Lift the lockdown

In his meeting with chief ministers on Monday, Prime Minister Narendra Modi rightly pointed out that importance needed to be given to the economy as well. It’s high time the government walked the PM’s talk and decided against a continuation of the lockdown beyond May 3. While some chief ministers are reportedly in favour of extending the lockdown to contain the spread of Covid-19, there are strong reasons for lifting restrictions on economic activity in a meaningful way. There was some logic to the first extension, beyond April 14, because there was no sign till then that the number of new cases daily was flattening. Now there is: The rate of new cases doubling has dropped to nine days, from four. While the absolute number of new cases daily is still growing, the growth rate has flattened. And the number of deaths is still under 1,000, which is not very high, considering the number of deaths from other preventable causes. The non-availability of medical infrastructure for other morbidities is also resulting in a loss of lives. So, unless new hotspots emerge or there is a second wave of infections, it is reasonable to say that the lockdown so far has produced the hoped-for results.

But this has come at a massive cost, especially for the poor. Unemployment has soared to 24 per cent, which is comparable with the peak rate in the US during the Great Depression of the 1930s. There are also large double-digit declines in key economy-wide indicators such as exports, oil consumption, electricity generation, rail and truck movement as well as specific indicators like the sales of automobiles, cement, and steel. Government revenues have also plummeted, which would worsen the financial situation, especially for states. For instance, according to Delhi Deputy Chief Minister Manish Sisodia, the city-state has seen a 90 per cent drop. Things could be worse in other states.

If this continues, the capacity of governments to lead any kind of revival will be severely impaired. In the absence of special measures, the fiscal stance may even become contractionary, and thereby add to the problem instead of mitigating it. Lower revenue and expenditure in states will impede recovery. Also, the already substantial human havoc will multiply manifold as it has proved impossible to reach all those at the bottom of the pyramid with relief measures. An extension of the lockdown will only increase the human cost, as with the collapse in revenue, the state capacity will be further constrained. Many medium- and small-scale enterprises face existential questions, so jobs may be lost permanently. While the government is reported to be preparing a package for small and medium enterprises, resumption in activity would help reduce bankruptcy and job losses to a large extent. Bankruptcies would also increase stress in the banking system and affect its ability to extend credit to the productive sectors. Lives vs livelihoods is a legitimate policy choice at this stage of the game, when the infection curve is flattening, and it is clear that the time has come to lift the lockdown in more meaningful ways than what has been done so far, so that something approaching normalcy can be restored in stages. Containment should now be more targeted with a higher number of tests. Besides, with easing restrictions, the government should work on a broader plan to revive overall economic activity.


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