The Levy Economics Institute Blog - June 2, 2020
Link to Report on the Levy Blog
by Harikrishnan S. and Lekha Chakraborty
As predictable as it can be, the Indian Prime Minister announced lockdown at 8 PM on March 24th 2020, giving the country and its 1.3 billion people all of four hours to get ready, evoking memories of the demonetisation announcement and the midnight launch of the GST! This was done by invoking the National Disaster Management Act of 2005. While many analysts lauded the communication strategy of the leader “directly” speaking to the people as political decisiveness, our contention is that it was a clear case of using a “command and control” strategy instead of co-operative federalism, which the government had been taking pains to highlight that it believed in. The manner in which we are getting out of the lockdown, with an ad hoc and arbitrary exit strategy, at a time when the number of COVID cases reported daily has seen a mountainous surge (almost every other day previous records are being broken), shows a clear lack of any sort of planning and sadly reeks of cluelessness.
While the obvious intent of the lockdown policy was “to flatten the curve” and control the spread of the pandemic, almost irreversible economic disruption has resulted in many sectors and a mounting humanitarian crisis through the unprecedented exodus of migrant labour is staring at us with all its severity. The empirical evidence shows that on March 24th 2020, the day the lockdown was implemented, the number of confirmed COVID19 cases stood at 564, with a recorded death toll of 10. While we write this, India has broken into the list of the top 10 most affected countries in the world in terms of COVID positive cases. To put things in perspective, the official statistics reveal that as of May 29th 2020, the outbreak of COVID19 had been confirmed in approximately 210 countries, and we, along with the US, Brazil, Russia, Spain, the UK, Italy, France, and Germany, are among the most severely affected. As of May 29th 2020, the virus had infected 165,799 people in India, and the mortality had risen to 4903.
Lockdown, as a strategy to control the coronavirus pandemic, has proven to be neither good nor bad. From the Indian perspective, ideally, it would have been effective had this period been used for improving the healthcare infrastructure, or at least boosting up the public health budget to deal with the imminent crisis. Constitutionally, even though public health is a state subject, in the seventh schedule (that specifically defines allocation of powers and functions between centre and states),entries 28 and 81 in the Union List deal with “port quarantine, including hospitals connected therewith,” and “inter-state migration and inter-state quarantine,” respectively. The intergovernmental framework is thus crucial in dealing with the pandemic through policy coordination and fiscal transfers, especially when the states are doing the heavy lifting to control the pandemic, despite their constrained fiscal space.
In an ideal world, the fiscal decentralisation at the local level—the principle of subsidiarity—would have been the effective policy mechanism, meaning the decision making processes in a crisis being carried out at the level of government closest to the people. But in India, the COVID policy response has been highly centralised. Although there have been a few online meetings between Chief Ministers and the Prime Minister, they have not been effective, as almost all decisions have been taken unilaterally, without consultations. Even the decision to go ahead with the curfew and lockdown was not discussed in the Prime Minister’s video conference with various Chief Ministers on March 20th 2020. Another very vital point that should not be missed is that in spite of the early warning from the WHO about the pandemic in January 2020, India’s response, with the closure of its international borders and ports of entry, was woefully late, quite obviously to make way for the Namaste Trump event to take place, and cater to some of the governments “more urgent” political considerations.
With economic activity almost ground to a standstill, the lockdown, even though it was a relevant policy response to deal with the pandemic, has had to be extended indiscriminately for a longer haul, due to the lack of preparedness to exit or a clear-cut exit plan. This, in effect, has created a dual crisis to respond to: a public health crisis and an economic crisis, through irreparable disruptions in supply chains. The corona pandemic hit the Indian economy when it was on a significant slowdown mode. The announced fiscal and monetary policy packages of 20 lakhs crores—which the government claimed to be around 10 percent of GDP—has been largely for infusing liquidity into the system for an economic revival, in long-term reform-oriented tranches. These tranches of COVID policy response appeared to be more or less “business as usual” rather than an “emergency pandemic package.. Interestingly enough, most analysts have identified the actual COVID response package as being only 1 percent of GDP or thereabouts, and not the 10 percent as announced by the government.
The trade-off between “life” and “livelihood,” and the government’s appalling apathy in dealing with the plight of migrant labourers, is rapidly burgeoning into a humanitarian crisis of mammoth proportions, with the increasing number of hunger deaths. The lack of authentic data on COVID positive cases and mortality is another area of concern. The recent data from cremation and burial grounds in Delhi contradicts the official COVID-19 mortality statistics by being almost four times higher than the official figure. This makes one wonder whether there is gross underreporting of data, both at the level of the states and at the national level. The lack of preparedness for aggressive testing, treating, and quarantining—asymptomatic and symptomatic tests—across India during the prolonged lockdown provokes dismay, to say the least; this, in spite of the WHO’s clarion call to “test, test, test.” South Korea has been regarded as a benchmark on this front, and their success in containing the pandemic is largely due to the aggressive testing strategy that they adopted.
Interestingly, the epicentre of the pandemic has shifted from China to G7 countries, and now to Brazil. India has broken into the top 10 despite the lockdown and its five extensions, and now the proposed Unlock 1, in the midst of exponentially rising case numbers, with various experts predicting that the cases are likely to peak in June-July!
Needless to say, these are politically challenging times for the government, and the diversion of focus from the virus pandemic to policies towards tackling external aggression (this time from China) could prove costly. We are tackling a pandemic, and the projected skill sets and carefully created image and characteristics of a leader would not help in dealing with it. For that we need strong “institutions” and “policy certainty.” But, for the moment, all that one can infer is, as a country, the policy that came directly from the central government for dealing with this dual crisis that we are facing—the public health crisis and the economic crisis—has been far from adequate. While there have been some bright spots in what has been largely a bleak picture, in the way the pandemic has been tackled in the country, the successes have been exclusively at the level of the states. One can only hope that the centre scales up its policy responses and intensifies its efforts at mitigating, and providing relief to, this appalling human and economic catastrophe, before it gets too late!
(The authors are, respectively, an independent political analyst and professor, NIPFP.)
