Restarting economy post lockdown

WHY IN NEWS?

Pre-emptive lockdowns have saved many lives, now there is a need for a larger stimulus to compensate for the short-run economic losses of the lockdown and to revive growth.

HOW TO REVIVE THE ECONOMY?

• Cautious opening of economy:
  • The government should slowly open the country for business in a carefully calibrated manner by focusing on reviving sectors like agriculture, manufacturing, and services while isolating geographic hotspots and vulnerable groups.
  • The most compelling requirement for reviving the economy is to ensure that supply chains are reopened and permitting enterprises with appropriate hygiene measures in place.
  • There must be greater emphasis on public transportation with more reliance on electric vehicles. The movement of people which includes the migrant labour force, professionals and even students are vital for swinging back the economy into motion.
• Re-kindling domestic demand: Activating India’s large domestic demand can potentially insulate the country from global shocks and shrinking of trade. For that the government will have to provide assistance and ideally pause any stringent action for defaults and non-payments.
• Government participation: It is not the business of government to be in business. But the government participation is inevitable in a post-lockdown economy whose priority areas should be healthcare, public transport, municipal services including drinking water, sanitation and power supply were private sector has much less role.
• Agricultural sector: Agricultural sector which accounts for 14% of our GDP can be the backbone of our economy if adequate support of logistics and storage are ensured. If agriculture sector is revived it can help in regaining the rural demand and also address supply-side constrains in food and commodities due to lockdown.
• Service sector:
  • Service industry which is the number one contributor to our GDP and hence its role is crucial boost our economy. The physical infrastructure of the industry has survived without much damage during the pandemic outbreak, but it is difficult to suddenly create demand as tourism, transportation, entertainment and other fields will not regain demand soon.
  • The advantage of reviving and stimulating the service sector is that it can put large population of workers back to work which can intern spur the domestic demand, which is crucial for growth and resuscitation of the economy.
• Healthcare: There should be focus on community-level public health and tertiary healthcare, with more private participation especially in the Northern States, which can also be converted to emergency cares in case of any pandemic like emergency in future.
• Importance of head-start: When the COVID-19 crisis ends and economies starts running again, the first few countries to get off the starting block will be at an advantage, especially when there are rumours that companies are planning to relocate from China.

WHAT ARE THE CHALLENGES AHEAD?

• The opening-up of economy would not be smooth as anticipated. There is a eminent threat of re-emergence of disease with aggressive community transmission.
• Before lockdown the asset values were arguably stretched to a higher side, if there is a collapse of asset value, it can create large financial shock.
• Micro Small and Medium Enterprises (MSME) that contribute to 30% of our GDP are out of action due to the lockdown, they are unable to pay their employees, and several of them do not have the financial resources to re-start their businesses.
• Liquidity constrains is one of the biggest obstacles for the revival of business, even if credit is available - the possibility of another lockdown, disrupted supply chains, missing labour, unstable demand may discourage many businesses from re-starting operations soon.
• Economists are of the opinion that the agriculture sector will relatively be the least affected, manufacturing industry can relatively come out of crisis as and when the administration lifts the restrictions. But service sector faces the threat of permanently destroyed demand.

CONCLUSION

• Major lessons from the Coronavirus pandemic is that - individual health outcomes cannot be divorced from the health and hygiene systems of the community, national borders are no defence against threats from nature, and that collective global action is increasingly a sine-qua-non for our own individual protection from such events.