The coronavirus (COVID-19), as of 23 April 2020 has infected
around 2.64 million people worldwide and claimed
about 0.18 lakh lives globally. It is not just a pandemic—it is also a burgeoning (global) economic crisis. What the world is going to face economically in 2020 is likely to be as bad as what the world faced in 1930—the Great Depression, when much wealth was wiped out over a period of ten years.
As per IMF data
, in early January 2020, about 160 member countries were expected to report positive per capita income growth in 2020. Three months later, this has flipped. IMF now expects about 170 countries to report negative per capita income growth in 2020. That is how serious it is.
In India too as COVID-19 has raged, about 21,370
people have been infected (as of 22nd April) and, at the same time, 681
have died. Without a doubt, government of India, state governments, private sector and civil society need to be congratulated for the wide ranging measures successfully adopted towards containment of COVID-19.
That said, what is, however, serious is that the Indian economy is facing its toughest run in recent years. Especially coming against the backdrop of an already stuttering economy, COVID-19 has run amok in terms of economic growth as the measures for containment of its spread (lock-downs etc.) have pushed the Indian economy to the brink.
The government of India has responded to the best of its ability. The first official stimulus of about Rs1.7 lakh crore came several weeks ago. The Reserve Bank of India (RBI), likewise, has cut interest rates twice and has also initiated measures to enhance liquidity in the financial system, apart from offering a package for direct lending to agriculture, small and medium enterprises (SMEs) and microfinance clients. The government is said to be readying another stimulus package right now and this is also very welcome.
That said, what needs to be done on priority now relates to the economic aspects of COVID-19. Here are some priority tasks briefly described below:
• STRENGTHENING SUPPLY CHAINS FOR ESSENTIALS AND FOOD/AGRICULTURE ITEMS: A key task is ensuring smooth flow of materials and outputs through (already somewhat disrupted) supply chains for essential goods (including medicines) and food and agricultural items. Keeping these supply chains in good (if not seamless) running condition and well-oiled to ensure availability of the various essentials and food items is most urgent and of paramount importance.
This is also critical for ensuring livelihood security to many informal sector workers, farmers and others. Furthermore, this is very necessary for ensuring food security of the country from a short-, medium and long-term perspective.
• ECONOMIC PACKAGES FOR POOR, FARMERS, MSMES & OTHERS: Delivering and implementing stronger economic packages for the poor and informal or unorganised workers, farmers, MSMEs and other vulnerable groups is an equally urgent task. These groups approximately contribute a little over 45% to India’s GDP and they are very crucial in terms of the unique skills sets and distinctive competencies that they possess. Therefore, there is an urgent need to support these groups, ensure their livelihood security and preserve their key skills.
Especially, these rescue and rehabilitation packages for the poorest of the poor, the working poor (daily wage earners), the agriculturists and (m) SMEs must build their survival, staying and negotiating power in a market place where their vulnerability can be exploited by middlemen cartels. We are already seeing farmers exploited and this is being reported from around the country. We also need money in the hands of people, and urgently.
• ECONOMIC SUPPORT AND REFORM IN KEY SECTORS HUGELY IMPACTED BY COVID-19: Providing immediate economic support and reform (including investment, cash flow support, rationalisation, deferment or waiver of taxes and duties and other crucial reforms) to key sectors like aviation, hospitality, travel, tourism and microfinance (which is the most vulnerable in the financial sector) is also a much required task.
For example, this is the right time to bring in radical reforms to the aviation sector—e.g., on aviation turbine fuel, structuring of bays or slots at airports and payment for these, etc. The economic support and reform to these key sectors is again likely to contribute to livelihood security of large numbers of organised as well as unorganised workers, apart from helping to lay the foundations for (building) a resilient and stronger economy, post lock-down.
That said, we also need to see these sectors really step up in terms of safety protocols and procedures so that the vital infrastructure to get the economy moving is ready. It goes without saying that production of key medical supplies and personal protective equipment (PPEs) must be supported big time as a corollary.
To reiterate, the need of the hour is a coordinated and comprehensive economic response to COVID-19. We need the government of India, state governments, multi-laterals, private sector, civil society and other stakeholders to work together and in tandem to create the greatest economic revival package in history of India. But this has to be done immediately and simultaneously along with containment measures to prevent further spread of COVID-19.
At the minimum, along with significant global economic help, countries like India that have very large vulnerable populations must be willing to spend at least 10% - 15% of their current GDP as an economic stimulus over a period of time. And, of course, there are creative ways to do it. It is now or never. Only if people survive, the question of protecting them from disease and sustaining their livelihoods come. Therefore, the economic revival package must take shape now in totality, although it can be delivered on a piecemeal basis. Swiftness in getting the economic stimulus on the ground is crucial and the government of India, state governments, multi-laterals and other stakeholders must act with great speed, agility and flexibility. We need an immediate, solid and comprehensive economic response to COVID-19 to help the people of India fight out this crisis economically and it can certainly be done.
(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.