The coronavirus (COVID-19) has proved that it is a once-in-a-lifetime situation with its multi-faceted impact set to render the world into pre- and post-COVID-19 eras—and there is no better example of the devastation that COVID-19 is unleashing than in the US, where president Donald Trump’s administration, the Congress (with bipartisan support) and the governors of the various states have taken major steps to contain the impact on health as well as the economic scenario, despite early blunders.
As of 11 May 2020 (02:59 GMT), the total worldwide COVID-19 cases
stood at 41,80,305 with 2,83,860 deaths. In the US alone, there have been 1,367,638 cases
with a total of 80,787 deaths
. Although the spread of COVID-19 in the US has been contained somewhat in recent times, there were reportedly 20,329 fresh cases
coupled with 750 death
s during the previous 24 hours. The US has been doing a lot of tests, especially recently, and the total tests are close to 9.5 million (9,444,525 to be precise
) while tests per million population stand at 28,533
In countries where data is available, the situation on the economic front is clearly devastating. Again, take the US for example, which confronts unmatched unemployment leve
ls not witnessed since the Great Depression of the 1930s. Both the Trump administration and Congress face a crucial choice—either keep pushing trillions of dollars trying to support workers and businesses, or simply hope that the reopening of various activities in the different states will kick-start the US economy, which is perhaps at its nadir, since the Great Depression.
Without a doubt, the month of April 2020 was simply devastating for the American economy as it sank deeper into the pits—an estimated 20.5 million jobs were reportedly lost even as the unemployment rate is said to have peaked at 14.7%, which is the highest in the past 75 years.
And, to make matters worse, it is reported that more Americans (millions of them literally) have apparently filed unemployment claims since the data was collected and compiled in mid-April. According to observers, this should enhance the unemployment rate to as high as 20%, leaving just over 51% of Americans with a job.
This is where policy action is really crucial and errors by the Trump administration and Congress could turn the 20 million temporary job losses into permanent ones—which, in turn, could sink the US into its deepest and longest recession, possibly unmatched over the last 75 years.
Having said that, the US has so far spent nearly 14% of its GDP as a direct stimulus—i.e., almost $3 trillion—to assist companies, workers and the unemployed. That is phenomenal by any standards and as far as I can see the US is not done as yet.
Additionally, the Federal Reserve has undertaken several astonishing steps
—this includes actions to ensure that the financial system functions very well, purchase of government-sponsored securities and operationalising strategies to purchase corporate and municipal debt so that credit can flow seamlessly.
On their part, the governors of various states have promulgated stay-at-home orders in an effort to retard the growth and spread of the virus.
Now, if this is the situation in the US, imagine how other countries, especially emerging economies like India, can manage the fallout of COVID-19 and its health and economic impacts.
India has been under lock-down since the midnight of 24 March 2020 and has been fighting hard in its battle against the virus. Apart from the healthcare strategies and three phases of lock-downs, India has allocated between 0.7% - 0.8% of its GDP as a direct stimulus (Rs 1.7 lakh crore
) and the Rreserve Bank of India (RBI) has taken several actions
but a lot more is required.
That apart, while the total number of cases in India stand at 67,161
with about 2,212
deaths (as of 11 May 2020, 02:59 GMT), the levels of testing are low, despite having been ramped up recently. As on date, the total tests in India stand at 1,609,037
and tests per million population stand at 1,166
. As India tests more, it is expected that the number of COVID-19 cases would naturally go up.,
Now, the key question is, how can countries like India win the battle against COVID-19, both health-wise and in an economic sense especially, when countries like the US are themselves struggling. Health-wise, we have a long way to go as our health infrastructure is woefully inadequate.
I was informed by a colleague that his relative in Mumbai heard the authorities stating over loud speakers that the paucity of beds means that positive COVID-19 cases will have to stay at home and take care of themselves—that is indeed a sad state of affairs, if true.
If this is the situation in Mumbai, which is India’s financial capital with unparalleled medical facilities in comparison to the rest of the country (barring Tamil Nadu, which also is reportedly known for its strong healthcare infrastructure), then imagine what the circumstances could be in other states of India, especially as testing is ramped up and the number of cases also commensurately rise.
This calls for the government of India and respective state governments to immediately requisition the services and infrastructure of all private healthcare providers. At least 40% capacity of corporate hospitals and individual healthcare clinics and practitioners need to be made available so that we have the necessary health infrastructure to tackle the COVID-19 cases. COVID-19 is a national health emergency and the private sector must be roped in to play a bigger role.
Apart from the brutal individual and corporate distress, many SMEs are on the verge of closure because they don’t have the much needed liquidity to survive
. Likewise, there are many poor and vulnerable people who are suffering as are companies in key sectors of aviation, hospitality, travel, tourism etc.
All of them need substantial levels of on-going economic support (this should equal at least 5% of the GDP, if not more, for it to be effective) by way of direct money transfers to the poor and the vulnerable people, enhanced liquidity and other support for MSMEs and corporations and direct subsidies for the hugely impacted sectors of aviation, hospitality, travel and tourism.
Failure to act now is likely to push India into one of its deepest recessions of all times.
(Ramesh S Arunachalam is author of 12 critically acclaimed books. His latest release in January 2020 is titled, “Powering India to Double Digit Growth: Five Key Steps To A Robust Economy”. Apart from being an author, Ramesh provides strategic advice on a wide variety of financial sector/economic development issues. He has worked on over 311 assignments with multi-laterals, governments, private sector, banks, NBFCs, regulators, supervisors, MFIs and other stakeholders in 31 countries globally in five continents and 640 districts of India during the last 31 years.