The Covid-19 Pandemic that’s left everyone in a flap

The onset of the Wuhan Coronavirus has impacted almost all parts of the world with some countries more severely impacted than others.  The pandemic is wreaking economic havoc and testing the medical infrastructure in many countries.  Every government has been stretched to its limit while developing its response to this unprecedented and extraordinary crisis. With number of positive cases nearing 5 million and the death toll surpassing 316,000 (as on May 18^th, 2020), the economic and social cost of this is deep and severe that may take a few years to heal.  The often changing advisory from the World Health Organisation (WHO) made matters worse. First, they said there was no risk of human to human transmission, then risk of air travel, then changed to say it can infect through aerosol and so on so forth.

[Source: www.worldometers.info/coronavirus]

The first case of Covid-19 in India was reported on 30^th January 2020.  The initial response of the government was to introduce thermal screening at airports and nothing beyond this was done until early March. The World Health Organisation declared Coronavirus as a pandemic on March 11^th, 2020.

India cancelled all foreign visas and OCIs effective March 13^th, 2020 leaving several of the OCI holders with family in India unable to visit and some could not see their near ones in their final moments of life.  However, during this period the government continued to allow all Indian passport holders to return from overseas and subsequently all international flights were suspended on March 22^nd, 2020.

As the number of positive cases began to show an uptick, the PM responded with an address to the nation to reassure the public that government had things in control and there was no need to panic.  And as part of that televised address, the PM announced a Janata curfew (voluntary curfew) to be observed on 22^nd March and requested the public to maintain social distancing. He also asked the public to clap from the balcony, ring the bell or bang utensils, make noise, all as an act of gratitude to frontline medical staff that evening, much like what Italy had done before. The public responded with unprecedented levels of compliance to the call. So much so that many took processions on the street to make it a celebration ignoring the calls for social distancing.

Probably encouraged by the public’s enthusiastic response, the PM announced on national TV on 24^th March at 8pm to announce quite dramatically a national lockdown from midnight of the same day for a period of 3 weeks (Lockdown 1.0), leaving many stranded, bewildered and in a state of anguish. This was déjà vu, Demonetisation 2.0 moment.

Again, cheered by the level of compliance, he announced his next task of “diya jalao” (light the lamp) or shine a flashlight for 9 minutes at 9pm on the 5^th of April 2020, which seemed much like the tasks on the reality show “Bigg Boss”, probably to keep people engaged and deflect their attention or may be to assess his popularity with the masses, latter more likely! 

Meanwhile, there were shortages of PPE and testing kits and the pace of testing was extremely low, which perhaps explains the low number of positive cases. In this aspect, most countries have struggled to secure PPE and testing kits.  The lock down did help to slow the spread of infection but despite this the cases began to rise quite rapidly in recent weeks confirming the main reason for the low number of cases to be low level of testing in the initial phase.

Even, now India is amongst the lowest in terms of testing per million population at 1,671 per million (as of 18^th May 2020) as shown below:

[Source: Statista.com]

India could have used the period of lockdown for rapid testing and this would have allowed it to open many of unaffected districts much ahead of the 5 weeks lockdown.

India also revised its discharge policy and as per this Covid-19 patients with mild and moderate symptoms need not be tested before discharge. It allows for mild and moderately-ill patients to be discharged from hospital 10 days after the onset of symptoms, if there is no fever and no need for oxygen therapy for three days, without testing them before discharge. Meanwhile, it states that severely-ill patients should test negative once after clinical recovery. While this will reduce the strain on health facilities, the potential for the spread of infection remains.

In its penchant to boost recovery rates, India seems to have revised its discharge policy but this opens up the risk of reinfection.

So, it’s too early to declare victory!

The Dreadful Apathy of the State – India’s forgotten lot

Roll forward a few weeks and what we see is the unfolding of a worst ever humanitarian crisis since the time of partition in 1947.  With no money, food and a place to stay, many labourers decided to head back to their home village with their families, on foot! There was exodus of millions of workers people from many cities like Mumbai, Surat, Bangalore, Noida, Gurugram to U.P., Bihar, Jharkhand from where these labourers migrated to find work in the cities.  The Railways didn’t run the trains, or the promised trains were cancelled at the last minute, and the States failed to run their buses to provide transport.  Many were prevented from leaving by the administration at the behest of industry lobbyists who wanted these labourers held captive so that they can begin work upon lifting of the lockdown and the State government turned a blind eye. States like Karnataka actively engaged in retaining the workers in shanty camps and cancelled the trains.  Both the Centre and the States were busy pointing fingers at each other and the Railways administration was indifferent.  Meanwhile, the labourers were being treated like slaves or captives.  This lead to a massive upheaval and in some cases these workers resorted to pelting stones in sheer frustration,

In sheer desperation they began walking on the streets in the scorching heat of May with their toddlers and young ones - hungry, homeless, shattered, and deceived by the government.  The businesses at which they toiled left them on the streets at the first sign of trouble with no compassion.  The scenes of thousands of distraught labourers walking back or cycling on the highways for hundreds of kms, some carrying their children on their shoulders while others making them hang on to strollers or lie on a cart in the scorching was heart rending.

While the ruling party practices politics of communal divide, the reality on the ground amongst ordinary folks is quite different.  On top right, you see a picture of Yakoob Mohammed and his friend Amrit who hitched a ride on truck from Gujarat to UP. Amrit fell sick so Yakoob stayed back to help him. Amrit later passed away while on ventilator. Yakoob still awaits his test results.

So many stories of distress emerged including that of a woman delivering a baby on the road shows the extent of apathy and the disconnect between the government and its people.  A 12-year old girl walked 100kms and died of dehydration and exhaustion in Bijapur dist., just 11kms short of reaching home.  In another incident 16 migrant workers who had fallen asleep on railway tracks were run over and killed in Aurangabad district.

Stranded without work and money 18 labourers set on a journey of 1,400kms from Mumbai to UP in a concrete mixer truck!  At the quarantine centre, one of the workers Manoj Yadav, who was supposed to get down at Lucknow to embark on yet another 200 km-journey to his native Prayagraj on foot, said, “The heat inside (the drum) was more bearable than the hunger.”

Even while all this was happening, the government was busy arranging repatriation flights for Indians stranded overseas – “Vande Bharat Mission”.

It was a collective failure - of the States, the Centre, the employers, people who failed to help, and much of the main stream media (busy pedalling hate) didn’t wake up to the crisis until it was no longer possible to ignore.

This also exposed the dreadful apathy and is a blot on the government across the spectrum. An utter and disgraceful failure of epic proportions.  The poor are treated merely vote banks and are a forgotten lot once the election is over.  Come election time, give some sop and they are too willing to forgive as the alternative choice can be equally abhorrent.

The dichotomy of India couldn’t have been starker!  On the one hand you have an India that made meticulous arrangements for testing, quarantine facilities at hotels with discounted rates for people arriving from overseas, and on the other hand, an India that left the poor labourers and their families on the street to suffer in hunger, thirst, blistered soles, no shelter and no money to hand!

The yawning gap between the professed ideals of compassion, service (athithi devo bhava), ancient civilisation, rich heritage etc., and the actual practice at the time of distress faced by the poor vegetable vendor or a factory worker or a cleaner came out in the open.

This also showed a lack of concern of the uninterested rich and a largely indifferent middle class who are only too happy to do their clapping, lighting the lamp and sharing it on social media.

Thankfully, some blessed souls, charities, the Jain and Sikh langars came out in good numbers to help these workers on their journey by handing them cooked food, water, and temporary shelter.

It is easy for many of these middle class and rich Indians to comment from the comforts of their home as to “Who asked these people to walk or take to streets?” One has to feel the expe

With no clear guidelines, the Indian Police did what it does best. It indulged in abuse of power and let loose its batons on people in a callous, high handed, and arbitrary abuse of power. 

The message of “Atmanirbhar Bharat” was clearly intended to these poor workers and their families who were left literally on the street to fend for themselves!

The PM, who likes to indulge in monologues with his “Mann ki Baat”, strangely never acknowledges these issues. While the PM was quick to launch the PM-Cares fund for raising funds for the epidemic, it lacked the transparency, probity and quick disbursals to provide relief.  After a lot of social media backlash, the PM release Rs 3,500 crores.  It is still not clear as to how much was collected.  Sadly, there is zero public accountability.

Why don’t more people speak up?

I often wonder how come many of the educated class ignore this basic point of seeking public accountability. Perhaps, centuries of subservience have blunted the Indian psyche to such an extent that they naturally take to sycophancy and cheer leading (either in order to fit in or because of “chalta hai” attitude or my life is not impacted so what do I care) and have lost their ability to demand accountability. Also, the government has been restricting the ambit of RTI and thereby restricting probity.

The Indian Babudom (bureaucracy) can make anyone frustrated, tired and helpless resulting in the continuation of bureaucracy’s power over people.  The odd few who demand accountability or speak truth to power are either subjected to harassment through the State machinery (ED, CBI, IT etc.) or branded as “anti-nationals” or “Urban Naxals” or such other terms that have been coined by the eco system of this government which indulges in spreading fake news, communal hatred and trolling on social media platform with impunity.

Demanding accountability shouldn't lead to what-aboutery or to the question - If not him who? or there is no other alternative etc.  Its about holding the government to account and demand information or question actions. The pradhan sevak has an obligation to the people and respond to people's questions.  Not holding a press conference after six years in government either shows insecurity or lack of willingness to be subjected to basic probity.

While the government has miserably failed on the social front, let’s examine their performance on the economic front.

Post the twin successive shocks of Demonetisation and GST, the economy has never really recovered.  The government initially was cavalier about it, citing it to be temporary factor and failed to make any course correction.  The GST, while a good idea, was implement very poorly both in design (too many slabs/rates) and the inadequate IT infrastructure. This resulted in a significant impact on SMEs, many of whom suffered significant decline in business volumes.  The unemployment levels also rose significantly during this time reaching a high of ~8% due to the slowdown in the manufacturing sector.

Despite a secular slow down across all sectors and a decline in personal consumption expenditure signalling a falling demand, the government continued to persist with supply side actions.  Even in budget 2020, the reduction in corporate tax rate was preferred over let’s say lowering personal income tax.  There is very little room for alternate views and when there are some such views, it’s quickly stifled (e.g. Rathin Roy).

Goldman Sachs estimates the growth in April – June 2020 to decline by a whopping 45%, and are predicting a deep recession for 2020-21 of 5% decline in GDP.

The stimulus package announced by the PM to be 10% of GDP, while significant at a headline level, needs to be carefully examined for details and its potential impact on reviving growth.

The PM announced a relief package of Rs 20 lakhs crores (~$265bn) on 12^th May 2020, which was widely cheered as an unprecedented level of relief package even though it had very little in terms of detail.  The PM outlined his vision to create a “Atmanirbhar Bharat” – a journey towards self-reliance. He left it to the FM to provide the information on the nuts and bolts of the relief package.

The FM laid out the details of the package, in what seemed like tele-serial, over five days. As the details were revealed each day, it became clearer that there was very little substance to the whole relief package.  Much of relief measures was either liquidity support to the system that was already announce by the RBI or new loan schemes. That would hardly qualify to be called a stimulus package. Let’s look at the components of this “illusory” relief package.  While the FM has proposed structural reforms in agriculture & fisheries, coal mining, aviation, space research etc. these are unlikely to have any short term impact.

The illusory Stimulus Package

Relief Measure	Rs Crores	Remarks
Earlier Stimulus measure	1,92,800	PM Kisan (Rs 1.7lakh crores – partly covered earlier – Rs 70k crores, Health care and Tax concessions – Rs 22,800 crores
RBIs liquidity measures to Banks	8,01,603	Liquidity measures on its own not adequate for credit flow
Loans to MSME, NBFC and Power sector
-          Working capital for Business incl. MSME	3,00,000	PSU banks will be required to lend
-          Sub-debt for Stressed MSME	20,000	Welcome initiative – details to be seen
-          Fund of funds for MSME	50,000	No clarity on how this will operate or deliver relief
-          EPF support for Business & Workers	2,800
-          Reduction in EPF rates	6,750	Reducing workers savings - How is this even a fiscal relief?
-          Special liquidity scheme for NBFC/HFC/MFIs	30,000
-          Partial credit guarantee scheme for NBFC/MFIs	45,000	20% first loss guarantee – Rs 9,000 crores
-          Liquidity for Discoms	90,000
-          Reduction in TDS/TCS rates	50,000
Total	5,94,550
Loan schemes for Nabard Mudra, NHB etc.	310,000	Includes food gain supply for 2 months of Rs 3,500 crores and interest subvention of Rs 1,500 crores
Agriculture Infrastructure fund and Fisheries	1,50,000
MGNREGA	40,000	Additional relief
Viability Gap funding	8,100	Whatever this means!
TOTAL	20,97,053

So, of the Rs 20 lakh crores only about Rs 1,77,000 crores represents the real fiscal stimulus. Less than 1% of the GDP against the headline grabbing 10% of GDP is the real stimulus. 

In short it’s just another “Jumla”!

My recommendation for the fiscal measures to drive demand and consumption as well as some revenue raising measures are:

1. ·         Reduce personal income tax rates for income up to Rs 25 lakhs
2. ·         Direct benefits transfer of at least Rs 5,000 each
3. ·         As crude prices are at multi-decade lows, reduce fuel taxes – will create a virtuous cycle of lower cost, lower inflation, reduce interest rates and spur demand
4. ·         Simplify GST with a single rate of 20% and exempt essential items
5. ·         Bring agricultural income above Rs 10lakhs into tax fold; this will only impact the disguised agricultural income (mostly abused by businessmen and politicians to launder money)

·         Stop hounding businesses with tax notices and create a culture of trust to promote compliance

And this is the time to use quantitative easing to support infrastructure asset creation that will drive jobs growth and have positive knock on effects for other sectors. As long as there is a clear medium term plan to unwind, this is one of the most important tools that the government should employ.

Conclusion

In Summary, the government is found wanting on both social and economic front. On economic issues its disingenuous and known to suppress and/or massage data.  On the social front it has demonstrated that it lacks empathy as evidenced by its failure to address the plight of migrant workers leaving them distressed.

With respect to its management of the Covid-19, it was slow to start, but made up with the bold measure of complete national lockdown, though the wisdom of this is questionable.  A more nuanced approach of lockdown of the affected districts or states would have had the same effect with lesser economic destruction.  The change of discharge policy is short-sighted and could potentially lead to an increase in infections.

The battle has just begun and it’s a long road to recovery.