Two weeks ago, when India went into a 21-day lockdown, I wrote that we seemed to be living in the pleasant hope that the spread of the virus would slow, and things would limp back to normal when the lockdown
was lifted. I had asked: What if this belief turns out to be false? Just as we underestimated the pandemic, what if we are underestimating the recovery time? Now, the 21-day lockdown
is being extended by another fortnight — to start with. So that hope of normalcy just got pushed out a bit.
I had also mentioned that we might be ignoring second- and third-order effects of the lockdown.
These effects have now started to kick in. Almost all businesses dependent on cash are closed. The working capital of many companies, especially those of small businesses, is disappearing. A disruption in supply chain, no cash flow, non-availability of labour, and the fall in purchasing power will break many businesses. Only large consumer-facing and essential ones like pharmaceuticals
and hospitals will keep going. These trends are colossal and unprecedented, and the state’s response so far has been confused, meagre, and misdirected.
This is not really a surprise because the country was shut down with a four-hour notice without any consultation with the chief ministers, domain experts, doctors, or preparation. Thereafter, we expected to see, at the very least, massive Covid-19 testing at a low cost and huge output of masks and protective gear, made available easily at least to health care professionals. These are crucial preventive measures, which the private sector can deliver at scale. But many factories that produce these items are lying closed because workers cannot go to work. The Supreme Court, in a radical overreach, ordered private laboratories to do testing for free. Expectedly, testing by private labs has dropped sharply. All this is evidence of gross mishandling. It also tells us what to expect in future — the economic impact will become severe over the next two weeks. Meanwhile, if the mishandling continues any longer we will have to be prepared, at least, for these four trends.
1. Civic unrest: Episodes of peasants and workers protesting the lack of food and work are proliferating. In Surat, migrant workers came out on the streets in large numbers, asking for their salaries and demanding permission to go back home. They set fire to vegetable carts and threw stones. The police were called in to quell the mob. In Chennai, workers housed in a school protested against pathetic conditions, leading to violence; they were beaten up. Episodes such as these will increase across the country because we are not planning for these situations and human needs.
In a survey of 3,196 migrant construction workers, Jan Sahas, a non-governmental organisation, says: “42 per cent of the workers mentioned that they had no ration left even for the day, let alone for the duration of the lockdown”, and if the lockdown continued beyond 21 days, 66 per cent of the workers said that they would not be able to manage their household expenses beyond a week. This is a dangerous situation because it will not be limited to just one part of the country.
2. Rationing and price control: The government failed to ensure smooth movements of essential goods. So, there is a severe demand and supply mismatch. Prices of fresh produce and grains are shooting up in urban areas, while they rot in fields. Here is a tweet that describes the picture: “Today, I called my father and enquired about our crops. He told me in the absence of a proper market, he sold chilli at Rs 10 per kg against Rs 30 few days ago. I went in Navi Mumbai market and bought chilli at Rs 70 per kg.” The response of politicians to such public outbursts is to take the path of least resistance — impose rationing and price control — but not to do the right thing, that is, ensure smooth supplies.
3. A more powerful state: Our first reaction to any serious problem is that the government should step in and do something; the second reaction is to get a new law. Now that our life has been disrupted and our struggles are increasing, more and more people will demand the government make things right. This will, of course, be music to the ears of politicians and bureaucrats, who are looking for opportunities to expand their reach. It is quite another matter that decades of monumental corruption and waste have sapped the state and kept us backward.
4. Centre vs states: The states are at the frontline of the fight against Covid-19. They will demand more compensation from the Centre. But the Centre’s revenues will fall dramatically. Oil consumption is down and so the government will make less money from customs and excise duty. Goods and services tax (GST) collection will be half the budgeted figure in March and April. The Centre still owes Rs 30,000-34,000 crore to states as GST compensation for December 2019 and January 2020. Squabbles will break out at any time now between the Centre and the states over resources.
Things could have been very different. If the government had delivered the reforms it had promised and was voted for twice, the state would have had a much greater capacity to fight this battle. Instead, we have seen grandiose ideas like Make in India, Digital India, bullet trains, and wasteful large infrastructure projects like super expressways, coastal roads, and now central avenue. Simultaneously, we had popular schemes from the Congress playbook. There was no attempt to clear the cobwebs of rules and regulations that stifle enterprise, which alone can generate prosperity. And now, a tiny microbe is about to push us into a deep crisis.
The writer is the editor of www.moneylife.in