The nationwide lock-down was first announced on March 24. It was further extended 3 times to contain the contagion of covid19. Now the country is slowly opening up in tranches. Slowly and steadily the lock-down conditions may be relaxed in areas where the impact of covid19 pandemic is relatively less or even negligible. Certain states where the number of fresh corona virus cases are still high there may be further extension of the lock-down, say in Maharashtra, which may also be considered as the epicentre of covid19 infection, it has already been extended up till the end of June 2020.
It is almost two months and a half that the Indian Economy has been facing the challenges posed by this novel pandemic. As the country was under mass lock-down, the production of goods and services was adversely affected. Index of Industrial Production (IIP) for the month of March, 2020 has registered a negative growth of 16.7 per cent over the Index of March, 2019. This is a huge contraction indeed in the backdrop of a positive growth in the preceding month at the revised rate of 4.6%.
Particularly the Index of Manufacturing and Electricity has contracted by 20.6 per cent and 6.8 per cent respectively whereas in the case of Mining there was no change in the index during March, 2020. The weightage of Manufacturing, Mining and Electricity production in overall Index of Industrial Production (IIP) is 77.63 per cent, 14.37 per cent and 7.99 per cent respectively.
However, if we look to the overall performance of the financial year 2019-20, the IIP has reportedly registered a cumulative growth rate of minus 0.7 per cent when compared with the previous year. The Index of Manufacturing decreased by a meager 1.3 per cent, whereas, Mining and Electricity sector grew by 1.7 per cent and 1.1 per cent respectively during April 2019 to March, 2020 over corresponding period of previous year.
Therefore things probably are not as bad when compared with the previous year. Although, the previous month’s performance is quite disturbing considering that the lockdown was declared in the fourth week of the month. So we may expect some more deterioration in the respective indices in the IIP Index for the month of April.
We have seen estimates about the increase in unemployment rate and the consequent displacement of the laborers to their home towns. On one hand there is growing unemployment and on the other many industries, when they finally work out plans to open up may face paucity of skilled labor force as many of them may have moved to their home town due to various reasons. However, a down trend in the consumer price index is a breather for the economy though its computation is partly affected due to difficulty in carrying out the field work which had to be partially suspended due to the preventive measures taken by concerned authorities and announcement of nation-wide lock-down by the Government to check spread of covid-19 pandemic.
Need to open up the economy to break Vicious Circle of Unemployment
The Government of India has already come up with a large number of measures to kick start the halted economy back into motion. With that the size of the big fat economic stimulus has increased to the tune of over Rupees Twenty Lakh Crore (around 10 per cent of the GDP) to break the vicious circles of covid19, both on the demand side as well as the supply side.
I find that the economic stimulus is quite tactical in nature as it directly aims to hit the targets whether either there is a need to grant relaxation say in terms of procedures, compliances or statutory payment deadlines or just to give direct support to MSMEs or vulnerable sections of the society. However, it may be very challenging to achieve the goals the economic stimulus has set has set, and a lot will depend on its effective implementation which may require a great degree of coordination between the centre, state and local governments. Some of the basic points of the Economic Stimulus as announced by the government in five tranches are enumerated below:
The various measures of the economic stimulus are designed to address challenges and opportunities in the covid19 affected Indian economy and may yield benefits in the medium to long run. Also many ingredients are already imbibed in the long term policy paradigm of the government but the timing of this comprehensive economic stimulus is quite advantageous for the economy as a whole.
The Economy opens up with hope amid uncertainty
After remaining under the conditions of lock-down, India and the Indians are preparing to get back to work. This is going to be a phase-wise opening of the economy with due safeguards. To begin with, all activities may resume in a phased manner in areas outside Containment Zones with a requirement to follow the Standard Operating Procedures (SOPs) to be prescribed by the Health Ministry.
The covid19 pandemic has hurt both the health and wealth of the nation and it seemed imperative to open up the economy so as not to be trapped in a vicious circle of unemployment or recession.
The plan is likely to focus on bringing the halted economy back into motion. So the mantra is “Be alert, Get back to work where necessary and possible, and stay home in every other case!” The logic is also clear.
We may have to learn newer ways of living with covid19 and follow the strict rules at home, shops, schools and work. If any work can be done from home, we may better stay home and stay safe! But if it is required to move out we may have to be cautious of the fact that covid19 battle is not over yet.
Businesses have had their responsibilities towards the society and the government before also. It is time they fulfil their obligations towards them in this critical period by providing a safe working environment, allow employees to work from home, if possible, or ensure flexible work hours under safe work environments for all their employees.
The government is out with a big fat economic stimulus. But the fight against covid19 shall be successful only when business, society and government work in coordination and in a proactive way.