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Millennium Post

Can the economic engine restart?

Only a carefully-calibrated approach can put lives and the economy back on track. What’s worrisome is that we seem oblivious to the problems that lurk ahead

Can the economic engine restart?
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Let's talk 18 May 2020. That's just a week from today, when India will step out of Lockdown 3.0 after nearly two months of cautiously traipsing this perilous walk. A walk that saw the country's economic ship abruptly change direction and go asunder– from 'Full Speed Ahead' to 'Shut Down Engines'– in the matter of a few hours. Over Lockdown 1.0, 2.0 and 3.0, the country saw a topsy-turvy about-turn in all activities; from the perspective of healthcare, business shutdown and job losses, the economy and, most telling and visible, the migrant labor exodus. Today, as we head toward a post-Lockdown chapter to rebuild our lives and livelihoods, what is required is a calculated approach, one where we deftly manage cultural, socio-economic, rural and religious matters and nurse a country of 135 crore souls back to life.

That 'life' is lacking in India today, even when viewed through the most optimistic prism. Step just 60 days back… Even before the COVID-19 outbreak and the imposition of the lockdown(s), our business and economic outlook was in desperate straits. Most sectors were reporting negative QoQ growth numbers, jobs were being cut down, the overall economy was decelerating and foreign investments were hitting nadirs. And years after their birth, the two blood brothers of demonetization and the Goods and Services Tax (GST) were still having a numbing impact on businesses large and small, with the last two quarters leading up to 31 March 2020 throwing up India's worst Corporate performance in a decade.

Lives matter more than profits

In this disquieting situation, COVID-19 arrived in the country. Its entry was stealthy, but its march and manifestation across state borders and into cities was anything but, as it drove nails into our economic cross. So hefty were the hammer blows that even in that time of ongoing economic chaos, a Lockdown was the only option left with the authorities. After all, lives do matter more than profits – at least for a bit.

That bit has passed. Today, after three rounds of lockdown(s), India finds herself at a crossroads that, somehow, no one saw coming. What's worrisome is that we are seemingly not seeing the situation for what it is, oblivious to the malaise at hand and willy-nilly refusing to acknowledge its deathly presence. When anyone is in denial mode, there is no reason to look for a cure, for there's no disease. Today, India refuses to call a spade a spade, and that's as much a cause for worry as anything we are dealing with.

The fact is that there is a deep and deadly rot in our economic farm and the greater truth is that India will not be able to survive an economic pandemic, surely not on the heels of a viral one. Nobel Laureate and Indian-American Economist Abhijit Banerjee summed it up last week. "A lot of us have been saying that we (India) need(s) a stimulus package," one that will shore up businesses and ensure job safety and wage payments to millions working from home. Banerjee added: "There is also a need to provide a moratorium on debts for one quarter. Spending is (always) the easiest way to revive an economy."

Bailout package remains elusive

But somehow, that COVID-19 stimulus package remains elusive in India, despite the country being well underway into her third lockdown. If we look at others worldwide, the United States, Europe and Japan have unveiled massive bailout packages, up to 10 per cent of their Gross Domestic Product (GDP), to shore up sagging business fortunes and ensuring liquidity. But India is yet to really get off the starting blocks. And that's after one, then two, and finally a third phase of the lockdown.

The only succor from the Indian Government came when Union Finance Minister Nirmala Sitharaman, in the first few days of Lockdown 1.0, announced a Rs 1.7-lakh-crore bailout package for the masses and small businesses. But those monies did not reach the ground level. Clearly, what we need today is for authorities to wake up to the issue at hand and act fast, especially as India's states are now fighting a losing battle to cope up with their financial needs and commitments.

It was this desperation of India's states that led to their raucous calls for opening up of liquor vends. The Central Government finally acceded to this in Lockdown 3.0, when certain relaxations were announced. Typically, Indian states net around Rs 12,500 crore monthly in excise levies from liquor sales. Given the COVID-19 'cess' announced by states on liquor sales (e.g. Andhra Pradesh @ 75 per cent of MRP; and Delhi @ 70 per cent of MRP), the collections will help write off some of the lockdown losses.

Desperate moves by Corporates

That's just the tip of the iceberg. The need for succor among our cash-less and bankrupt states, jobless and starving masses, activity-less and debilitated Corporates, and an incapacitated and disemboweled financial system are too desperate to quell without very substantial endowments. The Government's only handout of Rs 1.7-lakh crore has largely gone unrequited, because of issues stemming from logistics and sheer plausibility. Similarly, the Reserve Bank of India's liquid infusion of another Rs 1 lakh crore last month to catalyze the economy has been largely uncelebrated.

That perhaps is what catalyzed the Confederation of Indian Industry (CII) to seek a Rs 15-lakh-crore package last week to bail out Indian industry, citing losses of tens of lakh-crores due to the lockdown. Eerily, CII's appeal mirrored those put out a month earlier by the Federation of Indian Chambers of Commerce and Industry (FICCI), which called for a Rs 16-lakh-crore bailout package, the Associated Chambers of Commerce and Industry (ASSOCHAM), which asked for Rs 14 lakh crore, and the PHD Chambers of Commerce and Industry (PHDCCI), which sought Rs 16 lakh crore. All chambers cited impending doom for businesses and consequent job losses totaling up to 4 crore employees, perhaps more.

Sage wishes those, and if wishes were horses, we could ride out this financial storm by the end of Lockdown 3.0. But troth be different…The Government's tax estimations in the ongoing financial year are Rs 24.23 lakh crore. Of this, states' share would be Rs 8 lakh crore, leaving the Central Government with Rs 16 lakh crore. If this were to be done, there would be nothing left in the Center's vaults. Perhaps Indian authorities should go the US, German, Italian or Spanish way, where COVID-19 governments have insisted on equity in exchange for a bailout. Example: Alitalia.

Pundits and experts nationwide are at loggerheads; what works and what doesn't? Even for the largest business house, the answer is the same as one being faced by the average Indian everyday – self-sustenance, some safe steps and caring for thine friend and neighbor. This is a crisis. Live it out the best you can and save whoever you can in the process. Do your bit, for yourself and for others. History and 'karma' will celebrate you.

Some critical non-sequiturs

And we have other issues to deal with as well, opportunities dare we say.

One, China. Major nations are asking their manufacturing units to move out of China, given the vitiated global sentiment. Japan is leading the march, financing its top firms to do so. But India seems to have already lost this opportunity to Thailand and Vietnam. That's cause for worry.

Two, helicopter money. Never been resorted to in India, this could empower Indians to purchase more in the short term. It would certainly be more impactful than lighting 'diyas' and candles, beating plates with spoons, blowing conch shells and showering flower petals from the skies.

Three, the blame game. The first COVID-19 explosion was laid out at the doorstep of a particular sect. The second is already being placed on the shoulders of tipplers, for making a mockery of physical distancing while standing in queues to buy liquor. Who's scapegoat #3? (Perhaps the country's most vociferous daily television debate at 9 pm will clue us in on that).

Four, Lockdown 4.0, anyone?

The author is a business analyst and communications specialist. Views expressed are strictly personal

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