India’s COVID-19 war
Like most countries today, India, too, is in the midst of the raging COVID-19 pandemic, and doing a remarkable job of containing its devastation. Unlike OECD countries, India imposed a pre-emptive national lockdown when the total case count was still low.
It is important to appreciate the significance of this move, for a low-middle income economy of 1.38 billion people. The lockdown led to a significant decline in the growth of the virus and gave the country time to prepare and bolster its modest health infrastructure across 28 states and eight union territories. Within weeks, testing laboratories, special quarantine facilities and dedicated COVID blocks and hospitals were assigned across every district of India.
But while the national lockdown has slowed the virus, it has also brought the economy to a halt and threatened widespread loss of livelihood. The government’s immediate first response was a comprehensive humanitarian package, including widespread distribution of food grains, cash support and improved health insurance coverage for healthcare frontline workers. This package was targeted at the most vulnerable segments of the population, including migrant and construction workers, marginal farmers, women in self-helpgroups, widows and households in the bottom quintile groups within the Public Distribution System. The subsequent response in the form of a series of economic packages has been a judicious mix of fiscal and monetary policies.
The economic package of the government has avoided extreme protectionism as well as reckless globalization – and is a call for ‘Atmanirbhar Bharat’ – a resilient and competitive India against an uncertain global future. The policy announcements that followed targeted immediate fiscal and monetary support for the economy and also ushered in deep structural reforms that had proven elusive since early economic reforms of 1991. The immediate support targeted the critical MSME sector, which employs the majority of Indians outside agriculture, power distribution companies and financial sector institutions. These were complemented by monetary policies and significant measures of credit support across all sectors of the economy.
The major structural reforms included dismantling the Agricultural Produce Market Committees structure, a relic of the socialist past, thereby giving unprecedented freedom to Indian farmers. Another defining reform has been in the labor laws, which have often been cited as the single biggest obstacle to exponential growth of the Indian economy. There is also a clear resolve to unshackle the Indian economy from excessive government control. A New Public Sector Enterprise Policy is being designed with the objective of opening virtually all sectors of the economy to private enterprise.
MEANWHILE, THE status of the virus outbreak across India is best understood by studying the situation across different states. More than two-thirds of all cases in the country are concentrated within Maharashtra, Tamil Nadu, Delhi and Gujarat. These are the major economic and industrial areas, which employ large number of people. The lockdown of the economy and the simultaneous fear of the virus has led to a significant reverse exodus of seasonal migrants back to their home states, mostly in the eastern and northern parts of India. This has now led to spread of the virus across all states, with a considerable burden on the country’s health infrastructure. So far, however, the case load of 180 thousand appears to be manageable. Except for a few rare cases of hospital bed shortages in the hotspot areas of Mumbai, the overall burden seems modest. All states are also reporting significant and rising recovery numbers over time. Put together, the data suggests that the severity of the virus in India is far more muted than in several other countries across Europe, Latin America and the US.
In this moment of global crisis, India, too, is faced with the twin challenge of protecting her health and economy. The country has demonstrated resolve to build resilience and inherent competitiveness of its economy. Much like the war against COVID-19, there are looming uncertainties about the future of the world economy. It is abundantly clear, however, that preparedness and resilience will determine the future success of countries on both fronts. On the health front, India has one of the lowest COVID mortality rates globally - at 2.84 deaths per million people, in comparison to all European countries, the US (317) and China (3.34). Now it races to minimize economic losses from the unfolding pandemic.
The writer (@ShamikaRavi) is a noted Indian economist, a senior fellow at Brookings India and a former member of the Prime Minister’s Economic Advisory Council.