People wearing masks at an airport in Bihar | Representational image | ANI
People wearing masks at an airport in Bihar | Representational image | ANI
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Countries are tackling the threat from COVID-19 in different ways. India, with its limited healthcare system and its densely populated cities, chose to try to shut down as much as possible, as soon as possible. This hurts livelihoods, but may protect lives.

As COVID-19 spreads through the world, national strategies for tacking the coronavirus are also being revised continuously. The worst of both worlds for any country today is when it can neither prevent loss of lives, nor that of GDP.

With the emphasis on protecting lives, even at the cost of hurting GDP, India has taken a step in the right direction. There is no doubt that GDP will be impacted by the coronavirus. Stock markets, which are fundamentally based on looking into future growth, are unsurprisingly exhibiting huge volatility. No one knows how long this will take, and where we are heading.

Trying to predict growth rates and the extent to which the economy will be hit is premature. It depends on how the coronavirus will spread in India, and we know very little about that.

We hope and pray that our tropical climate and the approaching summer will make the spread slower than in higher latitudes. We hope that if we can delay the contagion, then by the time it becomes worse, there will be a vaccine, and that we will also know what medicines can help patients. But there is little that we know now.

There is no doubt that the service sectors like tourism, hotels and airlines, in particular, and the urban economy in general, will be massively hurt by the lockdowns and social distancing measures being taken. There will be multiplier effects as incomes get hit. But preventing the spread of the coronavirus before it infects more people is critical.


Also read: Modi announces ‘Janata Curfew’ on 22 March, urges for resolve, restraint to fight coronavirus


Lessons from Italy’s mistakes

When northern Italy saw a lockdown, people went southwards. They took the virus with them. Today, when urban India is shutting down, many daily wage workers, unable to earn their livelihoods, will go back to their villages. If the spread of COVID-19 is stopped before people take it to their villages, food will continue to be produced.

The economic effect may be a sudden and sharp downturn, but one from which we can potentially recover fast. At the moment, some lockdown steps may make people complain, as they lose customers and incomes. The critical thing is to contain the virus before it spreads across the country. Ways need to be found to pay workers, delay loan payments, support businesses to be in a position to bounce back when the lockdown is over.

Until barely a few weeks ago, the Italian authorities were expecting loss of lives, but were unwilling to shut down tourist spots, restaurants, universities and schools across the country. The economy was weak and the authorities did not risk it getting weaker. Analysis by the Bank of Italy COVID-19 monitoring team states that in democracies, the strategy of trying to save livelihoods at the cost of losing lives can give us the worst possible outcomes.

This analysis, coming from a country that made the mistake of trying to prevent loss of livelihood before loss of lives, and ending up losing both livelihoods and lives in the one of the worst tragedies being witnessed today, is an important lesson to be learnt by the rest of the world.

The main lesson from the Italian team of economists is that a choice is sometimes presented between business-as-usual options that keep the economy running. It is assumed that the cost in terms of public health is tolerable. It is assumed that society will accept a number of unavoidable losses in terms of human lives. Lockdowns would save lives but ‘kill’ livelihoods.

The economists correctly argue that the choice is only apparent. This option is very unlikely to be sustainable from a political standpoint. In democracies with free information, like the UK or the US, such an approach, implicit in the first few statements by their leadership, was very soon questioned by experts, and was reversed in the face of the public outcry. But thanks to the delay in social distancing, the most likely outcome for them is the worst of both worlds: preventable loss of lives and of GDP.

India chose to hunker down even before the WHO had said it should.

Silver lining

No doubt, there is much more that needs to be done — testing more people, preparing the healthcare system to take care of the rising number of patients, figuring out ways to utilise the private health sector to fight the coronavirus, and so on.

In the long run, economic growth depends on the size and health of the working-age population. COVID-19 is so far hitting the elderly and those with co-morbidities, rather than the young. The share of the working population being hit, so far, is small.

While we do not know how long the downturn and possibly a contraction may last, the long-term effect, based on simple projections of the working-age population that is being hit, should be limited. And that could be the silver lining to this cloud.

The author is an economist and a professor at the National Institute of Public Finance and Policy. Views are personal.


Also read: India doesn’t have too many options to deal with economic impact of coronavirus


 

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2 Comments Share Your Views

2 COMMENTS

  1. I read the piece by Italian economists Ms. Patnaik refers to – and what it clearly says is that “in the absence of coordinated containment measures, the most likely outcome is the worst of both worlds: preventable loss of lives and of GDP. Predictability and consistency in policy responses across space and time is key, both in the public health and economic domains.” It does not make the distinction Ms. Patnaik seems to, the “simplistic distinction between saving lives and livelihoods.” They advocate for “coordinated containment,” in the absence of which we could get “worst of both worlds.”
    Sure, it is creditable that India took some rapid action, but as seems evident from Modi’s speech, there does not seem to have been any concern for livelihoods – at least P. Vijayan showed more sense in his announcements. Once again, what I got from the paper referenced is the need for a “coordinated response,” which considers livelihood loss as well as loss of lives.

    As per the paper, even a “hunker down” response as adopted by India and praised here is no guarantee of an effective measure: “While something a little short of the hypothetical radical lockdown is still likely to work, after a certain threshold of social interaction – which, unfortunately, we do not know – any choices would likely yield the second scenario in terms of human losses, without avoiding the economic costs of the lockdown itself.”

  2. Uttara Kumara, fearing battle field, runs away from Arjuna, his charioteer crying “Jeevan Bhadrani Pashyati” – Alive, one can see good things in future”. Staying alive is important. GDP can be rebuilt. I think, experts should also read European history of 14th century, when Black Death swept across Europe and killed nearly half the population. Economically, Europe went back by a century at the end of the pandemic.

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