PM Modi
PM Modi
(PTI Photo)

After a day-long nation-wide Janata Curfew, we have a complete lock-down in large swathes of the country. The coronavirus has brought normal activity to a creeping halt in every sphere of human life. Without doubt, twin crises stare us in the eye. Both health and economic hazards need sensitive handling. And both require a huge flow of cash to mitigate the disastrous effects on the people. Long after we have finally succeeding in triumphing over COVID-19, to give its medical name, the fall-out of the severe hits the economy is taking would still hurt ordinary Indians. And, above all else, helping ordinary Indians to deal with the immediate disruption has to be the first priority of the central and state governments. Informal sector employment being disproportionately higher as against in the organised sector, the foremost task of the government is to compensate them through all means possible. Existing welfare schemes such as subsidized FPS food, MGNREGA, old- age pension, mid-day meal scheme for school children, etc., need to be implemented vigorously and comprehensively. But wherever possible, for instance, the provision of free rations over and above the normal FPS quotas from the chockfull warehouses of the Food Corporation, exceptional help in kind and cash can be considered for overcoming the once-in-a-lifetime calamity. Of course, it was right to stop all trains and inter-state buses, thus preventing workers in major commercial and manufacturing hubs in Maharashtra and other States from returning to their villages for fear that some of them might carry the deadly infection with them. Yet, those not fortunate to have formal employment must be provided at least subsistence- level assistance from the state treasury. It is good that the Maharashtra Government has undertaken to provide wholesome meals at reasonable prices, but due to the disruption in incomes of daily-wagers it might have to think some other way to help these out-of-towners to tide over the crisis. Loss of income by daily-wagers is a serious problem. Auto and taxi-drivers too would need state intervention in deferring the EMI payments on their vehicles as also by way of emergency loans wherever required. The point is that governments have to be proactive in ensuring that the misery of the people is kept to the minimum as far as possible.

Meanwhile, the bloodbath on the share markets signals a panic situation, a virtual doomsday scenario which the BSE punters are dealing mercilessly with their daily sell and/or short orders. The Nifty is down nearly 25 percent since the coronavirus outbreak early March. The problem is compounded by the foreign investors. They are taking out money with a vengeance, having sold equities worth nearly Rs 50,000 crores this month alone. They reported mopped up e an equal amount through the sale of rupee-denominated instruments for repatriation to their principals abroad. That may explain the recent pressure on the rupee and the fall in the forex reserves as per the latest data. But the behavior of the share markets should not overly concern the policy-makers. It is significant that even after the early reduction in the prime rate by the US Fed, and some other relaxations following coronavirus, the Wall Street was far from being calmed, continuing to bleed profusely, forcing the regulators to stop trading on at least two occasions. Ditto for the European markets. The point is that the tools available to the RBI and the central government to stop the panic on the bourses are limited. The RBI has already taken some steps but, clearly, these have proved inadequate to reassure markets. This crisis does not lend itself to standard solutions. Because both supply and demand are bound to be depressed in the coming days, weeks and months.

Ratings agencies from the S and P to Moody’s and Fitch have scaled down growth projections for the current and next financial year. Under the circumstances, a 5 per cent growth this year and a little higher next year should be satisfactory, given that the world economy is in the grip of a huge slowdown and China is grossly understating the hit it has taken from COVID-19 while the trade war with the US continues unabated. For India, the sharp drop in oil prices and in the value of the currency might compensate somewhat for the widespread disruption in economic activity, but it would not be sufficient to cancel out the loss of supply and demand in the economy due to the disruption. A Rs 2 trillion package bandied about in some quarters will further stretch the finances of the Centre and the States. It will badly impact prices, economic revival, demand, already reeling from the slowdown. Instead, the government should consider freeing up the economy further, undertaking urgent structural reforms and generally engaging the private sector as a partner rather than as an abject exploiter. Coronavirus has effected everyone in one or the other way. All will be required to bear the pain, economic, social, even cultural, before we can put behind the biggest scourge of our times.

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