Focus on gradual resumption

Topics Coronavirus | DPIIT | Lockdown

Prime Minister Narendra Modi’s address to the nation on Tuesday is expected to bring clarity on the nationwide lockdown. Even as some states have extended the lockdown for another two weeks to contain the spread of Covid-19, the Union government appears to be willing to partially relax the curbs. On Monday, for example, Union ministers and select central government officials started working from their respective offices. Since the government now has more data and a better understanding of Covid-19, it should selectively allow the opening up of industries as well. In this context, the Department for Promotion of Industry and Internal Trade (DPIIT) has done well by flagging to the home ministry a list of industries that can be opened. The DPIIT has suggested that large manufacturing units in sectors such as automobile, electronics, and textile can be allowed to function at a 20-25 per cent employee capacity in a single shift. It has also suggested that companies should have a single entry point for workers and space for social distancing. Manufacturing units that are allowed to function will need to regularly sanitise their premises. The department has also recommended free movement of workers and vehicles in certain sectors. Additionally, it is in favour of reopening certain repair units and restarting construction activity with adequate safeguards.

There are multiple reasons why India needs to selectively resume economic activity. For one, while the government had exempted essential services during the lockdown, restrictions on movement affected production and supplies. Easing restrictions will help rebuild supply chains and avoid potential shortages. Second, the spread of Covid-19 and the nationwide lockdown have induced a great deal of hardship for a large number of households and businesses. Since some businesses in the services sector, such as hotels and restaurants, are likely to remain shut for a longer period, it is sensible to start opening up the manufacturing sector to the extent possible to contain the overall economic damage. This will also help bring back at least part of the labour force to work and address the issue of unemployment to some extent. The government with its limited resources is not in a position to support the economy for an extended period. It is likely that firms will still face significant hardship and might need to make changes in manufacturing processes. Nonetheless, restarting activity — even with lower capacity utilisation — will help address the cash-flow problem of firms to some extent.

Third, Indian companies may end up losing export opportunities, both because of failing to fulfil past orders and not being able to bid for new ones due to the lack of clarity on production. For instance, as reported by this newspaper, while the Tamil Nadu and Karnataka governments have allowed aerospace and defence industries to function, restrictions on movement are not allowing employees to reach their workplaces. Aerospace companies are concerned that their inability to honour contracts could result in flight of business. It would be extremely important to avoid such coordination problems between different organs of the government.

 
However, a partial opening of manufacturing units and other businesses should not make the government complacent. India needs to scale up testing in a big way. This will help identify hotspots and limit the spread of Covid-19. Increased testing will also give reliable data for policy decisions and help ease the lockdown in the coming weeks. Greater clarity in terms of containment of Covid-19 will aid economic recovery.


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