The latest Purchasing Managers’ Index reflects the kind of damage the lockdown
is causing the economy. While the pandemic is taking its toll, poor policy management is increasing the economic cost. Even after 40-plus days of lockdown, relaxation rules are arbitrary and often confusing. After some states reported up to 90 per cent contraction in April revenues, the government allowed liquor sales even in red zones, but without proper systems in place. Serpentine queues for liquor, compromising social-distancing norms, demonstrate a complete lack of imagination in the policy establishment. The stampede seen in several places was caused by the ineptness with which the opening was handled in most cities. If shops open after 40 days, and consumers are uncertain about when they would close down (Maharashtra shut liquor shops
after opening them for a day), such chaos is only to be expected.
It is still not clear why liquor sale was prohibited when most consumables were sold freely. If such sale was allowed, like other essentials, it would have given some relief to state finances without hurting the objective of containing the pandemic. It is only after some states protested that a selective resumption of sale was permitted in the third phase. Since social distancing is critical for containing the pandemic, it is unclear why only a limited number of shops were allowed to open, especially in red zones. It appears that the government was unaware of the demand after a 40-day shutdown. Even if that is accepted, opening more stores was a no-brainer. Predictably, those allowed to sell were overcrowded to the extent that police had to use force. After observing the demand surge, several states decided to increase tax. The Delhi government, for instance, imposed an additional 70 per cent tax on the selling price. Again, what was stopping states from increasing the tax before sales resumed? The way states moved to raise taxes created uncertainty and might have prompted repeated visits.
To be fair, the government is not the only one to be blamed. The utter disregard for social-distancing norms on the part of citizens over the last few days is disheartening. If the ongoing lockdown
and the accompanying economic pain are not able to create adequate awareness about the pandemic, what will? In terms of policy, at one level, it is promising to see that state governments are learning from the situation. Punjab has permitted home delivery of liquor while several others are contemplating it. The government should now also allow restaurants to clear their liquor stocks, which will generate some cash for them at this difficult juncture. Home delivery should have been allowed at the beginning of the lockdown
and e-commerce companies would have handled it easily. Even food delivery firms, which started delivering groceries, could also have delivered liquor with all safety protocols. But such ideas may have been ruled out as any expansion in the activity of e-tailers for some reason is viewed against the national interest. Online marketplaces would have also delivered other “non-essential” items and helped the system in this difficult period. But they were not allowed to do so to protect the interests of brick-and-mortar traders. All this underscores that it is important for policymakers to make sure that decisions are well thought through and they don’t end up increasing the pandemic pain.