The nationwide lockdown announced by Prime Minister Narendra Modi will give the Indian health system a breather, helping to limit the speed at which Covid-19 will spread.
The lockdown is necessary if we have to have any hope of hospitals in India being able to cope with what is likely coming our way. It buys us time while the world finds cures and vaccines for the coronavirus. Countries that did not lock down early are doing so now, after much loss of lives and livelihoods, and have had to announce even bigger fiscal packages to protect the economy.
The lockdown in India will have both advantages and downsides. On the one hand, the health system will be better prepared, but on the other, there will be many jobless and destitute. Urban informal sector workers, largely consisting of male migrants, are the most vulnerable and the most difficult to reach through social security programmes.
Finance Minister Nirmala Sitharaman has announced a Rs 1.7 lakh crore package to help farmers, organised sector workers, MNREGA, women with Jan Dhan accounts, widows and pensioners. The programme will help farmers and others who will soon get affected due to the shutting down of mandis and supply chains.
It will help urban migrant workers once they go back to their villages, but perhaps only after the restrictions on public transport such as buses and trains are lifted, and the curfew on the roads ends.
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Preparing hospitals and protecting healthcare workers
Now that the lockdown is in place, the government needs to move rapidly and efficiently on the next critical steps.
First, it has to ensure that hospitals are adequately prepared. The government has announced a coronavirus fiscal package of Rs 15,000 crore for the manufacture and purchase of equipment, testing kids, medication, personal protective equipment, isolation beds, ICUs, etc.
With limited testing so far, we do not know accurately how many infected cases we currently have in India. We know even less about how many cases we will have in the coming days.
The spread of the virus depends on living spaces, weather conditions, health, age, immunity and other unknowns. We can only make rough estimates using models of how many people will be sick and where. This means that the requirements of the health system are unknown. No doubt this makes the planning and logistics even more challenging.
Ensuring the safety of healthcare staff is critical. There is a huge administrative challenge in making adequate safety preparations in all public and private hospitals across the country. It is worrying to note that 9 per cent of those infected in Italy are healthcare workers.
The Indian Council of Medical Research has recommended the use of hydroxychloroquine for healthcare workers as there is some evidence that it may save their lives. More importantly, masks, protective gear, sanitisers, etc have to be domestically produced, or globally procured and provided in hospitals. This might require emergency purchases without going through the normal processes of Government Financial Rules, lowest bidder etc.
Global and domestic conditions of supply and demand are changing every day. Procurement processes have to be nimble and flexible to obtain what the country needs without delays.
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Safety net for those who’ve lost incomes
The second key challenge for the government is to provide a safety net to millions of people who have been left with no incomes owing to the lockdown.
Though many countries face huge challenges in the lockdown period, India’s challenges owing to its large informal sector are daunting. The sheer number of people whose livelihoods are suddenly snatched away from them is huge. Economists have argued that this is the time to use the JAM (Jan Dhan-Aadhaar-Mobile) trinity and make immediate transfers to people who live hand-to-mouth.
Direct transfers have already been announced by state governments such as UP, Punjab and Kerala. The decision by the central government to give wheat and rice at subsidised prices is another step. All governments need to act immediately so that the pain faced by daily wage workers, particularly in urban areas where they are most hit, is minimised. Since they are the ones who will be hurt immediately by the lockdown, they have to be supported first. Yet, we see from the package announced that supporting them directly is perhaps the most challenging.
The government has asked employers to continue paying salaries. But in the lockdown, many businesses will suffer. Manufacturing and services are shutting down. Restaurants, hair salons, tailors, carpenters and umpteen other small businesses depend on daily sales. Three weeks may be too long for them to be able to pay salaries without any sales.
Unless there is clarity that the government will step in and pay for all the salaries during this three-week-or-longer period, how will businesses pay? Will they take bank credit to pay salaries? Will banks lend to them? If the government pays all employee wages during the lockdown period, what will it cost?
Middle-class customers paying EMIs and servicing loans may be unable to pay. This will no doubt burden banks with non-performing loans and losses, something an already burdened financial system cannot support easily. The rise in debt and defaults will have to be dealt with through an appropriate policy framework for the banking sector. The sooner the government puts this in place, the better.
Ensure supply chains work
In the meantime, the government has to ensure that essential supply chains work and food and medicines are available. When customers are being prevented from stepping out, a key question is how the government will keep food and essential products markets functioning.
Steps are being taken every day to solve problems as they arise. These will remain important challenges in the coming days.
The author is an economist and a professor at the National Institute of Public Finance and Policy. Views are personal.
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A very realistic assessment. For years I had been wondering how the governments were managing to pay such fabulous salaries. Staff of loss-making banks flying off to Andamans on LTC. Free electricity, water, rations,pensions to fake poor. Some army officials driving BMW or Mercedes cars, low level FCI officials holding weddings in 5- star hotels, all this baffled me for years. Now the picture is clear— all the fun and games were financed by borrowed money. Corona has brought the good times to an end.
your idea on economy and covid 19 handling are fine and realistic but can you manage to get it on the table I dont’t think in the present one man rule in India it is possible.
Thanks. There are enough and more wiser advisors engaged with Governments. Best would be to enjoy the unexpected, though unfortunate, solitude that we have got forced into.
Neither the UPA nor the Modi government listened to the economists. As a result we are in a horrible mess that could destabilize the country.
Unless you can prove that you are smarter than 20 man Modi team, you should keep your advice to yourselves.