Does Covid-19 Give Modi an Opportunity to Revive Indian Economy?

COVID-19: Increased spending to contain the pandemic will boost India’s flagging economy.

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How can you and I stop the Novel Coronavirus from spreading too quickly? First, wash your hands repeatedly and regularly, especially after you have touched any surface. Second, avoid crowded places, such as shops, malls, cinema theatres, restaurants, weddings & birthday parties. Third, Quarantine yourself if you are feeling sick.

Governments have to take tougher decisions. They have to act fast but also ensure that their action doesn’t cause undue panic. Evidence from China, Hong Kong and Singapore suggests that early shutdowns are the best way to stop the Novel Coronavirus from spreading too quickly. The other thing to do is mass testing. For instance, large scale testing helped South Korea, reduce the death rate, while China was able to isolate and quarantine people quickly, by testing the bulk of the population in affected cities.

All these options sound doable on paper, but in a country like ours, they are very difficult to implement.

• Options to contain the pandemic sound doable on paper, but in a country like ours, they are very difficult to implement.
  
• Government needs to go into overdrive to produce sanitisers at low cost and distribute them for free in slums et al.
  
• To ensure that blue-collar workers stay at home, if there’s a general lockdown, government must give them daily cash handouts, directly to their jan dhan accounts.
• The RBI must step in and ask banks to work out new loan repayment schedules for affected businesses. And banks, in turn, need to be compensated for their earnings loss, by the state.
  
• It could cost the government about Rs.20,000 crore to efficiently impose a general economic standstill and mass quarantine.
  
• Increased spending will boost India’s flagging economy.
  

How Can Everyone Wash/Sanitise Their Hands?

Let’s start with hand-washing. A big chunk of Indians, even in metros like Delhi, do not have running water at home. They collect it in buckets, once a day and use it for all daily necessities. To ask them to wash their hands, each time they touch a surface, is expecting the impossible.

What can governments do to solve this problem? Obviously, there is no way to supply water. So, all slums, tenement quarters, unauthorized colonies, should be supplied large cans of free hand sanitisers. Government companies need to go into overdrive to produce them at low cost. They don’t need to be in fancy packaging or with special colours.

Then comes the issue of asking people to stay at home. Let’s start with school closures. Most families adjust their work-life around school timings. If children are going to stay at home, child-care needs go up sharply. This means, parents also need to be given time off to look after their children.

Making ‘Work From Home’ Possible Will Need Government Funds

For white-collar workers who mostly work at a desk, work on their laptops or phones, working-from-home has to be made an easier option. This means turning to telecom companies and telling them to increase network bandwidth and subsiding broadband bills directly. The Kerala government has already moved on this, by asking internet service providers to increase bandwidth by 30%-40%.

But, the bulk of India’s people are blue-collar workers, self-employed people with low incomes and wage labourers. Such people cannot afford to skip work and not get paid. The only way to ensure that they stay at home, if there’s a general lockdown, is to give them daily cash handouts, directly to their jan dhan accounts.

Food in the Times of Coronavirus

What about food? It has to be delivered home. The Delhi government has started its doorstep ration delivery scheme, which can be tweaked to include perishables, like fruits, vegetables, eggs, bread and animal protein. Governments need to work together with delivery startups and cloud-kitchens to deliver meals, wherever it is needed. Does this seem impossible? Keep in mind, China delivered 15 million meals every day, when its cities were under lockdown.

Many poor families send their children to school because they get free mid-day meals there. State governments across India need to adopt the Kerala model, where mid-day meals are being delivered home, because schools have been shut down. A typical delivery consists of rice, pulses, vegetables, eggs, banana and milk. Kerala plans to begin delivering fruits as well.

If people stay at home, businesses will be affected, even if some people manage to work from home. The tourism industry is already badly hit – CII estimates that cancellations of hotel and tour bookings has touched 80% in March. Restaurants, malls, stores, cinema theatres are all seeing a drastic drop in footfalls. In Bangalore most of these have been asked to shut shop for a week, while Delhi has closed down cinemas till the end of March.

The only way for these businesses to come out of this crisis, without going bankrupt is for the Modi government to announce a targeted compensation package. Average sales volumes can be calculated from last year’s GST payments and businesses can be compensated for the drop caused by forced shutdowns. The RBI must step in and ask banks to work out new loan repayment schedules for such businesses. And banks, in turn, need to be compensated for their earnings loss, by the State.

Do We Have the Money to Deal with Coronavirus?

Where is the money for all this? Let’s say that out of the 30 crore families in India, about 2% have to be quarantined. That’s about 60 lakh families. Out of this, let’s assume that 50% will need financial aid. That’s 30 lakh families. If the government has to give each of them Rs.10,000 for a two-week period, it will cost about Rs.3,000 crore. Add the costs of supplying food, free tests, free sanitisers, free masks, mid-day meals and other provisions, the total costs will go up to about Rs.10,000 crore.

Now add compensation to business that will be badly hit by any large-scale shutdown. It could be another Rs.10,000 core. So, it could cost the government about Rs.20,000 crore to efficiently impose a general economic standstill and mass quarantine. A big part of that will probably be taken care of, by the drop in global crude prices. The 2019 budget allocated about Rs.38,000 crore for the petroleum subsidy, and crude prices have dropped sharply in the last two months of fiscal year 2019-20. The Modi government has already increased excise duty by on petrol and diesel by Rs.3 per litre, which will work out to an additional revenue of Rs.40,000-45,000 crore in 2020.

Coronavirus, Paradoxically, is a Good Opportunity for Modi Government to Revive Economy

In fact, the Novel Coronavirus pandemic is a great opportunity for the Modi government to announce a big fiscal stimulus package. Global ratings agencies, who frown upon additional government spending, will be much more accommodating, now that governments across the world are thinking of stimulating their economies. Increased spending will boost India’s flagging economy and bring back some of the dollars that are rushing out at this moment.

So, don’t let any economist tell you, that we don’t have the money or the space to quarantine people and shut down the economy for a few weeks. The only thing we don’t have is enough doctors, nurses, hospital beds, ICUs, ventilators, to take care of the sick. The only way for India to stop COVID-19, is to keep people away from its reach.

(The author was Senior Managing Editor, NDTV India & NDTV Profit. He now runs the independent YouTube channel ‘Desi Democracy’. He tweets @AunindyoC. This is an opinion piece. The views expressed above are the author’s own. The Quint neither endorses nor is responsible for them.)