Nobel laureate Abhijit Banerjee has said it is the impetus of the govt. to provide the basic necessities of food, cash and shelter to the country’s urban poor. Just a day after the lockdown the nation witnessed migrant workers moving to their homes in huge numbers.
Hanan Ibrahim
The coronavirus pandemic which originated in the Hubei province of China has now affected 181 countries across the world and the new cases are rising exponentially. The virus has overwhelmed health systems and governments across the world. As every country in the world is trying to tackle this crisis in their own way, India entered into a 21 – day lockdown so as to slow down the spread of the virus. In India the growth rate has lowered to 4.7% in the last quarter of 2019 which is a six- year low for the country. India therefore is looming at a social and economic crisis like never before.
The $23 billion fiscal stimulus package announced by the Indian government is inadequate compared to other countries like the United States which has announced a $2 trillion infrastructure package. Nobel laureate Abhijit Banerjee has said it is the impetus of the govt. to provide the basic necessities of food, cash and shelter to the country’s urban poor. Just a day after the lockdown the nation witnessed migrant workers moving to their homes in huge numbers.
The economic cost of the lockdown for the poor is massive and the reverberations, quite unpredictable. South Korea has shown a model to the world in terms of handling the crisis through rapid testing and by early announcement of a stimulus package of $10 billion which is aimed at the vulnerable group of small businesses and the workers who are laid off.
In this situation the state governments in India are stressed of their resources and several state governments have decided to either cut or defer salaries of their employees. The Reserve Bank of India has also taken a number of steps, including a significant reduction in policy rates, infusing liquidity, and moratorium on interest payments. But this may not be enough to save businesses, especially the small and medium enterprises. Businesses would also need government support.
While lockdowns save lives we need policy measures to sustain livelihoods. The government needs to support the small and medium enterprises and ensure that financial stress isn’t amplified. According to a FICCI survey conducted before the large-scale shutdowns that came into effect over the weekend, 53 per cent responding business units said that business operations have been impacted; 80 per cent said that cash flows had declined; 60 per cent said supply chains have been impacted. Forty- two per cent believed that it would take three months to return to normalcy.
It is significant to keep credit flowing to businesses and households and mitigate the economic turmoil caused by mass quarantines put in place to slow the spread of the virus. India needs to improve its testing capacity so as to detect and isolate the cases as a lockdown alone will not suffice the crisis the country is facing now.
The world is walking through a precarious state since the past few months and India needs to learn to respond better. At least, before making hasty policy measures like a 21- day lockdown just 4 hours before, it needs to envisage the catastrophic implications on the different sections of the population.
(Hanan is an M.Com. student in Jamia Millia Islamia, New Delhi)
