; repatriating Indians from affected countries; and issuing advisories on hand washing, covering one’s nose and mouth, and wearing masks. On March 19, the Prime Minister made an appeal to the people. All these were necessary, but were they sufficient?

I have carefully followed one number: the number of people who tested positive for COVID-19 as reported by the government. It was two on Sunday, March 1; it jumped to 32 on March 8; and jumped sharply to 111 on March 15. As I write this on March 20, the number stands at 236. The number of people testing positive is rising at an alarming rate.

Why Hesitation?

There were — and are — enough warnings from the World Health Organization, the Indian Council of Medical Research and many epidemiologists. All the warnings pointed to one outcome and only one outcome — that the number of infected persons will increase dramatically if we did not take tough, painful and unpopular measures.

Opinion | Tavleen Singh writes: In six years, PM Modi has never faced a test of his leadership more serious than this

I am duty bound to support the PM and I shall do so. In effect, he has asked the people to fight the enemy with moral armaments. I am afraid that the virus is not like Clement Attlee imbued with high moral values. I am pretty certain the PM will be compelled to come back in a few days with tougher social and economic measures.

I plead for a temporary lockdown of all our towns and cities for two-four weeks.

The other equally important concern is COVID-19’s fallout on the economy. The PM implied that the current economic slump was triggered by COVID-19; that is not true. The beginning of the decline of the growth rate of GDP pre-dates COVID-19. The growth rate has slided in seven successive quarters. The data for January-March certainly does not predict an uptick. The common sense conclusion is that the quarter January-March 2020 will be just as bad as the previous quarter, if not worse.

Impending Crisis

It is therefore fair to assume that businesses will be affected. Big factories have laid off their workers on three or four days a week. Casual and temporary jobs have been axed; if not so far, they will be. Orders by big manufacturers on suppliers have been reduced. Smaller producers have suffered huge cash flow problems. Supplies of raw materials have been affected. Credit has dried up. All these are the natural consequences of an economy in a rapid decline. I had blamed the government for its failure to formulate policies and take the right measures to arrest the decline. That criticism remains valid. However, the government cannot be faulted for the outbreak of coronavirus.

Nonetheless, the government is responsible for managing the economic fallout due to coronavirus. Its first duty is to protect employment and wages. The government must quickly identify the sectors where jobs are in danger and take steps to ensure that the current levels of employment and wages are maintained. The measures should apply to all registered employers. Employers must be compensated through tax credits, interest deferment or outright grants.

At the next level is the informal sector — millions of jobs are accounted for by ‘construction’ and ‘services’ like transport, tourism, maintenance and repair, home delivery, etc. The government’s support can be through lower interest rates, tax credits and enhanced purchases (e.g. more low income housing contracts).

READ | What a fast-spreading virus mean to an already slowing economy

Then, there is agriculture. Fortunately, farmers will continue to plough, sow, weed, irrigate, fertilise, and harvest. PM-KISAN’s coverage is limited to landowning farmers (including absentee owners), but that is the place to begin. The amount transferred under PM-KISAN should be doubled to Rs 12,000 and the balance for 2019-20 should be disbursed immediately. Tenant farmers — records are available with state governments — should be brought under the scheme and given Rs 12,000 per family. Once landowning and tenant farmers are compensated, the bulk of the daily agricultural workers will be partially protected.

There are non-agricultural daily workers who are the most vulnerable among the working population. A register must be opened in every block and daily workers must be invited to register for a monthly allowance. The idea is there in NYAY in the Congress’s manifesto. The allowance may be needed to be paid for three to six months, but that is a burden the country must bear willingly.

An Economic Imperative

All this will naturally require a humongous amount of money. The money can be found if the Central government and state governments

(i) ruthlessly eliminate wasteful expenditure; and

(ii) suspend temporarily all grandiose and long-gestation projects that generate little employment per Rs 1 crore.

The RBI should chip in and cut rates sharply. Financial stability is as much an objective of the RBI as containing inflation is.

There is not yet an estimate of the money that will be required. The Central government’s total expenditure in 2020-21, as per the Budget, will be Rs 30,42,230 crore. All state governments together will spend about Rs 40-45 lakh crore. Given that scale of expenditure, it is possible to find, say, Rs 5,00,000 crore towards mitigating COVID-19 over the next 6 months. This is a moral and economic imperative and we must find the money and spend it.

READ | Small investors are hit hard but coronavirus deeper worry than crash

📣 The Indian Express is now on Telegram. Click here to join our channel (@indianexpress) and stay updated with the latest headlines

For all the latest Opinion News, download Indian Express App.

More From P Chidambaram

P Chidambaram



Please enter your comment!
Please enter your name here