In most parts of the world or at least in India Covid-19 is just looked as a health exigency. What is to be impressed upon is its economic devastation which could be much more painful and long lasting than its health impacts.
As the chair of the council of the economic advisors of President Obama, Jason Furman recently concluded that Covid-19 could be worse than the great recession of 2007-09. Though he was talking about the US economy, things are not much promising for Indian economy.
So, looking at Covid-19 pandemic just as a health emergency may not suffice. India has to fight two wars simultaneously - the war against the outbreak of Covid-19 and also to ensure that the already depressed economy does not plunge into economic depression. Both these challenges may prove out to be an arduous task for Indian policymakers given the available resources.
To contain the spread of this virus, the government of India (GoI) has put in action a twenty one day lockdown of the entire country. This is primarily meant to break the chain of community transmission of the virus.
The effectiveness of such a lockdown however depends on the way it is being implemented by the government and then followed by the people. Seeing the pictures of stranded migrant workers post-lockdown does not seem to provide a promising outcome.
The alarming crowd at AnandVihar bus stand seems to have killed the very essence of lockdown. Thousands of people walked hundreds of kilometers to reach to their home. It is highly possible that these people may not only be infected but also act as potential carriers.
Tracing them could be a herculean task given the asymptomatic nature this virus. Why was this not considered before implementing the national lockdown? If GoI was able to bring back their people from rest of the world, why was there no concern for these poor domestic migrant workers? Was it a policy failure, negligence or they were not considered at all?
Another step GoI undertook to control this epidemic was the announcement of economic packages. Finance minister NirmalaSitaraman has announced a financial package of Rupees 1.7 trillion (lack crore). This has been supported by the Reserve Bank of India (RBI) by reducing its policy interest rate along-with maintaining an accommodative monetary policy. The repo rate at which the commercial banks borrow from the central bank has been reduced by 75 basic points (bps) from 5.15 percent to 4.4 percent.
Reverse repo rate has been reduced by 90 bps from 4.9 percent to 4 percent to discourage the banks parking their money with the central bank. The RBI further infused a liquidity of Rupees 1.37 trillion through its different instruments. Moreover, a three month moratorium on interest payments were offered to all borrowers. These policy measures were taken for two purposes. First, to make adequate funds easily available in order to fight Covid-19 and second, to boost the aggregate demand in the depressed economy.
Both these measures (the lockdown and the financial package) have also been taken in West and other countries but what is different in India context is: a) its large scale informal economy b) its level of corruption and c) the slow growing economy. This makes Covid-19 not only a different but a much more difficult problem in India.
The pandemic in a country with more than 90 percent of its labor force in the informal sector along-with faltering output growth will not be solved by mere announcement of economic packages or changes in the interest rates. The poor needs to be considered as part of the solution rather than just a part of the problem.
The effective allocation, utilization and distribution of funds to a major chunk of the population is a herculean task given the level of corruption in India. Moreover, with the reduction of the policy rates (210 bps since Feb 2019) the RBI is making itself more powerless to stabilize the economy when it is required the most.
We need to be more cautious before we turn into a chronic and devastating economic and health emergency. The problem may not seem severe as of now because the number of tests performed are too low in comparison with other countries. USA is conducting one lack tests per day, Germany five lack per weak and India will be conducting seventy thousand per week in the coming days. This clearly shows that only a minuscule of the population is being tested.
This underestimation may prove to be a major problem in the coming times. Also, poor and informal workers seem to be worst hit and the central government doesn’t seem to be very much concerned about them. This may be a policy mistake given the experience after they were left out in the demonetization exercise.
Providing more money in their hands directly may be better option than opting for interest rate cuts which is like “pushing on a string”. The reason being that during economic slowdown, the confidence of consumers and firms is so low that any change by monetary policy does not get reflected in the economy.
So, it is not the interest rates per se rather building the confidence and providing more money with the poor. This may be helpful not only in saving the economy by boosting aggregate demand but also preventing it from going into economic depression. It is also the responsibility of the people of India not to expect everything from the government. These are the trying times and we need to be fight this pandemic through mutual cooperation. People have to be disciplined, follow government orders and maintain social distancing by putting self-restrictions.
The problems in Kashmir are not anew. Be it the long-lasting conflict of partition, flood of the 2014, demonetization in the 2016, implementation of GST, revoking of Article 370 and 35(A), and now the novel corona virus. Kashmir has always been surrounded by one or the other problem. The only good thing so far has been that it is neither a sowing nor the harvesting season in Kashmir.
This however does not mean that Kashmir is immune to Covid-19 nor should it be taken lightly. With the rising number of positive cases along with limited health facilities coupled with cold climatic conditions, the state is in alarming position. If this pandemic does not turn out to be seasonal, it can have devastating effects for the health and agricultural sector.
Irfan Ahmad Shah is PhD scholar in Economics at CDS Kerala. Muneeba Shah has completed MBBS at SMHS, Srinagar