Opening Up 

#GS2 #Governance  

  • The current war against COVID-19 isn’t a conventional one. Far from having a definite endgame, wherein the enemy signs an instrument of surrender, the novel coronavirus will continue to survive and infect well beyond the 21-day lockdown that ends on April 14.
  • All the more reason, then, why the sweeping nationwide restrictions now on movement and production have to give way to a dynamic strategy that allows resumption of economic activity based on evolving and localised epidemiological conditions.
  • The present generalised lockdown was, no doubt, necessary to slow the spread of the virus.
  • It is early days yet before the key states are able to “flatten the curve” but there is some respite given that a fifth of the 700-plus districts in India have individually reported five or more positive COVID-19 cases.
  • Further, these districts have accounted for 80 per cent of all confirmed cases so far.
  • That’s why it is important to sequester these to ensure that the virus doesn’t reach here but there is an opportunity here too.
  • It is conducive for the reopening of factories once the lockdown period is over, while also minimising the risk of any uncontrolled spread of infection.

There are three things that the government can and should do after April 14.  

  • The first is to identify hotspots with high numbers of COVID-19 cases, where the current curbs will have to continue for some more time.
  • The second is to permit organised manufacturing establishments, especially government and private corporate sector-owned entities, to start production. As enterprises registered under the Factories Act, these units are amenable to monitoring, which also makes it possible to strictly enforce social distancing rules on them.
  • Third, a substantial scaling up of testing, including rapid serological diagnosis for detection of antibodies in the blood, is required. Without large-scale prevalence testing, it would be difficult to track hotspots, both existing and emerging, and respond with localised lockdowns or other necessary interventions.

All this reinforces the point: The war against COVID-19 is, if anything, going to be a series of battles fought over an extended period. The response, too, has to be dynamic. The number of coronavirus cases will rise in the coming days, but so long as they are localised and the gradient of the overall curve, cases or deaths, doesn’t get steeper, all efforts must be made to ensure factories start humming — with strict precautions, of course.

Market recovery depends on biz that will survive 

#GS3 #Economy 

The recent stock market crash is one of the first instances of a global collapse of equity valuations caused by a public health emergency. India’s benchmark indices have also moderated significantly. Mint explores the collapse of capital markets in India. 

 

 

What are the factors behind the collapse? 

  • The extent of the spread of covid-19, combined with a high death rate, has resulted in an unprecedented situation of lockdowns being imposed across the world. 
  • Such lockdowns on a global scale, with no economic activity or value addition taking place across key economic sectors, are unique. 
  • This has led to equity investors facing a problem of identifying which businesses would be able to survive the lockdown. 
  • Consequently, there is a lot of fear and anxiety among them that has resulted in sell-offs as everyone demands safer assets such as the US 10-year treasury bills.

What’s the insight with respect to 2008-09? 

  • The stock market decline at present is significantly faster and deeper compared to the 2008-09 collapse or the dot-com bubble. 
  • The current decline has happened over two months as the world recognized the scale of economic disruption caused by the covid-19 pandemic, which is markedly different from the 2008-09 crash. 
  • For India, the decline is steeper as it was already experiencing a sharp slowdown since the second quarter of 2018. 
  • The fact that the global economy is in recession, coupled with the uncertainty regarding lockdowns, has raised concerns regarding the prospects of recovery in the months ahead.

How much have other major markets declined? 

  • Most markets in the US, Europe and other major economies have experienced declines that are broadly consistent with that of BSE. 
  • There is a near-perfect match between the monthly closing values of S&P 500 and BSE. 
  • This suggests a key reason for the decline could be a shift towards safer assets due to uncertainty regarding the immediate future.

Will equity valuations be low in the future? 

  • The key reason for the shift from equity is the problem of accurately identifying businesses that could survive the lockdown. 
  • For instance, there are concerns about the aviation industry facing consolidation as it experiences its worst year. 
  • But historical evidence suggests recovery from such steep market falls is short-lived. 
  • Equity investments are discounting future income stream from a business. Once the world economy starts functioning again, markets are likely to review the valuation of several firms in India and abroad.

Will recovery from the current lows be swift? 

  • The jury is out on this as nobody can predict the pace of market recovery. 
  • A lot is contingent on the likely progression of the disease, which impacts the decision of governments to resume economic activity. 
  • If all markets respond in a consistent manner, then the recovery could be synchronized. 
  • An interesting stat is that across the 11 periods since 1990 when the S&P 500 fell over or equal to 10% in a quarter, the following quarter saw an average return of 7%.

A script of action, responsibility and compassion 

#GS2 #Governance #CrisisManagement 

The Coronavirus Containment Programme in Rajasthan has been intense and proactive; challenges are being met 

  • As Albert Einstein once said, in the midst of every crisis, lies great opportunity. This is the time to start improving our health-care management, formulating a cooperative Centre-State relationship to build a health-care network, and ensuring that equipment and personal protective equipment (PPE) is available to all practitioners. 
  • Rajasthan, for instance, had pathology laboratories during the Swine flu outbreak in the year 2009-10 in each division. These laboratories were augmented without any loss of time this time.

Rajasthan fights back 

  • The Corona Containment Programme in Rajasthan has been the most intense and proactive. The Jaipur SMS Medical College was chosen as the nodal centre for the containment programme; it now has 1,200 beds with adequate distancing and adequate supplies of PPE. There are 500 ventilator beds, now being increased to 3,000 beds. 
  • Rapid response teams have been monitoring all the hotspots, tracing contacts and working to isolate cluster zones. Door-to-door screening has been the hallmark of our COVID Containment programme.
  • Bhilwara has now become a case study in containing the spread of the novel coronavirus. This was one of the very first challenges as we were unaware of the nature and scope of the spread of this virus. 
  • The Triple-T method, i.e. ‘Tracing, Testing and Treatment’ was made mandatory. Strict adherence to quarantine norms and meticulous screening of more than 32 lakh people, resulted in the curbing of a number of COVID-19 infections in Bhilwara. 
  • This very procedure is being followed now for the entire State where more than five crore people have been screened till now. 
  • Rajasthan’s mottos, “Rajasthan Satark hai” (Rajasthan stays alert) and “Koi Bhuka nahi Soega” (No one shall sleep hungry) have become the war cry in our administration. A “Unity of Command and Unity in Communication” system, which is very useful in dealing with crises, has been implemented.
  • Cooked food packets for daily wagers, street vendors and needy people who are not covered under the National Food Security Act (NFSA), are being provided free of cost. Two lakh packets of cooked food were served on April 3, 2020 in Jaipur alone.

Social security measures 

  • A relief package of ₹2,500 crore for the weaker sections and sustenance grants of ₹2,500, for 31 lakh construction workers, factory workers and street vendors, and destitutes have been disbursed.
  • More than 78 lakh social security pensioners have been given two months pension directly into their accounts.
  • Essential ration supply has been sent to every gram panchayat, so that the patwari/gram sewak may give it to the people in need. 
  • Pregnant and lactating women are being tracked to ensure institutional delivery, immunisation and essential food and nutrition. 
  • Rajasthan has created a helpline to ensure food and fodder for stray animals and birds and our teams are working in close coordination with non-governmental organisations and Gaushalas. 
  • Fifteen lakh small and marginal farmers and the Scheduled Tribe farmers would be given free hybrid seeds (maize and bajra) for the coming kharif crop. Farmers are being provided tractor and farm equipment for harvesting, threshing and other agriculture-related activities free of cost or on very nominal rent. 
  • Interest-free crop loan of ₹8,000 crore will be disbursed in Kharif 2020, which will benefit 20 lakh farmers. 
  • The State government has also relief given to the hotel and tourism industry by giving them reimbursement of State Goods and Service Tax for three months up to June 2020 and relaxation in excise fees.

Empowering States 

  • The Prime Minister’s package of ₹1.7-lakh crore is a welcome step. Although additional funds need to be pumped in, preferably prioritising them in proportion to the population and number of COVID cases in respective States, others can be given aid in equitable proportions. 
  • This can be executed with the active participation and consultation of the States and also with the Goods and Services Tax Council or on the standards formulated by the Inter-State Council. 
  • The government of India needs to facilitate sufficient health infrastructure and PPE kits for doctors and medical staff. The Central Health Ministry needs to make it easier to procure them by issuing suitable standardisation and pricing.

India has to ‘recognise’ that the people in the forefront of this fight do not discriminate while saving lives, lending help, and restoring harmony. Their commitment towards their duty and society is the greatest investment in nation-building today. And, therefore, there cannot be a more fitting example than these testing times to realise the importance of compassion and humanity. We are a country with one of the richest examples of heritage, culture, ethnicity and demography. We thrive on our diversity. 

Preparing for exit 

#GS3 #Pandemic #DisasterManagement 

Overall relaxation of lockdown needs massive testing and support for infection clusters 

  • As the world watches, India must plan its strategy for a calibrated exit, possibly in a week, from the most aggressive lockdown anywhere to contain the novel coronavirus. 
  • The government faces the challenge of normalising some level of daily life and oiling the wheels of the economy, without causing a surge in cases that could follow wrong steps. 
  • The strategy will have to take into account the exodus of migrant labour from cities to their home towns or to camps set up along inter-State corridors. Given that this is harvest season, cessation of activity due to labour issues can trigger food deficits and high prices. 
  • On the medical front, States are monitoring those under isolation or in quarantine and straining to trace the contacts of those who attended the Nizamuddin congregation, many of whom are now found in distinct clusters in some districts. 
  • The States must also scale up testing, as part of the latest ICMR advisory for clusters and migration centres, and going forward, as part of the exit strategy. Against this complex background, the States are cautious, and Telangana and Chhattisgarh have voiced doubts about an exit without a clear plan. 
  • With high emphasis on social distancing, universal mask use and hand washing, it should be possible to open up some activity and release the pressures building up under the lockdown.
  • The identification of hotspots, where a virtual lockdown could be in force even if the nationwide curbs are relaxed, would require planned, humane measures to ensure availability of food, other essentials and medicines. 
  • Mass gatherings, long-distance travel and leisure activity would have to wait. Urban mobility for workers in the absence of public transport could be made possible by encouraging bicycle use where feasible, avoiding congestion.

A different economic approach 

#GS3 #Economy 

How the public health versus economic health trade-off can be resolved during this pandemic 

  • India has chosen to bring the economy to a near halt with no clear idea of how many lives can be saved in this manner. The 21-day lockdown will reduce the gross value added (GVA) during this period to near zero. 
  • More than half the GVA is contributed by the unorganised sector. A disproportionate burden of the economic cost has fallen on this large segment.
  • In time, a vaccine will become available. But the economy cannot remain shut until that happens. A prolonged lockdown will extract a huge economic cost. 
  • Therefore, the policy objective must be to find ways of ensuring that the lockdown ends early without compromising on public health.

Aggressive testing and isolation 

  • The economic cost of combating COVID-19 can be reduced by combining aggressive testing and isolation, a strategy proposed by economist Paul Romer for the U.S. For it to work, people must be tested in large numbers. 
  • Those who test positive must be isolated. This will make it unnecessary for the rest of the population to stay home and it will allow the economy to restart.
  • The success of this will depend on eliminating the fears associated with isolation. Such fears can be reduced only if isolation facilities are good. The precondition is the substantial ramping up of manufacturing capacities for medical grade masks, gloves, gowns, ventilators, testing labs, etc. This ought to be on a scale large enough for domestic use and, if possible, for exports for costs to be low.
  • In normal times, governments wrestle with dilemmas such as whether to allocate the limited available tax money to education, health, public transport or a sop that could change the outcome of the next election in their favour. But during a public health crisis, all resources must be used to ramp up healthcare capacities.

The way forward 

  • Loan moratoriums and cash transfers can fend off bankruptcy and defaults for a few months and buy time on non-performing assets in banks. But they cannot make good the GDP lost due to the economic shutdown because liquidity and cash released by monetary and fiscal policies cannot get transmitted to the real sector during an economic shutdown unless they are funneled into the sector that is still active, which is healthcare.
  • Just about everything from masks to kits has been placed under price controls. This has removed the incentive for private labs to ramp up capacities. Instead, the government should fully subsidise testing. 
  • At zero MRP, more people with symptoms will come forward to get tested. Private labs will quickly ramp up capacities if they don’t have to worry about losses. 
  • The number of suppliers will increase. Costs will reduce. Private enterprise and technological innovations will come up with cheaper tests that produce results quicker.
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