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Economy and second wave

The government must go for large-scale spending to tackle another recession

Economy and second wave

LAXITY: Symptom monitoring needs to be made more stringent. Tribune photo



Aunindyo Chakravarty

Senior Economic Analyst

Just when it looked like India had won its battle with Covid, it is back. If you look at our graph, new daily cases peaked in the middle of September, then there was a small bump during the festival season, after which there was a steady decline. Fresh daily cases dropped to around 10,000 in mid-February, but since then it has been rising every day. And now, even states like Delhi, which had announced that the pandemic is all but over, are faced with an explosion in positive cases.

We should vaccinate people who are most likely to go out to work — the 24-60 age group — first. This will ensure that normal economic activities can resume quickly.

What does this mean for India’s economy? Can we afford another series of lockdowns and disruptions? Clearly not. India’s economic performance has been the worst amongst larger economies. This was mostly because of the extended lockdowns we faced. However, we were already doing badly before Covid hit us. This made it even more difficult for India to cope with the pandemic-induced global recession.

The only country whose economy has grown in 2020 is China, ground zero of the pandemic. In fact, China’s ‘official’ Covid numbers have been more or less static since April 2020. And since then, it has recorded only six additional deaths from the disease. Experts attribute this to China’s authoritarian and highly centralised welfarism. If a decision is taken at the top of the Chinese central government, it reaches a citizen’s home within a very short time.

How did China react to a small increase in cases that were reported from Hebei province in January this year? It built 1,300 prefabricated quarantine centres in record time to house new cases and isolate them from the general population. People were moved to quarantine centres within 12 hours of a positive test, and everyone they had contact with were also put under strict isolation. The crucial point here is that the action was taken preemptively and it moved at breakneck speed. For instance, as the New York Times reported, the day the decision was taken to build isolation centres at Hebei, the contract, plans and the materials were all put in place within a matter of hours.

A mega-machine like the Chinese state can probably only work within an authoritarian framework, but surely democracies can learn from the Chinese experience and adapt systems that can work for us? There are several things that India can do without affecting our rights-based freedoms. The first is to create state-wise databases of the 11 million people who got Covid but have recovered since then. They should be tested to see whether they have antibodies currently. Even though they are at a risk of reinfection, the likelihood is lower. Once the database is ready – and it has to be done on an emergency footing – the next stage is to see what kind of work they can do. It could range from hard physical labour to low-intensity desk jobs. These people could form India’s ‘Covid-warrior workforce’.

The objective should be to reorient most of economic activity to creating a welfare infrastructure for India. For starters, it should be aimed at building hospitals and clinics in small towns and villages. The government needs to fund this, even if it is partly executed by the private sector. Medical startups, especially those that work in AI-based diagnoses and treatment, need to be brought together and given contracts to create networks of semi-trained medical professionals. These people, who are currently the first line of defence for the majority of Indians living in small towns and villages, need to be given 24-hour online training and support to be able to diagnose and treat people in their neighbourhood.

The second important focus point should be schools. The government needs to spend big money on building schools that can support both physical and online education. This will also mean increased spending on creating a free broadband infrastructure for the poor. Money needs to be spent on buying devices in bulk and distributing it to economically weaker families so that their children can attend online schools without having to pay for them.

Large-scale investments have to be made in public transport. All auto manufacturing companies need to be brought on a single platform to produce for a centralised public transport plan. Capacities need to be installed overnight, like China has done, to produce vehicles that suit the new requirements. This means coordination between auto companies, components manufacturers, equipment suppliers, capital goods companies, banks and other financial institutions and the various relevant ministries at the Centre and in states.

Industries which can successfully implement social distancing should continue to operate. However, norms for symptom monitoring and contact tracing have to be made more stringent and have to be implemented strictly. Since this will mean higher operating costs for companies, they need to be given employment and production-linked financial support. Most importantly, the government needs to provide free periodic testing for everyone who works in close proximity with others.

Since localised lockdowns are inevitable, restaurants, caterers, cloud-kitchens and food apps need to be brought together under a single, but decentralised scheme to provide cheap and nutritious meals to people in their homes. This will again require large-scale government spending, where the government gives contracts to private players and monitors them to ensure corruption and leakages are minimised.

Of course, the most important of all is vaccination. We need to vaccinate people at a much faster rate than we are doing right now. In fact, some argue that our vaccination priorities are not suited for a country like India. We should vaccinate people who are most likely to go out to work, which means vaccinating people within the 24-60 age group first. This will ensure that normal economic activities can resume quickly.

The government has to bite the bullet and raise taxes on the super-rich and increase public borrowing. It is all very well to worry about leaving large debt for future generations. If we don’t do it, there might be no future generation to speak about.


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