In the six weeks so far, India’s economy has functioned at about half of its full activity level, with over 140 million non-farm workers inactive (of a total of 262 million)(REUTERS)
In the six weeks so far, India’s economy has functioned at about half of its full activity level, with over 140 million non-farm workers inactive (of a total of 262 million)(REUTERS)

A blueprint to restart the economy| Analysis

Build a granular, dynamic, locally implemented lockdown and restart management capability
Hindustan Times, New Delhi | By Rajat Gupta and Anu Madgavkar
PUBLISHED ON MAY 06, 2020 07:52 PM IST

The coronavirus disease (Covid-19) is an unprecedented humanitarian crisis. Six weeks of national lockdown have given India the time to make a concerted effort to flatten the curve. Attention is now shifting to reopening the economy while containing the virus.

In the six weeks so far, India’s economy has functioned at about half of its full activity level, with over 140 million non-farm workers inactive (of a total of 262 million). This is a cost that India cannot incur repeatedly. Since the infection risk is likely to persist and could increase when the lockdown is lifted, the economy will need to be managed alongside Covid-19, possibly for a prolonged period.

In this situation, effective management of lockdowns and restarts will be a critical capability for Indian administrators, along with healthcare and infection tracking capacity.

Looking ahead, three considerations may inform a suitable approach for India.

First, India’s manufacturing, labour and distribution chains are tightly intertwined and this will need to be taken into account when lifting lockdowns. Take the electronics manufacturing sector, for example. It requires inputs from sectors as diverse as metal working, plastic moulding and paper processing; disallowing any of these could limit production.

Second, India’s economic activity is concentrated — 130 districts that are classified by the ministry of health and family welfare as falling in the red zone comprise 40% of India’s GDP; the 352 green zone districts, where most activity is allowed, account for less than a quarter.

Third, states may choose to keep red zone districts locked down beyond containment zones in order to minimise the risk of infection spreading, even though the ministry of home affairs (MHA) has allowed them to reopen. Mumbai and Pune, which represent 6% of India’s GDP, are two such examples. Furthermore, varying interpretations of government guidelines by local frontline administrators could confound the issue. In the dynamic environment anticipated, such guidelines may change frequently, needing an agile implementation capability on the ground.

We used district-level data on employment for 700+ districts across 19 sectors to analyse economic activity and worker situation. If 27 of the most urbanised red zone districts that also have relatively high infection rates are under lockdown, only 80% of India’s economic activity occurs, and 67 million non-farm workers remain inactive. States such as Maharashtra, Tamil Nadu, Uttar Pradesh, West Bengal, Gujarat and Delhi will each have over four million non-farm workers inactive (see accompanying graphic). This will affect the lives and livelihoods of 195 million people and cost more than $12 billion per quarter in government support.

 

Therefore, India needs to build a granular, dynamic, locally implemented lockdown and restart management capability. Such a capability would consider several measures beyond the essential ones needed for managing the health situation (for instance, critical care capacity creation, disease tracking and spread prevention).

One, clearly moving from a list of permissible activities to a “not-permitted” or “negative” list, which would be easier to understand and implement. This will avoid the risk of critical intermediate industries being disallowed because of a difference in interpretation.

Two, reinforcing the principle of locking down only containment zones, not whole districts, in line with MHA guidelines. Administrators, particularly at the district level, are focused on what’s being reported daily —the disease statistics. Providing a 360 degree view that tracks health impact across both lives and livelihoods will enable more informed decision-making.

Three, operationalising safe and controlled movement of labour between urban and rural areas, as well as within cities.

Four, increasing implementation capacity at the district level through 700+ capable and trained officers deputed to work with district magistrates in each district to help execute locally tailored back-to-work and tailored lockdown plans; supported by cross-functional centres of excellence in each state. This happens in every Indian election.

Five, strengthening coordination and communication. Tight coordination among various arms of the government — central departments, states, local administration and regulators — and with stakeholders from industry and commerce is important. A senior-level state-cum-central government Covid-19 forum that meets weekly could be created to interact frequently, sharing cross-functional learnings. This could help deliver clearer communication to stakeholders at all levels.

Six, looking ahead and contingency planning since the future is uncertain and the situation will continue to evolve. It will be wise to develop contingency plans at all levels of government based on possible scenarios of disease evolution.

India’s economy may likely need to function alongside Covid-19 for a prolonged period. Effective management of lockdowns and restarts will be a critical capability for Indian administrators in this context.

Rajat Gupta is a senior partner in McKinsey’s Mumbai office, where Anu Madgavkar is a partner. Hanish Yadav, an associate partner in the Delhi office, contributed to the piece
The views expressed are personal
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