A Long Dark Night
The current situation feels like waiting for the sun to rise and for a long dark night to end. The Covid-19 outbreak has disrupted lives and caused havoc across the globe. As of April 12, India reported 909 new cases of coronavirus infection taking the tally to 8,356. April 12 also saw the United States overtake Italy in terms of the highest deaths caused due to the pandemic, with 20,506 deaths and 527,111 people infected. Given the spike in cases across the world, government/ states have extended the areawise restrictions and lockdowns to curb the spread. It has been reported that Saudi Arabia has extended the curfew in the kingdom till further notice. Thailand, has a curfew from 10pm-4 am and might be extending it. South Africa has extended its lockdown till end of April. New Zealand too might look at extending the lockdown if cases continue to rise. The UK has pledged GBP 200 million to the WHO (World Health Organisation) and charities help fight the spread of the virus in vulnerable countries and as per reports they might look at tightening the lockdown as well.
In India, with a three-week lockdown nearing its end, PM Narendra Modi chaired a meeting with the Chief Ministers of various states on April 11 to detail plans of extending the ongoing lockdown. Discussions revolved around extending the lockdown by a fortnight and a gradual easing of restrictions. The ongoing lockdown has an economic cost to it and there have been suggestions from policymakers and leaders of various sectors to help the economy back to its feet. In March, the Indian government announced a stimulus package of Rs 1.7 lakh crore as a relief measure for the poor. As per reports, another stimulus package directed at MSMEs (Micro, Small and Medium Enterprises) will be announced soon in addition to tax breaks and refunds. An April 2020 McKinsey report states that in a situation where there is moderate relaxation after April 15 but the lockdown continues till mid-May, production begins and supply chains start getting back to normal, the economy could contract by around 20 per cent in the first quarter of the fiscal year 2021, and to 2-3 per cent growth for fiscal year 2021. Such a scenario could put 32 million livelihoods at risk and swell NPLs by seven percentage points. The cost of stabilizing and protecting companies, households, and lenders could exceed Rs 10 lakh crore, or more than 5 per cent of GDP.
Quick Facts:
* In March 2020, Finance Minister Nirmala Sitharaman announced an INR 1.7 lakh crore relief package for poor
* $1 billion approved by the World Bank for India to fight Covid-19
* The Asian Development Bank assures of $ 22 billion support package for India to fight Covid-19
* USAID announced a $2.9 million aid package to India to fight Covid-19
In its April report titled, ‘Exit from the Lockdown’, the (CII) Confederation of Indian Industry has put out suggestions for a staggered opening post the lockdown, based on the incidence of cases geographical areas can be divided into red, amber and green to aid in easing of restrictions in those areas starting with the green. The report further suggests a two-fold economic revival package, fiscal expansion directed towards the bottom of the pyramid and enhanced credit to industry through banks. The recommendation is for banks to provide additional working capital comparable to three-month salary/wage bill to companies, at interest rates between 4 to 5 percent. This would need to be guaranteed by the government so that it can step in if companies fail to pay up and the RBI can provide a refinance guarantee as well. The report proposes that the additional working capital would also cover the interest obligation of stressed sectors like construction, aviation and tourism.
Suggestions are to prioritize industrial sectors for restart to gain from the control measures employed to reduce the spread of the pandemic while limiting the economic impact of the lockdown affecting exports, jobs and livelihoods. Textiles and apparels, food processing, pharmaceuticals, minerals and metal besides, automobiles, ecommerce and chemicals are the key sectors suggested for restart of operations in a calibrated manner.
“As we begin to plan the restart of industry operations post COVID-19, CII has looked into the Health, Social and Economic impact of lockdown to arrive at the prioritisation of the industry sectors. CII has used four key indicators for prioritisation of sectors for restart. These include sectors that are part of and support the essential goods and services ecosystem, labour intensive sectors that support jobs and livelihoods, sectors that are essential for protecting India’s export market share and gain the confidence of global markets besides sectors that will help us manage our imports to a minimum based on essential requirements for further production and export” said Mr Chandrajit Banerjee, Director General, CII.
