Beware of a lopsided lockdown

The poor seem to count for very little in the Central government’s curfew plan

26/03/2020

Jean Drèze

REUTERSDANISH SIDDIQUI/REUTERS

“I am willing to go hungry if there is no other way to stop this virus, but how will I explain that to my children?” We heard these poignant words two days ago from Nemi Devi of Dumbi village in Latehar district, Jharkhand. Her son and husband, both migrant workers, are stranded far away. In village after village, many other women expressed similar worries. And that was even before the Prime Minister announced a drastic 21-day lockdown, from Wednesday.

The enormity of the coronavirus crisis is gradually dawning on India. For you and me, it is still in the future. But for many informal-sector workers and their families, the crisis is already in full swing: there is no work, and resources are running out. Things are all set to get worse as the privileged hoard with abandon and food prices go north.

Hopefully, the Central government’s decision to impose a 21-day lockdown will prove right in due course. But the lockdown (a virtual curfew) is crying out for relief measures, including income support for poor families. As it happens, most of them already receive a limited form of income support: food rations under the Public Distribution System (PDS). Under the National Food Security Act, two-thirds of Indian families (75% and 50% in rural and urban areas, respectively) are covered. In most States, including the poorest, the PDS works — not perfectly, but well enough to protect the bulk of the population from hunger.

Use excess food stock

The PDS is the country’s most important asset in this situation. It is essential to keep it going, even to expand it, in terms of both coverage and entitlements. Fortunately, India has gigantic excess food stocks. In fact, it has carried excess food stocks (more than twice the buffer-stock norms) for almost 20 years, and this is the time to use them. Nothing prevents the Central government from, say, doubling PDS rations for three or even six months as an emergency measure. That will not make up for most people’s loss of income, but it will ensure that there is food in the house at least.

Some bold steps are required to make food distribution effective. For instance, biometric authentication (fingerprint scanning) is best removed at this time — it is a source of exclusion as well as a health hazard. Distribution needs to be staggered and tightly supervised, to avoid crowds and cheating at the ration shop. Dealers who are caught cheating must be swiftly punished. All this is well within the realm of possibility; the main thing is to release the stocks without delay.

Having said this, the PDS is not enough. For one thing, many poor people are still excluded from it. Large-scale cash transfers are also required, starting with advance payment of social security pensions and a big increase in pension amounts (the Central government’s contribution has stagnated at a measly ₹200 per month since 2006). Here, one possible hurdle is the payment system. Many pensioners collect their pension from “business correspondents” (BCs) – a kind of human automated teller machine (ATM), who dispenses money on behalf of the bank. The problem is, unlike ATMs, most BCs use biometric authentication rather than smart cards. And mass biometric authentication could accelerate the transmission of the novel coronavirus.

Payment arrangements

Ideally, biometric authentication should be abandoned for now. Even if it is not, many BCs may vanish for fear of infection (most of them are poorly-paid employees of poorly-regulated private entities). Under both scenarios, something has to be done to ensure safe crowd management at the bank. New payment arrangements are also possible. For instance, social security pensions could be paid in cash at the panchayat bhavan on a given day of the month, obviating the need for everyone to go to the bank: this has been done in Odisha for years, with good results. Cash could also be disbursed, with due safeguards, through anganwadis or self-help groups. Cash transfers need not be limited to social security pensions. Revamping the PDS and social security pensions would go a long way, but a significant proportion of vulnerable families are likely to fall through the cracks. Further, food rations may prevent hunger but people have many other basic needs; they will need money to cope with this spell of unemployment.

There are several possible ways of extending the reach of cash transfers beyond pensions. For instance, money could be sent to the accounts of Mahatma Gandhi National Rural Employment Guarantee Act job-card holders, or Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) beneficiaries, or PDS cardholders. How these lists are best used and combined is a context-specific question, perhaps best handled at the State level (my sense is that in many States, the MGNREGA job-cards list is the best starting point). These are just some examples of possible emergency measures. Many other valuable suggestions have been made, relating for instance to midday meals, community kitchens and relief camps for stranded migrant workers. The first step is to make relief measures an integral part of the lockdown plan. Failing that, it may do more harm than good. For one thing, a hungry and enfeebled population is unlikely to fight the virus effectively. A constructive lockdown should empower people to fight back together, not treat them like sheep.

Finally, Centre-State cooperation is essential. Many State governments have already initiated valuable social-security measures, but they are far from adequate. The Central government, for its part, has been struck with inexplicable paralysis on this. Adequate relief measures require big money (lakhs of crores of rupees) from the Central government. Implementation, however, should be led by the States. They all have their own circumstances and methods. The Central government is unlikely to do better on their behalf. If it foots the bill, that will be a good start.

Jean Drèze is Visiting Professor at the Department of Economics, Ranchi University

Dressing a wounded economy

The two major tools that the government has available before it are monetary policy and fiscal actions

26/03/2020

C. Rangarajan

The impact of the coranavirus pandemic is now felt by almost every country. First, there are the health effects of the virus, and second is the economic impact of the various actions that have to be taken to combat the virus. The world is experiencing an additional slowdown on top of the contracting tendencies already present and India is no exception. The economic impact on India can be traced through four channels: external demand; domestic demand; supply disruptions, and financial market disturbances.

External, domestic demand

As the economies of the developed countries slow down (some people are even talking of recession), their demand for imports of goods will go down and this will affect our exports which are even now not doing well. In fact after six months of negative growth, it was only in January that Indian exports showed positive growth. The extent of decline will depend on how severely the other economies are affected. Not only merchandise exports but also service exports will suffer. Besides these, the IT industry, travel, transport and hotel industries will be affected. The only redeeming feature in the external sector is the fall in oil prices. India’s oil import bill will come down substantially. But this will affect adversely the oil exporting countries which absorb Indian labour. Remittances may slow down.

To ward off the spread of the coronavirus, the government has declared a lockdown of the country. As passengers travel less, the transportation industry, road, rail and air, is cutting down schedules, sometimes drastically. This will affect in turn several other sectors closely related to them. The laying off of non-permanent employees has already started. As people in general buy less, shops stock less, which in turn affects production. Perhaps retail units will be first to be affected and they will in turn transmit this to the production units. One is unable to make an estimate of the reduction in economic activity at this point. If the situation is not reversed soon, there can be a serious decline in the growth rate during 2020-21.

Supply disruptions can occur because of the inability to import or procure inputs. The break in supply chains can be severe. It is estimated that nearly 60% of our imports is in the category of ‘intermediate goods’. Imports from countries which are affected by the virus can be a source of concern. Domestic supply chain can also be affected as the inter-State movement of goods has also slowed down.

Financial market issues

Financial markets are the ones which respond quickly and irrationally to a pandemic such as the coronavirus pandemic. The entire reaction is based on fear. The stock market in India has collapsed. The indices are at a three-year low. Foreign Portfolio Investors have shown great nervousness and the safe haven doctrine operates. In this process, the value of the rupee in terms of dollar has also fallen. The stock market decline has a wealth affect and will have an impact on the behaviour of particularly high wealth holders.

How does the government deal with this sudden decline in economic activity which has come at a time when the economy is not doing well? The two major tools that are available are monetary policy and fiscal actions.

Monetary policy in a situation like this can only act to stimulate demand by a greater push of liquidity and credit. The policy rate has already beenbrought down by 135 basis points over the last several months. There is obviously scope for further reduction. But our own history as well as the experience of other countries clearly show that beyond a point, a reduction in interest rates does not work. It is the environment of the overall economy that counts. Credit may be available. But there may not be takers. You can lead a horse to water but you cannot make it drink. Any substantial reduction of policy rate can also affect savers. Interest is a double-edged sword.

The Reserve Bank of India (RBI) needs to go beyond cutting policy rate. A certain amount of regulatory forbearance is required to make the banks lend. Even commercial banks on their own will have to think in terms of modifying norms they use for inventory holding by production units. Repayments to banks can be delayed and the authorities must be willing to relax the rules. Any relaxation of rules regarding the recognition of non-performing assets has to be across the entire business sector. The authorities must be ready to tighten the rules as soon as the situation improves. This is a temporary relaxation and must be seen as such by banks and borrowers.

Fiscal actions have a major role to play. Once again, the ability to play a big role is constrained by the fact that the fiscal position of the government of India is already difficult. Even without the pandemic, the fiscal deficit of the Central government will turn out to be higher than that indicated in the budgets for 2019-20 and 2020-21. Revenues are likely to go down further because of the virus related slowdown in economic activity.

In this context, the ability to undertake big ticket expenditures is constrained. But there are some ‘musts’. The virus has to be fought and brought down. All expenditures to test (there is some concern that the extent of testing that we are doing now is low) and to take care of patients must be incurred. Now that private hospitals are allowed to test, the cost of the people going to private hospitals must also be met by the government. The involvement of private hospitals has become necessary. It is mentioned that a test costs ₹4,500. The total cost can be substantial if the numbers to be tested run in the thousands and more. This may sound exaggerated. But we must be prepared so that we avoid the tragedy of Italy. Therefore, the first priority is to mobilise adequate resources to meet all health related expenditures which includes the supply of accessories such as masks, sanitisers and materials for tests. The challenge is not only fiscal but also organisational.

The job sector

Serious concerns have been expressed about people who have been thrown out of employment. These are mostly daily-wage earners and non-permanent/temporary employees. In fact some of the migrant labour have gone back to home States. We must appeal to the business units to keep even non-permanent workers on their rolls and provide them with a minimal income. Some relief can be thought of by the government for such business units even though this can be misused. However, in general, in the case of sectors such as hospitality and travel, the government can extend relief through deferment of payments of dues to the government.

There is also talk of providing cash transfer to individuals. There is already a programme for rural farmers with all the limitations. For a system of cash transfer to be workable, it has to be universal. At this moment when all the energies of the government are required to combat the virus, to institute a system of universal cash transfer will be a diversion of efforts. The burden on the government will depend upon the quantum of per capita cash transfer and the length of the period.

As mentioned earlier, the government should advise all business units not to retrench workers and provide some relief to them to maintain the workers. A supplemental income scheme for all the poor can be thought of once the immediate problem is resolved. Provision of food and other essentials must be made available to the affected as is done at the time of floods or drought. States must take the initiative.

The fiscal deficit is bound to go up substantially. The higher borrowing programme will need the support of the RBI if the interest rate is to be kept low. Monetisation of deficit is inevitable. The strong injection of liquidity will store up problems for the next year. Inflation can flare up. The government needs to be mindful of this. All the same, the government must not stint and go out in a massive way to combat the virus. This is the government’s first priority.

C. Rangarajan is Former Chairman of the Economic Advisory Council to the Prime Minister and Former Governor, Reserve Bank of India

Railways cancels all trains till April 14

26/03/2020,NEW DELHI

The Railways have announced the cancellation of all passenger trains, mail, express, suburban trains and trains of the metro rail up to April 14, in the wake of the COVID-19 outbreak. However, freight operations would continue, the Railways said in an official statement. The Railway Board has also announced the suspension of bookings for all types of journeys till April 14. E-ticketing facilities for booking of reserved tickets for journey after April 14 will be available online.

Government college teachers to donate day’s salary to State

Decision taken to tackle spread of COVID-19

26/03/2020, STAFF REPORTER,CHENNAI

The Tamil Nadu Government College Teachers’ Association (TNGCTA) has decided to donate a day’s salary of all its members to the State government for its fight against COVID-19.

T. Veeramani, president, TNGCTA, said that the association had more than 5,000 members. “Tamil Nadu and the entire country is facing a health and economic crisis of an unprecedented nature. Hence, we decided unanimously to make the contribution,” he said.He added that the association was sending a letter to the CM and the Higher Education Minister to take steps to deduct a day’s salary from its members.S. Suresh, joint secretary (general), TNGCTA, said that the association was willing to fully cooperate with the government in fighting the contagion.

Doctor shuts down clinic in rural Sivaganga

‘Establishment lacks modern facilities’

26/03/2020, S. SUNDAR,MADURAI

In the wake of COVID-19, a retired government doctor has closed down his private clinic in a village near Tirupattur in Sivaganga district.

A notice board outside the house of M. Sheik Davooth, who retired as professor of pharmacology from Pudukkottai Government Medical College, says he has gone into self-quarantine along with his family members since Tuesday.

Since his rural clinic does not have any modern facility, he decided to close it down, he says.

“I am not able to identify people falling under category B among patients coming to my hospital. These are people who could have come into contact with those who have infection. Besides, some with infection can be asymptomatic. And some infected with the virus will not have any symptoms in the initial stage.”

The physician says he gets around 40 to 60 patients every day with all kinds of minor ailments such as cough, cold and fever.

“My hospital does not have space to maintain social distancing. This can put everyone’s health at risk. Besides, masks and sanitisers are also not available freely in the market.”

Train reaches destination without a single passenger

Vivek Express rolls into Kanniyakumari after 81 hours of travel through 7 States

26/03/2020, S. VIJAY KUMAR ,CHENNAI

Vivek Express entering an empty Kanyakumari railway station, after completing four days of journey, on Wednesday.

It started on the night of March 22, barely hours before the ‘Janata Curfew’ called by Prime Minister Narendra Modi came into force and continued its journey for the next four days, traversing seven States across the country to reach its destination in the southern tip of India.

Though the train had about 50% occupancy during most of its journey, it reached its last station Kanniyakumari without any passenger. About 250 passengers, including women and children, were deboarded at Palghat and quarantined at Government Victoria College there. However, when contacted, a Southern Railway spokesperson said some passengers were allowed to travel beyond Palghat. As a nationwide lockdown also dawned on Kanniyakumari, train No. 15906 Vivek Express rolled in empty. The train, the longest travelling express in the country, was the last in the railway network to complete its journey on Wednesday, as the Ministry of Railways extended the cancellation of all passenger services till the midnight of April 14, 2020, in the wake of COVID-19. The weekly train started at 11.05 pm at Dibrugarh in Assam on March 21 and took 81 hours and 36 minutes to cover a distance of 4,205 km to reach Kanniyakumari four days later. Despite the threat of COVID-19, people boarded the train at the last minute to reach home, sources said. “The Kerala government is taking care of screening, food and other logistics for them. Most of the passengers belong to Tamil Nadu…we are not sure how long they will be quarantined there,” an official told The Hindu.

Villupuram GH turned into COVID-19 hospital

26/03/2020,VILLUPURAM

The Villupuram Government General Hospital has been converted into a special facility for treating COVID-19 patients, Law Minister C.Ve. Shanmugam said. The Health Department had set up a 100-bed isolation facility in Villupuram Government Medical College and Hospital. Three patients were under quarantine. The throat swabs of two of them had tested negative while the result was awaited for the third, he said.