CORONOMICS
“Ignore that fly on your nose and it will surreptitiously take roots and spread its tentacles”. China, US and Europe are the children of this profound quote. After a dangerous complacency by all the three nations, they witnessed a sudden surge in covid-19 cases within a span of two weeks. Of course, these are fully developed nations at the helm of the global economy and are replete with resources to feed their sparse population (well, China is an obvious exception to the idea of sparse population). Now, China has happily resumed their activities, workers have returned to their workplaces and have gone to the point of re-opening Shangai amusement park to revive tourism. But the situation is the exact opposite in India.
Millions in India are scrambling, grovelling and begging for a two square meal a day. Covid-19 has wreaked havoc in its economy, putting millions of businesses and enterprises that provide employment to millions out of business. Yet, the MSME sector that is the highest employment provider in the country next to agriculture, continued paying its employees during the lockdown. But how long can this go? The MSMEs are already facing disruptions in cash flow. A longer lockdown will definitely bring the MSMEs on its knees and finally lead to bankruptcy. This will unveil severe unemployment issues. The plight of 1.2 crore people alone from Tamil Nadu that work in MSMEs will become disastrous. The automobile sector with its confusion over BS4 to BS6 conversion has ended up hitting a wall. To get this back on track, the centre should allow these sectors to resume their work including the supply chain that is not yet fully placed. For starters, it could fund the MSMEs to restart their business activity that has hit a state of doldrum. Two-wheeler and four-wheeler showrooms, service centres for electronic goods, motors and computers, hardware stores, bakeries, parcel-only eateries, couriers, lorry booking offices, photocopy centres and construction based operators are those trades that were opened on Sunday. Of course, with strict norms such as fumigating and sterilising the shop frequently, social distancing with customers, labour safety and prohibiting AC usage.
At the global level, there is a clear indication that companies that are doing business in China are seeking other attractive places to invest as the common nemesis at the moment is China. This means it is a blessing in disguise for India to receive overseas investments by displaying itself as the most compelling destination than its immediate competitors. With the famous Make in India slogan and the recent budget announcement by Finance Minister of India, Nirmala Sitharaman to reduce corporate tax significantly, India should have witnessed a deluge of investors willing to invest. Alas, the reality espouses the diametrically opposite end. It’s like The Carrot and the Stick principle where the rider keeps dangling a carrot in front of a donkey while jabbing him with a stick from behind. Our government has deployed this approach towards investors. This reward and punishment approach has simply driven them East. Vietnam, Indonesia and Malaysia are the ones who won the auction in the end. It is thus clear that certain fundamental reforms need to be rewired and rebooted to invoke some confidence in investors. An imperative reform that has to be undertaken is guaranteeing consistency in state policies. It is like the anchor that moors the ship unlike the hitherto carrot-donkey-stick approach. There have been instances where the centre has brought in drastic changes overnight! This just scares away the investors from investing here. Second, to offer lands to industrial units at affordable prices as global companies drift away from China. As we know, the industrial infrastructure in India is really poor as compared to China, some labour has to be invested in this realm. Other supportive measures are required like to lower the cost of capital, labour, electricity and logistics in India.
Corporate debts have soared high after the 2008 global recession, so the global financial status is prone to a great tribulation. IMF predicts India’s GDP growth will drop to 1.9% and Global growth will shrink by 3%. This comes unprecedented and at a time when the entire world is at a standstill. No one and no force can do anything about it now. The world economy is under a voltage fluctuating life support system. Few billionaires can go on posting motivational messages on twitter and boost their moral standing. Few can go and donate a few crores. But how long will they donate? Some economists argue that rapid lifting of lockdown is essential to revive the economy. It is certainly risky but also essential to save the economy. “Social distancing and lockdowns in India will not be as effective as in developed countries like US and China” says the economist and columnist Swaminathan Aiyar. The concept of shopping once a month and stocking up supplies may be feasible in other rich countries but fail to do so in India. A perfect example is panic hoarding of supplies in Koyambedu in Chennai where social distancing norms were flouted and people without facemasks mindlessly going on bargaining with merchants like all is well with the world. Chennai is already witnessing its ramifications with cases skyrocketing and spreading around fiercely in Cuddalore, Pondicherry, Kancheepuram, Trichy. The same community transmission is likely to repeat itself in the tasmac cluster where people thronged in the early dawn to grab their ‘elixir of life’ with absolutely no sense of social norms and even withstanding a heavy downpour. Millions in India live in slums where six or more people get crammed in one room.
With these sad realities in mind, boy, lockdown is not India’s cup of tea. It has also true that the number of Covid-19 infections in India is commendably low as compared to other countries. Even WHO has acknowledged it. It is also essential to know that the number of non-covid-19 deaths are sharply rising because of the dangerous negligence the hospitals have shown towards other ailments. If people don’t die of covid-19, they’d die of lockdown. Without economic activity even a mega stimulus won’t work. Diabetes patients are struggling to buy their daily dose of insulin. Did the non-covid-19 ailments become an unwanted stepchild upon covid-19 arrival? US government on May 7th reported that 33 million people out of 162 million workforce were shown the infamous pink slip. According to Centre for Monitoring Indian Economy (CMIE), 27 million youth in the age group 20–30 years are out of work. “Now, unlike US and Europe where laid off workers can claim unemployment benefits and the Centre even funds the companies to keep the employees on the payroll, India cannot support this vast population of unemployed youth for long”, says Ruchir Sharma While economists suggest the RBI to just print the money needed to finance the mega stimulus, global investors like Mr. Sharma argue citing Brazil and Venezuela as examples as to how global markets exploit this spending.
Now, I don’t understand what Trump was thinking when he threatened us with trade sanctions unless the ban on Hydroxychloroquine was lifted. Was he woefully ignorant or wilfully obtuse? Was he completely blind to the fact that India too with its population four times that of US has people suffering from Malaria, lupus, arthritis? Or just selfishly assumed US lives matter more than Indian lives? Now if all goes well and hospitals are replete with PPEs, and other equipments, MSMEs get well fed and their financial bruises get alleviated, government starts lifting lockdown with minimal restrictions by the end of July, the economy is will bounce back to normal and the recovery will be V-shaped. This is an optimistic way of looking at the scenario. But for Satan’s sake, let’s look at the other end. The virus continues its regime indefinitely and economy goes for a toss.
When SARS broke out in China in 2003, there was no lockdown implemented. People lived through the epidemic with just social distancing and sanitation measures. It is interesting to note that India has nearly 2.5 crore TB cases with more than 4 lakh deaths annually. WHO reports estimate India has 1.5 crore Malaria cases per year causing 20,000 deaths per year. With this data in hand, Covid-19 appears trivial. Discretion is the better part of valour. Its time we start lifting lockdown with minimal restrictions while advocating social distancing, wearing masks and innovating on safety measures. When we can live in peace with deadly diseases such as TB, Pneumonia, Malaria, Dengue and even unwarranted road accidents, we can definitely do so with Covid-19. The youthful demography of India plays to our advantage. Amid all the Panglossian hopes that high tropical temperatures will kill the virus, it is imperative to note that despite the narrative that WHO favoured China in disseminating false information and manipulating the number of infected figures, the virus knows no discretion. A concerted global action plan, cooperation and collaboration are required. Just remember this too shall pass. Humankind has dealt with similar diseases like Spanish flu, SARS with great temerity. How difficult will this trivial Covid-19 be?
