FPJ EDIT: Of pandemic and the economy

FPJ EDIT: Of pandemic and the economy

Given the size of our population, the density of old habitations, especially in urban conglomerates, the low level of literacy about personal and civic hygiene, and, above all, the ever fragile health system, the number of cases at about 8,000 and a death toll of about 250 at the weekend would suggest that the nation-wide lockdown is paying off.

EditorialUpdated: Monday, April 13, 2020, 02:10 AM IST
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PM Narendra Modi | ANI

The 21-day lockdown due to the Chinese virus is to be extended till the month-end. The decision has not been announced by the Prime Minister. Instead, various States seem to have reached a consensus on the extension. To err on the side of caution is better than a premature opening which risks the contagion spreading further.

As the Prime Minister told the chief ministers in a four-hour video-conference on Friday, ~jaan bhi jahan bhi~ a slight play on the old saying ~jaan hai to jahaan hai~. Both are appropriate in these challenging times.

Given the size of our population, the density of old habitations, especially in urban conglomerates, the low level of literacy about personal and civic hygiene, and, above all, the ever fragile health system, the number of cases at about 8,000 and a death toll of about 250 at the weekend would suggest that the nation-wide lockdown is paying off. Complaints about the low level of tests for the Chinese virus might well be motivated by the hostility against the Modi Government.

Such complaints are routine in the US and the UK, to mention only two of the developed countries with reasonable healthcare systems. We in India cannot ignore the fact that there has been no noticeable rise in the number of deaths during the course of the pandemic. Oral and other evidence from morgues and crematoriums and burial grounds would have lent weight to the complaint about low tests if the data about the contagion was wilfully suppressed by the States and the Centre. That is far from the case. Sometimes prudence may lie in lending credence to the official word as well.

Meanwhile, while the health authorities continue their operations to test, isolate and treat the infected, the economic planners need to most urgently firm up plans for offering relief to the poor and the needy. Not only the millions of daily wage employees, but even the small and medium self-employed entrepreneurs are in need of a helping hand. Millions of small businesses will find it hard to get back on their feet without adequate financial assistance.

Easy long-term credit, write-off of interest for the locked down period, tax-holiday for the current financial year, etc. are some of the suggestions worth considering. Small- and medium-sized export firms are hit by cancellation of import orders. They, too, need assistance. The RBI may have to intervene to ensure that they have access to easy credit on relaxed terms. Otherwise, surviving the twin blow of an abrupt lockdown and the cancellation of orders already in process will be hard.

The outlook for the global economy is rather grim. A deep recession lies ahead. The prognosis for India, to, is not optimistic. The latest World Bank assessment puts the growth rate for 2019-20 at five percent while lowering it to a mere 2.8 percent for the current financial year.

The situation is bound to get grim before it improves in the next financial year. A number of economists have called for printing money regardless of the constraints of the Fiscal Responsibility and Budget Management Act. Former Finance Minister Yashwant Sinha writing in a contemporary the other day argued for what is tantamount to breaching the FRBM despite, as he said, he himself had piloted the above law in Parliament.

A few other equally influential voices have been heard in seeking to step over the limits on fiscal deficit. It is going to be a tough call to make for the policy-makers. For there are legitimate fears that with foreign money already pulling out, and the rupee under a renewed pressure, the resulting rise in inflation will hurt the common consumer while a high level of deficit financing boosting growth would still remain uncertain. On balance, we think prudence lies in keeping the fisc under control while cutting down all unnecessary government expenditure.

All new infrastructure projects can wait till the situation improves, belt-tightening can include a suspension of mandatory pay rises for the huge army of government and semi-government employees, including those in the public sector.

Besides, the disinvestment programme can be fast-tracked to sell off the white elephants including those duds, the MTNL and BSNL, after hiving off parts which are vital for strategic security purposes. The pandemic should serve as an opportunity to get rid of the dead wood on the government payrolls, to sell off the wasteful totems of the socialist years, and to streamline the economic engine for serving the needs of 130-crore-plus consumers. Modi should try and build a consensus on a nimble government unencumbered by the deadweight of the socialist shibboleths. That should be a net gain from the current crisis of global contagion originating from China.

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