A man prays to a deity on display, not pictured, at the Bombay Stock Exchange (BSE) building in Mumbai. | Photographer: Dhiraj Singh | Bloomberg
A man prays to a deity on display, not pictured, at the Bombay Stock Exchange (BSE) building in Mumbai. | Photographer: Dhiraj Singh | Bloomberg
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There are three phases on a standard growth curve, like one that plots the progress of Covid-19. The first is when the number of new cases increases every day at a steady or accelerating rate. The second is when the rate of growth declines; the total number of cases continues to increase, but the curve flattens. The third phase is when the tally of new cases daily stops increasing altogether and begins to decline. Seven of the top 10 countries that account for 80 per cent of the 10 lakh cases so far are into the second or the third phase. The exceptions are the US, Britain, and Turkey. The world as a whole seems to be at the fag end of the first phase of the curve.

India is at the same spot, or would have been without the contribution of the Tablighi Jamaat. If we follow the norm, which is to track proliferation from the day the country notched up 100 cases (14 March), it took nine days to quintuple to 500. In the first 10 days of the subsequent lockdown, the number has quintupled again to over 2,500. If we quintuple again in the 11 remaining days of the lockdown, the total would get to about 12,000 by mid-April. If we have not moved decisively into the second phase by then, despite the lockdown, it would be really bad news. No wonder the prime minister has suggested only a phased ending of the lockdown.

Fortunately, we may never reach the cases-to-population ratio seen in western Europe. Cases numbering 1,00,000 for populations of 5-6 crore in Europe would translate pro rata in India into a peak of well over 20 lakh cases — whereas the world as a whole has just reached 10 lakh cases. Still, the limitations of India’s medicare infrastructure could soon be in evidence.

The government’s response has been a combination of maximalism (for you and me) and minimalism for itself (the rate of testing and size of relief package). Instead, a maximal lockdown (closure of factories, loss of incomes, crisis for migrants, etc) should have been accompanied by more generous, universal pay-outs, starting immediately and not a week later. The lack of forethought is becoming a habit: Demonetisation in 2016 saw a shortage of new currency notes, made worse because they were issued in a different size that necessitated re-calibrating cash-dispensing machines.


Also read: How India can buck the trend of global recession caused by coronavirus


What is the impact on the economy? The early numbers show severe effects during the last month, and reflect also the earlier slowdown: 50 per cent fall in automobile sales, 20 per cent shortfall in revenue from goods and services tax (GST), 20 per cent drop in petrol/diesel consumption, a reported 30 per cent drop in power consumption, and so on. Direct tax revenue for the full year is where it was two years earlier, when the economy was 15 per cent smaller in nominal terms. Some of the numbers would be worse than in the 2008 financial crisis.

The fiscal stress will increase as revenue shrinks and crisis-driven expenditure goes up. We may therefore have moved back three decades on the fiscal situation. The finance minister had a cushion then: He could squeeze capital expenditure in the Budget. Since that is now a much smaller fraction of GDP, the cushion no longer exists.

One should expect a quarter or two when the economy shrinks, and after that a slow recovery. Slow, because of the time needed by closed firms to start up again, tight fiscal constraints, an unfriendly trade environment, lower consumption as household budgets reflect lay-offs and pay cuts, and therefore an investment famine. There will also be renewed life for the twin-deficit problem: Amid falling demand that has already provoked a commodity price crash averaging 25-30 per cent, heavy corporate debt could morph into stressed assets for the financial sector.

The first decade of the new century ended in crisis. The second has done the same in an environment of sharply slowing growth. The first half of the third decade, if not all of it, is likely to fare much worse than the last two decades. Do please light your lamps as the lights go out.


Also read: How the coronavirus recession is like World War II


 

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12 Comments Share Your Views

12 COMMENTS

  1. PM Modi can plan & execute supply chain of voters and opposition MLAs & MPs to come to power. He has planned his power garbs very well. PM Modi his govt plans and executes what they care for . PM Modi gave 3-4 days for thanli bajao and tali bajao and now diya jalao but just 4 days for preparing lock-down for citzies. It only shows PM Modi’s govt does not care.

  2. What is written is known to most of us.Mr,Ninan being an Economist should have suggested solutions for comingout/solving Economic Slowdown.

  3. Does a pandemic subscribe to a scribe’s skewed skullduggery. As our UN envoy Syed Akbaruddin says, this is not the time to bicker over trivialities. Sure, introspection can wait. Yes, we must be circumspect. Vigil is vital. But this scribe like the Soho-trained London returned lawyer is indulging in guttural gibberish. Oh, he has taken the cue from that Nincomoop of Razaack Sardesai. How great! And, that NRI Siddharth Varadarajan is right. He is peeved at being singled out by the UP govt. He rightly says all scoundrel scribes must be rounded up.

  4. No doubt the Demonetization was a haste decision taken where our economy effected very badly and the government had taken several consequential measures in a process to cover up for which we still unable to recover. But, the epidemic is not so. Very urgent and harsh measures are needed that any government can react and that the same has been reacted and taken. Delay in the name of preparation will be a fatal in such cases.

    • modi was busy with delhi.elections, mp govt toppling, motera inaugration and trump drama till march 8th full 3 months after wuhan exploded

  5. I am sure Mr Ninan most probably never fall’s ill as he must be pre planning. If he fall’s ill his medicines must be ready along with hospital bookings. In fact he must be well prepared for CORONA VIRUS. Ha ha ha

    • True. We had a colleague who said he always kept a medical kit ready when he travelled. I don’t trust the govt, he said. One doesn’t know when the rescue team comes and helps. So i keep antibiotics (he mentioned more) ready and gulp them. Very clever, i thought. But if he is not in a condition where he is unable to take out his treasure, or having taken it out, cannot pop into his buccal cavity? T N Ninan and those of his ilk are highly intelligent folk so tech-savvy that their medicine chest does all it must as Ninan has programmed his robots. But robot has no mind of its own. Who can dare to tell Ninan or his gang?

      • modi was busy with delhi elections till march 8th then wasted time on mp govt toppling. before that wasted our money at motera on trump trip which achieved nothing. before that on karnataka elections. shame. now busy blaming markaz when chamcha MEA jaishanker gave them visas and delhi police under amit shah gave tem them permission o gather at one place

        • It seems Sujit is PA of Modi. He knows what he does and when he does. Like he is the only managing country! What a hopeless comment is this ! He just appealed to stay at home but people took it casually and blaming someone who has taken efforts for nation !

  6. Funny hearing ‘experts’ predicting a slow down in the economy. Thank you but we already know it. These know-all can criticise the government ad nauseam. Central government can do only so much with the finance available. This government has certainly done better than generally expected.

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