The world is reeling in the midst of the novel coronavirus pandemic with fear of rising toll due to the deadly virus. With ‘Janata Curfew’ that kept people indoors on Sunday, it has been a test of endurance and personal commitment for India to prepare society to fight together. The World Health Organisation (WHO) has hailed the quick response of the Indian government as ‘good and impressive’ to combat the spread of Covid-19 in the world’s second most populous country.
A similar proactive measure was the quick formation of ‘Covid-19 Economic Response Task Force’ (CTF) led by the Finance Minister that will formally begin quantification of the impact of CoV19 and its collateral damage to the Indian economy. It is broadly intended to assess the damage and work out well-calibrated relief measures to help revive various sectors of the economy.
Containing the spread of Covid-19 and safeguarding public health is a national emergency, and, hence, a series of steps has been lined up to restrict public movement. Mobilisation of people is barred. Roads are turning empty and commercial activities are coming to a grinding halt. The impending economic costs of the lockdown of all associated activities will have far-reaching inimical repercussions on the economy.
It is, therefore, the right time to estimate the potential damage of loss of productivity and workout costs of relief measures to address them with an appropriate policy framework. It will require a collection of detailed data/information from various sectors of the economy and hold discussions with industry honchos to take a broad view. That consultative process has already begun.
The immediate impact will be widening of fiscal deficit, rise in inflation, break-up of supply chain where even essential supplies could be affected, potential cut in GDP growth, increase in unemployment, more in the unorganised sector, and easy money policy. There will be no exception to the sufferers in the economy but the worst could be aviation, surface transport, micro, small and medium enterprises (MSMEs) and many interconnected sectors forming a major part of the economy. The impact of the loss of momentum in productivity can be known only when the period of crisis ends and normalcy is restored.
Carving Out Relief
Looking at the wider ramifications, the challenge of CTF will be to precisely measure the impact of Covid-19 so that genuine relief reaches the sufferers. Among a host of issues, its response should drill down notably to providing immediate relief to the impacted sectors to compensate for loss/downsized economic activities and enabling revival of business activities to quickly restore normalcy.
Since data is accessible, it will be relatively easy to carve out relief for the organised sector. But addressing the pain points of the unorganised sector will call for a lot of coordinated support of district-level administration and it can be a profound challenge.
While Finance Minister Nirmala Sitharaman has already announced a few measures including extending deadline for filing GST returns, a combination of near-term relief measures and medium to long term revival support is needed that can span across:
• Grant of extended moratorium in the repayment of loans to bank borrowers
• Availability of new loans on easy terms to accelerate/restart business activities
• Forbearance to banks in the treatment of NPAs
• Restructuring of loans to continue to make them eligible for future loans
• Deferment in invoking provisions of Insolvency and Bankruptcy Code, 2016; Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002, ( Sarfaesi Act) to provide a chance to revive the units
• Permitting staggered payment of rent of commercial establishments and government dues
• Default on repayment of dues in the current phase to be exempted by rating agencies in arriving at the credit rating of commercial entities
• Deemed extension of routine licences and renewals of business establishments and so on.
It will be more challenging for the CTF to compute the economic costs of disruptions in the value chain of micro economy in the unorganised sector that had suffered the most even during demonetisation. It may be less in terms of share in the GDP but very significant from the point of the number of dependent people at the bottom of the pyramid.
In a bid to encourage social distancing, measures such as working from home, isolation of people and self-imposed quarantine have led to a partial closure of small and micro trade, reduced air and surface transport activities and even closure of wayside food/snack bars. Consequently, it reduced use of last-mile connectivity through autos, rickshaws, tonga (horse carriage) in the hinterland etc, which might displace the huge unorganised workforce whose subsistence is linked to the day’s earnings.
Such voiceless people have to silently suffer from uncertainty. There is a lack of advocacy for such a section of the huge population. Accounting for loss of earnings of the unorganised sector needs compassion and solidarity, as it’s seldom that any industry forum flags their woes.
While providing direct cash transfer to people at large on the lines of Universal Basic Income (UBI) may not be possible in the given situation, guaranteeing, say, 100 days minimum wage to hitherto earning members can be worked out on the lines of the Mahatma Gandhi National Rural Employment Guarantee (MGNREGA) scheme to ensure their subsistence during this disruptive period.
The CTF will need to work amid several challenges to articulate response to the Covid-19 crisis with social justice in mind. Just because a window is open, mighty sectors should not be allowed to sway the benefits for themselves and a sense of proportionality has to be ensured. Providing genuine relief to address the distress will uphold the purpose of timely formation of the CTF and mitigate the sufferings of the public at large.
(The author is Adjunct Professor, Institute of Insurance and Risk Management, Hyderabad)
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