When demonetisation was announced on November 8, 2016, the RBI had announced almost 65 notifications till December 31. What did that indicate? The plan for demonetisation was not in place and the act was random, one for which no one was prepared. Hence, the ensuing chaos -- with people rushing to change notes at banks and ATMs unable to dispense new notes due to the modifications required -- and the teething problems citizens had to face. The same could be said about the Maharashtra lockdown, which looked to be on the cards but came as a thunderbolt in April.
The issue with the lockdown was the ambiguous nature of communication, as it was never clearly explained what could be done and could not be done. This is a problem for business. To begin with, Monday to Friday was supposed to be ‘normal’, with curfew in the evening from 8pm and a full weekend lockdown. This was then changed to cover the entire week and subsequent clarifications went on to restrict timings for even essentials to four hours. The problem with such communication is that everything is left open to interpretation and the local police have a field day, having their way with establishments.
The absurd rule of e-commerce not being allowed to sell non-essentials looks out of place because if rice and biscuits can be delivered, why not mobile sets and clothes? Evidently, this has been done to placate the non-essential establishments, which thought it was unfair that their businesses would be shut while e-commerce flourished. The local police have their way and the new sticker policy, subsequently scrapped, created unnecessary panic.
As the rule was that one could be on the road for a specific permitted activity, stickers for vehicles was not required especially so because one could still be going out to the airport or railway station or to visit an elderly relative and not be in the medical, grocery or essential service categories. Such anomalies are widespread in the circulars issued, which give cross references to policies of the past that are hard to trace and figure out.
What does this indicate? It is evident that the administration in the country is not prepared for this second wave of the virus and the response has been knee-jerk. Last year, it was understandable that the sudden national lockdown had several inconsistencies in communication and the public were confused about the restrictions. It could have been done in a better way this time, but it does appear that there was no plan drawn up before the announcements were made. This can be a pain factor for businesses across the country, as the infection cases rise and more states go in for lockdowns.
On their own
The reactions in Delhi, Bengaluru, Ahmedabad etc. have followed the Maharashtra playbook so far. First, services are closed down and hence malls, theatres, restaurants get affected. Next, the curfews start in the night and then move to the weekend. In the last stage there are total lockdowns, bringing everything to a halt. The businesses that are affected are left to fend for themselves.
The Maharashtra government has been extremely progressive here, by announcing a package to help out the vulnerable sections. But today, there is no way to look after itinerant labour, which is the migrant population. Last year, there were relief camps set up for them so that they could stay and be looked after. Presently, the states are grappling with the lack of hospital beds, doctors, oxygen, medicines and have no bandwidth to stop migrants from fleeing. Therefore, it is a repetition of what happened last year.
Business cannot function with uncertainty and as the pandemic is characterised by this factor, the state needs to provide comfort. With the Centre advocating ‘no lockdowns’, the responsibility for containing the virus is on the states, which will lead to asymmetric responses. This affects movement of goods and services, which create problems for business. It becomes difficult to plan production if clothes can be shipped to Telangana but not to Maharashtra. There have to be symmetric rules in the country. Travel has been in a quagmire as different states have their own rules of Covid testing passengers from other states.
Also, there are no timelines which can be given by states, as no one knows when the infection numbers will come down. Presently, they are going up and there is no sign of abatement. This leads to disruption in business plans, as differential lockdowns and guidelines across states multiples uncertainty at a time when business appeared to be picking up. This is not good news for labour, which will once again bear the brunt, as well as consumption that will be in jeopardy.
There is need for all states to agree on a set of uniform guidelines and timelines for the lockdowns. This can happen if there is a collective will. Otherwise, business will keep slipping in different pockets, causing large-scale disruptions in corporate activity. The SMEs will once again be on the radar, with no further assistance being provided. This should be avoided.
The writer is Chief Economist, CARE Ratings, and author of Hits and Misses: The Indian Banking Story. Views are personal.