The key question that PM Modi faces is how to unwind the lockdown without endangering the lives of millions of Indians(Vipin Kumar/HT PHOTO)
The key question that PM Modi faces is how to unwind the lockdown without endangering the lives of millions of Indians(Vipin Kumar/HT PHOTO)

A road map for India’s exit from the lockdown | HT Analysis

It should ease restrictions gradually, and increase contact tracing and mass testing in high-risk areas
By Maurice Kugler and Shakti Sinha
UPDATED ON APR 30, 2020 07:31 PM IST

Prime Minister (PM) Narendra Modi is in an unenviable position. Many state governments and most commentators want the lockdown to continue as new cases mount, including in areas hitherto free from the coronavirus pandemic.

Mathematically, even with the rate of doubling going up to over 11 days, because of the large numbers, or base effect in statistics, new cases will continue to increase substantially. At the same time, there is the issue of the livelihoods of over 400 million persons; many above the poverty line are liable to slip back due to the income shock of lost earnings.

Approximately 65% of the Indian economy is in the unorganised sector. What makes the situation worse is that over 90% of the workforce is informal with limited welfare entitlements. In fact, but for the Jan Dhan Yojana (cash transfer measures that have benefitted around 350 million people, including farmers, rural workers, poor pensioners, construction workers, low-income widows) and Ayushman Bharat (free medical cover up to Rs 500,000 for 40% of the population), India would have been facing a catastrophic situation. However, in the absence of a universal basic income or unemployment benefits, the economy, which is now operating at around 40%, must be restarted to provide income for the vulnerable population, and prevent millions of others from falling between the cracks.

The key question that PM Modi faces is how to unwind the lockdown without endangering the lives of millions of Indians. One of the co-authors of this piece (Maurice Kugler), along with a colleague, developed six options for the United States (US), and we attempt to apply these to India.

The surest way of controlling the pandemic is to keep the shutdown going till a vaccine is developed and the entire population immunised. The second option is for it to be eased off gradually, and as the curve flattens, its health and economic trade-offs both fall in the mid-range. The third option is a more aggressive version of the second, allowing for greater opening, but retaining the possibility of reintroducing a complete lockdown if the infection rate picks up. Under the fourth option, antibody tests are to be carried out and those who are immune can be allowed to move around freely. Under the fifth option, the entire population is to be tested once every two weeks. The sixth option requires contact tracing and widespread testing where cases are detected.

The first is not an option that India can afford as it would likely take 12-18 months for the vaccine to be available. Similarly, the fourth and fifth options can be ruled out for financial and logistical reasons and non-availability of enough test kits.

The trouble with the third option is that while its health costs are probably lower than the second, economic recovery would be more uncertain and distant. The outcomes could be volatile. It could leave policymakers with little room to manoeuvre and lessen their credibility with the people.

The only viable route for India would be to roll out a modified second option, allowing for greater opening faster, but with strict protection measures, along with the sixth option. Since the virus has a demographic preference (infants and the aged), an alternative is to keep these age-groups locked down. This is not possible in the Indian context, and the best way is to use geography as a determinant. This approach has already started in India with the identification of hotspot localities — the district is too large a geographical area to be a viable unit of disaggregation and would unnecessarily penalise millions.

The other is contact tracing backed by mass testing, if any positive case is identified. In reality, hotspots, as a concept, have limitations and we should be looking for “hot” persons. Therefore, the use of Aarogya Setu, and the procurement of adequate testing kits, personal protective equipment, and ventilators (including from domestic sources) has to be stepped up by an order of magnitude. Contact tracing is not going to be easy with even Singapore failing to get 20% of its population enrolled. But India has no option.

However, India’s imminent emergence from the lockdown will only be meaningful if the government and the Reserve Bank of India (RBI) adopt extraordinary and unorthodox policies. India should not worry about a one-time large fiscal deficit, and instead, carry out structural reforms in agriculture (open up markets, bring in forward trading) and industry (make acquiring land easier, encourage hiring, simplify taxation systems).

Similarly, despite the RBI loosening up monetary policy, banks will not be able to step up lending because of existing high-levels of non-performing assets. Learning from the US Federal Reserve, which is directly buying below-investment level corporate bonds, the RBI, with the government, should create a public sector entity that can pick up part of the equity of micro, small and medium enterprises that are otherwise sound, deploying their capital to reduce their term loans. Once companies recover, the equity held can be sold and costs recovered, where feasible.

The joint roll-out of the second and sixth options and the adoption of aggressive fiscal and monetary policies should enable India to ride out the worst of the pandemic, setting the stage for economic recovery later in the year.

Maurice Kugler is professor of Public Policy at the Schar School of Policy and Government,
George Mason University, USA.
Shakti Sinha is the director, Atal Bihari Vajpayee Institute of Policy Research and International Studies, Maharaja Sayaji University, Vadodara
The views expressed are personal
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