Covid-19: Draw up a new economic plan | HT Editorial
Few events have united people, communities, and countries across the world as the raging coronavirus disease (Covid-19). There is still a lot that is not known about it — how much it will spread; how many people may die; when it will subside. But there is one, clear, inescapable conclusion. Covid-19, besides testing health systems across the world, will severely contract the global economy. While the Organisation for Economic Cooperation and Development has assessed that global growth could dip by 50 basis points, a recession cannot be ruled out. For India, this is bad news. Struggling with an economic slowdown, the virus will only deepen the crisis.
The roots of the economic contraction are simple. There are a set of measures necessary to keep citizens healthy — social distancing, reduced mobility, work from home mechanisms, closure of public spaces and offices, ban or restrictions on travel. But the same measures slow down the economic engine. Public health measures — which must, of course, remain the top priority, and be followed meticulously and rigorously — are crippling supply chains and reducing the ability of businesses to function. They are also having a direct impact on incomes and demand. Factory output will reduce; retail will shrink; services will suffer; unemployment will rise; spending will dip; some sectors, such as aviation, tourism, hospitality will be devastated; trading arrangements will get hit; productivity will decrease; markets will continue crashing; and, if, or when, the disease spreads to rural India, in case of community transmission, agriculture and allied activities will be affected.
The problem is global. The United States, for instance, is preparing for a fiscal stimulus, and even considering, direct cash handouts. It has proposed a $850-billion stimulus package. In India, the problem is particularly acute, because a large section of the population operates in the informal economy. Daily wage workers have no financial cushion, especially given the weak or non-existent social security net. The government needs to, urgently, come up with a comprehensive coronavirus contingency economic plan — to keep businesses viable — including through tax relief and extension of deadlines on loan repayments, among other measures; and, provision of income support, if necessary, to the more marginalised segments of the population to meet their basic livelihood needs. The economy will get worse before it gets better. Be prepared.