The economy seems to be at a virtual standstill due to the coronavirus pandemic, even though the death toll is miniscule in comparison to other countries. While on the one hand, the government is spreading awareness and taking preventive measures like lockdowns, on the other it is resulting in raising panic amongst people of all hues as the economy is going to be severely hit.
Nagging uncertainty over the virus remains and speculation is driven by those nations worst-impacted. It is feared the virus may have large-scale impact and lead to business closures, unemployment and loss of basic income at an unprecedented magnitude. Consumption will slow down, impacting production and push back expansion plans.
In the midst of all this, while the RBI Governor has claimed there are “enough policy tools and stands ready to take any measures” to help the economy tide over the pandemic impact, no concrete steps have been announced till now. Obviously, the economy’s growth in this fiscal will be further retarded and the growth rate may not cross 4.5%. In the past 7 to 0 days, the stock market has crashed mainly due to bulk selling by foreign institutional investors.
According to one report, overseas investors pulled out a net Rs 25,000 crore from equities and over Rs 13,000 crore from debt segment during March 2 to 13. Experts say the LIC has not played any role in stabilising the market while the somewhat hyped up scare has added to the depressed investor sentiment. Is it because there is no signal from the government?
On the health front, experts point that while the government has taken WHO guidelines seriously, the question arises what has it been doing all these years when lakhs of people die due to diarrhoea, dengue, swine flu etc, every year? This is clear reflection on the poor health infrastructure the country has in comparison to fast developing nations. The facilities in backward districts and sub-divisions are poor and lack of doctors and nurses add to the problem.
Testing facilities in the country is woefully inadequate, specially in populous States like UP, Bihar and Rajasthan, despite government claiming to have one lakh of test kits and another 2 lakh ordered. Records show that till March 13 India performed just 6500 tests on 5900 individuals, mostly in 3-4 States, much too few for a country of 1.3 billion population.
There is general agreement the government will never give sufficient attention to developing public health infrastructure, and prioritise the needs of its people. Budgetary allocation for health sector has always been insufficient, judged from any criteria. However, there has been a proposal to hand over district hospitals to private parties, which should raise the question whether this could be a solution to the grave health problem existing in the country? Remember, the lower sections of society end up selling off their land and property, or end up in heavy debt just to get the right medical treatment for ailments such as cardiovascular diseases, TB, cancer, leukaemia etc.
Such a reality goes against the very principles of social justice. Providing health care facilities to all or at least major segments of population must be viewed as a right in any welfare State. Moreover, the role of the private sector in nation building is far from encouraging as it is always profit-oriented. In fact, recent reports indicate this sector has filed to fulfil its corporate social responsibility (CSR) and the government has conveniently withdrawn the harsh penalty clause obviously due to pressure from big business houses.
Experts demand that it is time the country gears up the public health infrastructure in the country, particularly rural areas with more investments and at least a few hospitals in sub-divisions with bare minimum facilities. At least these should be able to treat patients with dengue, malaria, swine flu etc, let alone the deadly coronavirus.
Then there is the other side of the pandemic i.e. sheer economics. The virus has sent shock waves in an already weak economic environment. As China is severely affected and there is severe disruption in supplies, India may have a opportunity to take this place. But it’s not easy as several measures need to be taken including easy availability of funds, export incentives and the like to make dents in the global supply chain. Most global companies are looking to migrate from their China exposure and create supply chains, which India should try to tap.
The cost of borrowing in China has fallen to below 2% while it is around 12% in India. The government needs to explore means of bringing down the cost of capital and improve availability, specially for export and import substitution projects. The RBI could cut interest rates, which are not yet announced, to revive lending when recession is affecting businessmen; some duty waiver for limited period on materials like steel may be considered to encourage global companies to set up units in India.
Dealing with economic challenges may well be long term, as 93% of employment in the country is unorganised. A recent analysis suggests if the current crisis continues for a few months then: the Rs 18 lakh crore-tourism industry is expecting direct job losses of 1.2 million; hotel industry is expecting revenue losses of $1.3-1.5 billion’ restaurant industry, which employs 7 million people, is expecting job losses of around 15 per cent; Aviation experts are predicting over Rs 4000 crore in losses to private carriers and the retail business is expecting 11 million job losses!
Experts suggest transferring of Rs 1000-2000 to the bottom half of India’s poor families be considered using the JAM trinity to mitigate their problems; fiscal concerns need addressed and a UBI type support be developed for those affected and to stem further decline in demand. It’s near certain, business as usual may no longer be feasible and joblessness will be further aggravated in the next few months. Experts also feel that Covid-19 may not cost many human lives but economic losses are likely to far exceed, at least in India. The government, like the rest in the world will need to come out with concrete revival plans. As is being heard, it’s better to be safe than sorry and certainly not again.