Restricting economic activities beyond a point will push the cases of Covid-19 and its related consequences. Should India care for COVID-19 by imposing restrictions like lockdown or allow the economy to grow? This is a difficult catch-22 situation. Even after around 100-day of continuous total lockdown, we are not in a position to say that these measures were successful in containing coronavirus.
The official data indicate that despite the stringiest lockdown in the world, India has recorded a quantum leap in the new coronavirus cases. With a record single-day increase of 29,168 cases (as on July 12), India’s Covid-19 tally zoomed past the eight-lakh mark on July 10, 2020, just four days after crossing the seven-lakh post. India’s total caseload stood at 8,22,603, while the cumulative death toll was 22,144, as per the worldometers.info website. The rapid spread of the pandemic has upped India’s share in daily global cases to nearly 12% as on July 10 from 8% on June 12, 2020.
Looking at these trends, one can conclude that India is not suitable for lockdown based on the social distancing given its settlement patterns and congested and unplanned urban areas dominated by slums. Further, it isn’t easy to understand why the lockdown was imposed on the entire country. It had a profound negative impact on the economy, which had already been weakened by years of mismanagement before this crisis struck. So what should India be doing in containing the coronavirus pandemic and revive the economy?
Consider The COVID-19 Battle First
Nobody knows about the future of neither COVID-19 and it’s the same for its vaccine. However, the sharp increase in positive cases has led experts/investors to worry about renewed broad lockdowns with large negative effects on the economy. But there are also other ways to reduce infections, including stringent bans on large gatherings and greater use of face masks. Further, WHO has acknowledged that wearing a mask is a must to protect from COVID airborne transmission. Besides, India’s medical facilities are limited.
Its density of doctors of 8 per 10,000 people is lower than that of even Sri Lanka (11/10,000) but nothing to China’s 20 or America’s 26. As such, we have to follow a different regime of treatment. It is proposed that those who are elderly and frail, and who happen to have diabetes and other health issues should be given preference. The asymptomatic cases could be treated at community clinics/homes.
As far as the management of COVID-19 is concerned, it is becoming clear that the whole process should have been driven by a group of epidemiologists, doctors and social scientists and not the bureaucrats in Delhi.
How To Manage The Economy Amidst A Pandemic?
Wearing a mask alone cannot push the economy and lower the risk of coronavirus. One has to take specific measures to revive the economy to generate resources to manage the pandemic. The following ten steps will create an enabling environment for the economy:
First, the current pandemic has forced us to think about India’s plight. We have to boost the confidence and morale of the workers. A regime of social security must be installed to meet the basic needs, including housing and public transport. Second, one cannot resolve agrarian problems without absorbing at least two-thirds of those dependent on the farm in non-farm jobs. Further, India needs to create 10-12 million jobs every year in the coming decades to provide quality of life for its growing population.
Third, in India, capital is scarce, and labour is abundant. The Micro, Small, and Medium Enterprises (MSMEs) are thought to have lower capital-output and capital-labour ratios than large-scale industries, and therefore, better serve growth and employment objectives. MSMEs generate the highest employment per capita investment. Still, they also go a long way in checking rural-urban migration by providing people living in isolated areas with a sustainable employment source.
Fourth, India has to improve the basic infrastructure with special reference to the uninterrupted cheap power supply to generate non-farm jobs. Moreover, emphasis should be on renewable energy since its production can be decentralized, and this will be a great help in promoting MSMEs even in remote areas. Moreover, solar and wind power now cheaper than coal.
Fifth, ease of doing business (EODB) is to facilitate the domestic producers as well as foreigners. Do we have the needed institutional framework for ensuring that skilling, productivity, technology development are on par with countries like China or even Thailand and Vietnam? Do we have enough technocrats in the governance system as ministers, bureaucrats to enable the processes? Interestingly, of the 56 companies that moved bases from China in 2018-19, the World Bank found that Vietnam got 26, Taiwan 11, Thailand 8, and India 3. Now the “shift” sentiment favours us even less.
Sixth, the economies that have a peaceful environment accumulate more physical and human capital accumulation and rapidly enhance economic growth. Here the issue of communal harmony is critical to attaining economic growth. India should not raise controversial issues like the Citizenship (Amendment) Act, 2019, which disturbs the harmony and creates an obstacle for economic development.
Seventh, India has to create conditions for the demand generation to create jobs. This would require changes in labour and land laws, cutting corporate and general taxes to the level of East Asian countries.
Eighth, for India to emerge not from the corona crisis but also to revive the economy, there is a need for greater dialogue in a federal setup. It is because India is a big and diverse country. We can’t have a “one size fits all” model. It is, therefore, the decentralization should be the base for economic planning.
Ninth, India needs smaller states for better governance, an essential requisite for economic development. About half of the country’s population lived in five states, namely, Uttar Pradesh, Maharashtra, Bihar, West Bengal and Andhra Pradesh in 2011. The 2021 Census will reveal an unmanageable picture of the population in these states. The Uttar Pradesh population may be more than 250 million in 2021.
Finally, as discussed above, the structural reforms are essential in generating employment and creating an enabling environment for economic development. Still, for sustained growth, the issue of labour productivity is a must. Labour productivity measures output per labour hour. It is driven mainly by investment in physical capital, technological progress, and human capital.
The government can enhance labour productivity by investing in infrastructure, technology, and human development. With technology changing the nature of work, and India’s population expected to reach 1.7 billion by 2050, investing in human development has never been more critical. It is argued that investment in people (especially poor) early, often, and at the household level, can lay the foundation for human capital formation that will enhance productivity.
To start with, India must focus on essential components of human development in a more tightly integrated form. These are: improving the quality of elementary education, facilitating water and sanitation, enhancing primary health, reducing the gender gap, and stabilizing population. In essence, the above reforms will provide a better option to build an efficient, globally competitive economy not only to manage the pandemic but also to prepare India to reply to the Chinese aggression in a language they understand.
In short, India should rapidly ease the COVID restrictions to revive the economy.
Otherwise, it may suffer the worst of both worlds — economic collapse without checking the virus. At a Princeton University webinar, The Economic implications of COVID-19 on July 10, 2020, economics Nobel laureate Angus Deaton did not mention India by name. Still, he highlighted the danger of developing countries getting the worst of both worlds.
In short, saving the economy saves lives.