It was expected by all that the lockdown would get extended. Most of the states wanted it, and the Centre too agreed to the extension. Truly, the virus suddenly appeared out of nowhere and caused irreparable damage in the lives of all of us. The lack of transparency on the part of the Chinese government has now only aggravated the problem. All this, however, seems to be immaterial now, since the damage has already been done.
The entire world is suffering through sleepless nights, thinking of better ways to fight away the virus, which is not only highly contagious but also has no straightforward treatment as of now. The healthcare system is under great stress, and patients are now becoming hard to manage. A lot of these patients need intensive care, and beds, doctors, ventilators, paramedics, and other healthcare facilities are sadly proving to insufficient. As of now, social distancing is the only temporary solution to this otherwise permanent problem; until vaccines and other treatments are discovered.
As per experts, those countries which took some measure to restrict travel and imposed a lockdown at the correct time still did reasonably well in having contained the disease. The lockdown is now the new normal. However, the economic impacts of this restriction are magnanimous and far-reaching. In a country where a majority of the labor belongs to the unorganized sector or is involved in daily chores, construction, casual work, etc; economic hardships are bound to arise. Not only these, but a lot of well-settled industries have also been severely hit by the lockdown. These include hospitality, real estate, aviation, tourism, construction, and manufacturing among others. Job losses, pay cuts, halts of all development activities are now becoming more and more common, and consumer demand is falling with each passing day.
This trade-off between human lives versus their livelihood is one of the toughest decisions that one can be forced to take at this time. On one hand, the lives of people are at stake. On the other hand, how is survival even possible when there is no means of earning one’s basic bread and butter! The matter is indeed a double-edged sword. A lockdown that is unable to give support to people on the economic front fails to meet its purpose, despite it giving some respite to the administration.
There is a large section of the society which is in favor of a complete lockdown, with zero relaxations whatsoever. This population is largely the one which has financial cushioning for at least the next half a year, or the one which deems public health to be of the utmost priority (though the former is mostly the case in our country). agreed that from the healthcare perspective, a lockdown is the need of the hour, and there needs to be no debate about it. then others advocate area centric relaxation with a view that at least some economic respite can be offered to the poor, and the manufacturing and service sectors, which have been so badly hit, can be supported in at least some way. As per the opinions of this part of the population, the government has been able to manage the crisis decently well, and thus some relaxations should be given, while safety protocols are of course taken care of.
In the first phase of the lockdown, the government has used a three-pronged support package. It announced several relaxations on taxation compliance. Secondly, it did its best to reduce the economic hardships on the poor. This was done through the provision of food essentials, cooking gas, direct cash transfer to bank accounts, relief to construction workers, payment of the first installment to farmers, increased wages under MGNREGA, etc. The move was supported by the central bank, and a three-month moratorium on payment of EMIs was announced. At the same time, repo and reverse repo rates were reduced to inject some liquidity into the system.
Unfortunately, when you take into consideration the extended lockdown, this support is sadly not sufficient, which makes it safe to state that further support will have to be announced. The economic scenario of the country is on a standstill now and will need a lot of effort to bring it back to normal order. The government now has three segments of the society to support: the poor and marginalized, the unorganized sector which includes the SMEs and also the big industries.
Cash transfers to the needy would offer some respite to them. Farmers should be allowed to harvest the Rabi crop, and sow the Kharif crop so that they can get some purchasing power. Providing support to the unorganized sectors and SMEs is still a huge challenge though. The sector is not even able to pay salaries to its employees, and startups are badly hit. To save these firms from insolvency, loans will have to be restructured, and interest rates would need to be lowered. The units which were mostly into exports are also losing their foothold in the market, as importers would soon search for alternatives. Moreover, the huge number of migrant labor which is employed by this sector has now been left homeless, and new job opportunities for them are non-existent. Even the organized sector now needs some sort of specific support and stimulus. If things go out of hand, predators might be even able to buy Indian companies at really cheap prices.
Where amidst all this chaos and gloom can the government find funds to extend the support that it needs to do? Tax collections are falling, which leads to the speculation that the government would probably have to resort to borrowing from external sources or mint money. Or could there be chances of budget reallocation? The present Union Budget has lost all its relevance, and in a budget where around 52 percent of the allocations are fixed and cannot be changed, there is only limited scope for maneuvering. Even minting money is not a solution, since it has its limitations and side effects.
The government is under great pressure to prioritize between lives and livelihoods at this time, and policymakers are being pulled by health concerns on one hand, and economic stress on the other. This tug of war is a challenging and stressful one; and all we can do meanwhile as mute spectators are to keep hope.