THE EXIT STRATEGY
The key is to strengthen India’s health capacities to battle a possible second wave of infection, apart from providing substantial relief to the needy and a stimulus package to revive the flailing Indian economy
With the COVID-19 epidemic still raging, an extension of the national lockdown was inevitable. But how long can the paralysis be sustained? INDIA TODAY looks at the road ahead
When Prime Minister Narendra Modi began his televised address to the nation at 10 am on April 14, he made two gestures that summed up the dilemma that India faced. He started by greeting the nation with a lengyan wrapped around his nose and mouth. And then lowered it soon after to deliver his speech, the substance of which was that the national lockdown would continue for another 19 days. This was to ensure that the curve on the graph showing the number of people infected by the COVID-19 virus in the country flattens and levels out. However, as an incentive, he added that if, within one week, there were clear signs that the containment strategy was working, there would be a gradual reopening of the economy. It was in keeping with what he told state chief ministers in a video conference three days earlier—“Jaan bhi, jahaan bhi (Life as well as livelihood)”. This phrase signalled a departure from the one he used when he first announced the 21-day lockdown on March 24—“Jaan hai to jahaan hai (Health is wealth)”.
So, what prompted the prime minister’s decision to extend the lockdown and opt for a phased opening up of economic activity? And what does the country need to do to make the exit strategy he outlined work to save lives and livelihoods? These are valid questions because with burgeoning unemployment numbers and the humongous loss to the economy (expected to be 3-4 per cent of GDP), there were worries that, as an expert put it, “the crisis of corona may be replaced by the crisis of hunger”.
BENEFITS OF THE LOCKDOWN
When the prime minister announced the lockdown on March 24, the previous week had seen a steady rise in cases, but it was still low at 516 cases and nine deaths. On April 14, when the prime minister announced the extension of the lockdown, the number of cases had grown to 11,487 and the deaths to 393. The Union ministry for health and family welfare (MoHFW) believes the lockdown helped to considerably slow down the spread of the disease. India took six days to move from 6,000 cases to 12,000 as compared to the two days it took the US, Italy three days and Spain four. Lav Agarwal, joint secretary in the MoHFW, said in a press briefing that studies by the ministry indicated that without a lockdown and other containment measures, there would have been a 41 per cent cumulative rise in cases. As against 12,000 cases, the number would have shot up to 820,000 by April 15, he suggested.
The other key benefit of the lockdown was that the Centre and the states used the 21-day
THE EXTENDED LOCKDOWN WILL GIVE THE CENTRE AND THE STATES TIME TO RAMP UP INDIA’S HEALTH CAPABILITIES TO COMBAT A FURTHER SPREAD
reprieve to bolster the country’s health capabilities to meet the enormous challenges of COVID-19. The real worry for Team Modi was that should there be an exponential growth in cases, afflicting some 100,000 people in a populous city like Mumbai (as has happened in New York), it would immediately need 20,000 hospital beds to isolate these patients and treat them. Of these, some 3,000 would require some sort of ICU care, including ventilator support. When the lockdown was imposed, Mumbai had about 2,600 isolation beds and about 300 ICU beds—far, far short of the requirement to meet a potential crisis. Worse, across the country, there was a huge shortage of Personal Protection Equipment (PPE), particularly for medical personnel who were risking their own lives in trying to save the lives of COVID-19 patients.
The other pressing need was to ramp up testing to assess the spread of the virus. One of the major criticisms levelled at the Modi government—by Rahul Gandhi, among others—was that our rate of testing was dangerously low. Initially, the government had followed the advice of the Indian Council of Medical Research (ICMR) to test only symptomatic high-risk patients, partly because of the limited availability of testing kits and laboratory facilities in the country. That saw India conducting an average of 5,000 tests a day as compared to South Korea, which with one-twentieth our population, was doing 20,000 tests daily. That limitation impacted the country in two ways: one, the low testing numbers meant that asymptomatic carriers could be spreading the virus and, two, the country’s policymakers did not have a correct estimate of how widespread the threat really was for them to lift the lockdown.
To rapidly overcome these and other impediments, the prime minister, on March 29, five days after the lockdown, set up 11 empowered groups comprising senior bureaucrats and top experts (see graphic, The COVID-19 Response Team). Of these, three were dedicated to upgrading the health system. These groups were entrusted by the Prime Minister’s Office to cut red tape and get the job done, including importing equipment, if needed. Modi’s instruction to them was simple: “Don’t tell me what you are doing—tell me what you have delivered. I want outcomes, not inputs.”
GETTING BATTLE-READY
The Centre then sanctioned Rs 15,000 crore to meet emergency health needs. By the second week, the groups had begun to show visible results. When it came to PPE requirements, the concerned group adopted a twin strategy. India had 300,000 pieces of PPE as against the estimated need of 20 million. Import orders, therefore, were immediately placed with foreign companies— mainly in China and South Korea—for 17.5 million kits. Meanwhile, some 30 Indian companies, both in the public sector and in the private sector, were asked to start manufacturing these indigenously after the government gave them the specifications and ensured that they could meet the requisite quality standards.
The team faced a similar problem when it came to testing kits. Two types of kits—the confirmatory test kit called RT-PCR (Reverse Transcription-Polymerase Chain Reaction) and the rapid blood test kit—are being used. RT-PCR kits were already being made in India, but not in sufficient quantities. The rapid test, which promised results within half an hour instead of the days RT-PCR tests take, would only indicate whether the immune system had antibodies, signifying an infection; an RT-PCR test would be needed to confirm if it was COVID-19. The government is beefing up the availability of both kits, placing orders for 4.5 million rapid kits and 2.5 million PCR kits, mainly with Chinese companies.
Apart from the kits, there was also a need for labs across the country to analyse the samples. The group identified laboratories across the country, including in medical colleges and, with online training, approved close to 219 as on April 13, even as more are being added. When the group took over, 5,500 tests were being done daily; within a fortnight, they had been scaled up to 24,000 tests a day, or by almost five times. By the end of April, the target is expected to hit 40,000 tests. Yet, crucial gaps remain, whether in the testing itself, or in the availability of kits and labs (see accompanying story, Detection Gaps).
The groups tackled the problem of hospital quarantine facilities, including ICU beds and ventilators, with the same vigour. To make best use of the already available facilities, the groups worked on a graded system of healthcare: one for cases with mild symptoms and the other for those exhibiting serious respiratory issues. They followed the thumb rule that 20 per cent of those infected will need some sort of hospitalisation, and 3-5 per cent will require ICUs with ventilators. For the former, the members of the group told the district collectors to identify beds across private and public hospitals, apart from medical colleges, and requisition them to create isolation wards with beds. Over 138,000 such isolation beds have been set up across the country, including those provided by the railways, defence and public sector units.
India also had just 32,000 ventilators, when it needed around 80,000. Here again, the policy of asking Indian companies to chip in and placing orders with foreign firms was cleared rapidly to acquire 40,000 additional ventilators. Group leader C.K. Mishra, secretary in the Union environment and forests ministry, had instructed his team thus: “We should be prepared for the worst-case scenarios because it will be a huge tragedy if we don’t—every life is precious.”
Even as most groups were working on fortifying the health services to meet any exponential growth in cases, one of them was concentrating on planning an exit strategy to contain the virus and restart economic activity. Based on the spread and concentration of the positive cases, the team worked out a strategy whereby it split areas into hotspots with large out
ALL HANDS ON
DECK Finance minister Nirmala Sitharaman undergoes a thermal scan at North Block; far right, defence minister Rajnath Singh chairs GoM meeting on COVID-19 TEAM MODI IS WORKING ON A RADICAL REBOOT OF THE ECONOMY, MADE POSSIBLE—EVEN NECESSARY—BY THE WORLDWIDE DISRUPTIONS OF THE GREAT LOCKDOWN
breaks, those with clusters of infection in them and potential hotspots. This was done in consultation with states and plotted on the Indian map (see accompanying story, The Line of Corona Control). The figures, as on April 16, were 123 hotspots with large outbreaks, 47 with clusters and 207 potential hotspots—in all 377 affected districts, a little more than half of India’s total 720 districts. In the next two weeks, there will be a concentrated focus on these hotspots, where there will be a total lockdown in containment zones, which number 1,500 so far. This will be followed by intensive testing, along with the isolation and treatment of those who test positive.
This is one of the major reasons why Modi extended the lockdown for another 19 days to give the government greater confidence to lift it after May 3. Yet, the threat will remain even after the lockdown is lifted. Dr Vinod K. Paul, member, NITI Aayog, points to three challenges ahead. Firstly, he advocates that individuals, families and members of society observe a new normal to maintain social distancing in their interactions and ensure the continued use of masks, handwashing and restrictions on congregations. He terms these ‘30 per cent of lockdown behaviour’ and warns, “We cannot go back to our old ways as this would be a recipe for disaster.” The second point he makes is that the lockdown will not kill the virus, only contain it. It is bound to proliferate again and the preparatory effort the country has put in during the lockdown for surveillance, health delivery and containment systems should help keep it in check. Thirdly, he says the lockdown has to be eased out in a manner that, in his words, can help “get maximum economic gain with minimum loss of lives through the pandemic—that is the balance we have worked out through the lockdown”.
This was what Modi did too, by announcing that the government would, from April 20 onward, start the process of restoring livelihoods by permitting economic activity in key sectors, such as agriculture, pharmaceuticals, packaging, exports, e-commerce, construction and self-contained industrial clusters. The prime minister is deeply concerned about the looming economic crisis not just in India but the entire world. A top official involved in the decisionmaking process reveals that while planning for restarting economic activity, it was evident that it could not be what he termed a digital stopstart, “you cannot go from 0 to 1—even if you open up all industry, it cannot go to 100 per cent in a week. It will have to be gradual, possibly one step at a time, for it to ramp up production.” Officials confess that they have not dealt with an economic crisis of this magnitude in the past— neither in 2008 nor in 1991—when both supply and demand have been totally depressed and almost all economic activity, barring in essential sectors, has ceased, a phenomenon most economies in the world are grappling with.
THE LONG ROAD TO RECOVERY
One of the empowered groups, headed by Union secretary Atanu Chakraborty, who also heads the department of economic affairs, has been tasked with working out appropriate economic and welfare measures. Based on their inputs and those from other departments, including the department of promotion for industry and internal trade, the government is approaching economic rehabilitation and revival through three broad strategies. Its top priority is to ensure that the poor, migrant labour and farmers who have been hit hard by the lockdown are provided adequate relief both in terms of food and cash. On March 25, a day after the lockdown, finance minister Nirmala Sitharaman announced a raft of measures totalling Rs 1.7 lakh crore for these groups, including increasing grains and pulses entitlements under the public distribution system and cash transfers to farmers, women and senior citizens in addition to free cylinders to BPL families. Already, Rs 32,000 crore has been disbursed in the past
week, and a second round is expected next month.
Despite suggestions from experts, including Nobel laureates Amartya Sen and Abhijit Banerjee, to give direct cash benefits to people rather than route assistance through various relief schemes, the Modi government so far has been averse to what it sees as disbursing doles without accountability. As a senior official put it, “The prime minister is against such loose doles and is judicious, even stingy, about spending money—he will do so only when he is convinced it would go to the right people.” He also points out how the government has given states Rs 11,000 crore for the 700,000 migrant labour in cities, including construction workers, to ensure their basic needs are met.
Even for the first stage of reviving the economy, Modi insisted on focusing on agriculture and ensuring that the rabi harvest was a success. The measures included freeing all truck movement and pushing through radical reforms such as bypassing the Agricultural Produce Marketing Committees (APMCs) to purchase grain directly from the farmers. Great attention was paid to detail, including allowing dhabas to remain open on the highways so that truck drivers transporting supplies could have food en route. The government also stopped discriminating between essential and non-essential goods for transport, in an order dated April 12, as it was causing enormous blockages at check-posts. As an officer put it, “The speedy movement of the entire supply system was dependent on the whims and moods of the constable manning the post.”
The government also lifted all restrictions on the poultry, fisheries and meat industry as well as milk distribution, which should see close to 30 million people return to work. For medium, small and micro enterprises (MSMEs), a sector that employs 120 million, the Reserve Bank of India has announced an indirect relief package totalling Rs 50,000 crore. But getting the MSME sector back on its feet will be an uphill task (see accompanying story Getting Down to
Business). If the process of harvesting goes smoothly, and much of the labour finds adequate work in this sector, the government is confident it will stem the growing unrest and despair resulting from the lockdown and also infuse liquidity and demand back into the economy.
However, a State Bank of India report, after the extension of the lockdown, bears grim tidings, including GDP growth dropping to 1 per cent in FY21. It estimates that the total loss in income to the 373 million workers—whether self-employed (52 per cent of the total), casual workers (25 per cent) or the remaining regular workers—works out to around Rs 4 lakh crore (or 2 per cent of GDP) and that any fiscal package should strive to make up the loss. In addition, merchandise exports are expected to decline by 16 per cent while the output loss is expected to be $50 billion (Rs 1.86 lakh crore). Some of this can be compensated by exports of services, particularly in the field of information and communications technology, as the pandemic is certain to give a push to digitisation and enhanced use of software to maintain social distancing norms for a while. But key sectors such as automotives, textiles, construction, aviation and tourism saw an average 50 per cent drop in output. Top economic experts talk of the need for an additional stimulus of at least 5 per cent of GDP, or about Rs 10 lakh crore. As part of the second leg of its strategic recovery, the government is working on a stimulus for sectors that urgently require it. However, as a senior official put it, “Don’t expect us to spend like mad or throw away money— the bucks will go wherever we get the most bang out of it.” The government is likely to step up its plans to spend the Rs 20 lakh crore it had earlier set aside for infrastructure, whether roads, rail or ports, to boost employment.
The third prong of the strategy Team Modi is working on is a radical reboot of the economy which the Great
Lockdown (a term coined by IMF’s chief economist Gita Gopinath) offers an opportunity for. The argument put forward by many senior officials is that the pandemic will forever change the way we do business and could see a major churning in the global trade and financial architecture. “It gives the Modi government an opportunity to aspire for big-ticket reforms,” says an official. BJP ideologue Ram Madhav even talked in terms of the prime minister laying a New Deal for India as Franklin D. Roosevelt had done for the US after the Great Depression in the 1930s. Currently, the thinking is not to dilute the process by trying to focus on widespread reforms but to concentrate on a handful of sectors such as power, agriculture, petroleum, mining and labour and ensure that these are achievable.
NO EASY EXIT
Yet, industry has serious concerns about the government’s moves to restore economic activity even after May 3. The key would be to reduce the designated hotspots to a minimum, otherwise manufacturing activity will continue to be stymied. A study by the HDFC Bank research team shows that areas with high incidence of COVID-19 and falling in the hotspot zones are the biggest contributors to the Indian economy. The group that has the highest number of cases, including Maharashtra, Tamil Nadu and Delhi, cumulatively accounts for 30 per cent of India’s GDP. Maharashtra and Tamil Nadu alone account for
27.6 per cent of India’s manufacturing output and 23.5 per cent of services output. These three states also account for as much as 22 per cent of all-India construction output. Another cluster of states—UP, Rajasthan, Andhra, Telangana and MP—which accounts for 34 per cent of allIndia manufacturing activity, has fewer number of cases, but remains vulnerable.
Even the restricted number of industries outside the COVID-19 ‘hotspots’ that have been allowed to resume activity will take a couple of months to actually come on stream. The government has permitted construction activity, provided strict social distancing guidelines are adhered to. But the hotspots are the areas where normally most construction activity takes place. For instance, Mumbai, a hotspot, currently has the highest under-construction residential stock of nearly 465,000 units. This accounts for 30 per cent of the 1.56 million under-construction stock across the top seven cities. Moreover, most of the migrant labourers have already left for their home states, so getting them back to the construction sites will not be easy. Migrant workers comprise at least 80 per cent of the total 44 million workforce in the construction sector at present, says real estate consultant Anarock.
The key remains in clearing the hotspots, particularly in metros such as Mumbai, Bengaluru, Chennai and parts of Delhi, which have the highest demand for consumer goods and durables, automobiles and garments. The Rs 7.6 lakh crore automotive sector, for instance, will find it pointless to start production if the dealerships in cities and towns remain closed. “In fact, the starting point of the automotive business is the dealerships. For us, it makes sense to start only when the inventory gets moving,” says Vikram Kirloskar, president of the Confederation of Indian Industry (CII). Only a free movement of goods into and out of factories can make it sustainable for businesses to operate. R.C. Bhargava, chairman of Maruti Suzuki, says that his company cannot start operations immediately since the automotive industry is a highly supply chaindriven one. Between 70 and 80 per cent of the parts that go into making a Maruti Suzuki vehicle are sourced from different suppliers, mostly Indian. “If my company has, say, 350 suppliers, and even if five of them are in the ‘red’ zone, I won’t be able to manufacture,” he says. The company doesn’t have a problem opening its dealerships, as some 60 per cent of them are outside the so-called hotspots. But the disruption in the supply chain will make production of cars impossible.
It is not easy, therefore, to muster optimism unless industry is confident that it can resume business without major disruption. Yet, with the virus lurking around, the uncertainty will persist. In India, the virus may be contained in the coming months by what an official called “General Summer’s help”, referring to the approaching season. But experts expect a second wave in SeptemberNovember—the prime season for flu flare-ups. Of course, as South Korea has shown, strong intervention can keep the virus in check and help resumption of economic activity.
The one ray of hope is that with several groups across the world and in India working on a vaccine, we could well have one by the end of the year. India is well positioned to not only mount such an R&D initiative, but also has the manufacturing capacity to become one of the world’s largest producers of such a vaccine. Characterising it as a great opportunity, Dr V.K. Paul says, “We should chase the R&D solution crazily and relentlessly not just in India but across the world. Because if we succeed, we will remove all commas against the virus and put a full stop to it.” That is a venture India and the rest of the world should invest heavily in.
APART FROM A STIMULUS PACKAGE, INDIA MUST CONTAIN THE NUMBER OF VIRUS HOTSPOTS TO PUT INDUSTRY BACK ON ITS FEET