A game plan to revive the various covid-affected sectors of the economy4 min read . Updated: 14 Apr 2020, 12:40 AM IST
- A few timelines can be pushed back. For instance, the bankruptcy code can be suspended for one year. Income-tax filings can be deferred till 30 September
- What does one do? Here is a list of possible interventions, all in the nature of suggestions.
NEW DELHI : If predicting the progress of covid-19 is difficult, predicting its impact on growth and employment is even more so. The state of the global economy, the course of the epidemic and the policy on lockdown (beyond 1 May) are all uncertain. Suffice it to say, out of four drivers of growth —consumption, investment, government expenditure and net exports—all but government expenditure have question marks.
Purely as a back-of-the-envelope number, for the entire year, secondary sector contribution will probably shave off almost 2% from growth. For the tertiary sector, a corresponding number would be something like 1.75% and for the primary sector, something like 0.25%. So, with a range of 6-6.5% real growth pre-epidemic, real growth for 2020-21 is unlikely to be more than 2% or 2.5%. But even this is a shade optimistic.
In decreasing order of magnitude, the sectors most affected are clearly: airlines and hotels; automobiles and ancillary industries; construction; textiles and garments; freight and logistics; oil and gas; metals and mining; power; consumer products and retail; chemicals; IT and related services; pharmaceuticals; telecom; and agriculture (including animal husbandry, horticulture).
For textiles and garments, consumer products and retail, chemicals, IT and related services and telecom, one can hazard a guess that some kind of revival will occur in Q2 of 2020-21. For construction, oil and gas, power, pharmaceuticals and agriculture, the timeline will probably be Q3. For the remaining sectors, one is possibly looking at Q4.
Outside agriculture, the impact of job losses is largely restricted to construction (of the order of 16 million); trade, hotels and restaurants (5 million); manufacturing (13 million); transportation (4 million); and mining (1 million). That’s around 39 million. In the event of India faring much worse, this number can increase to upwards of 60 million.
What does one do? Here is a list of possible interventions, all in the nature of suggestions.
■ In addition to direct transfers included in PM Garib Kalyan Yojana, consider direct income support for workers for three months. In urban India, there are an estimated 60 million contractual and permanent workers, though most work for MSMEs/SMEs and not for the corporate sector. Since most MSMEs/SMEs are not legally registered, some form of identification has to be based on GSTN (GST Network) numbers. Without identification of enterprises and workers, direct income transfers cannot work.
There are an estimated 135 million informal sector workers. There are instances (more for rural) where mapping between Socio-Economic and Caste Census 2011 (SECC) and PMJDY/Aadhaar has been done. In such cases, direct income support for targeted beneficiaries identified through SECC is an option to consider, for a limited duration of 3 or 6 months.
■ Adjusting the scope of MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) to offer employment to returning migrants. Giving one month’s advance wages through authenticated MGNREGA accounts is also possible.
■ There should be specific interventions for migrant workers, including tracking them, ensuring access to basic food, transport and healthcare and enabling them to access PM Garib Kalyan Yojana, even if not formally registered (if they are without Jan Dhan accounts, but have an Aadhaar card or Ayushman Bharat card or ration card). There should be identification, registration and formal linking of migrant workers, daily wage workers, construction workers, through e-platforms that link benefits.
■ Accelerating infrastructure building in healthcare and Make in India sectors (including National Infrastructure Pipeline), through state agencies and the National Investment and Infrastructure Fund.
■ Liquidity line from the Reserve Bank of India to banks/non-banks to help MSMEs, with credit backstop by government (can also be structured as support to large corporates who provide credit support to the supply chain). Credit guarantee fund to absorb likely non-performing loan slippage and credit costs in small business and MSME loans, despite liquidity infusion.
■ For large corporates, debt restructuring by banks, easing procedural requirements to raise private or foreign equity capital, and a transparent troubled asset relief programme-type programme of government capital infusion for select distressed companies in key sectors (travel, logistics, auto, textiles, construction, power). This needs to be independent of government, with a new institution and an independent board.
■ Capital strengthening for banks/NBFCs (rolling back regulatory capital constraints, easing capital raising procedures, TARP-type recap for stressed entities). Also, other liquidity measures such as payout of unpaid government dues, and steps to boost liquidity for banks, NBFCs and reforms in the bond market.
■ Restore and rebuild a stronger primary healthcare system, with a strong community care component, providing a protective and secure environment for healthcare professionals. Expansion of health infrastructure as an employment multiplier for doctors, nurses and para-medical staff, ASHA workers and ICDS Anganwadi workers, technicians and related services, along with skill development support.
■ A short-term contingency plan involving reorientation of existing industries/PSUs/ railways/defence units for production. This should be spliced with a medium-term plan for diversification and self-reliance. This is also an opportunity for India to occupy disrupted global supply chains.
Bibek Debroy and Ratan Watal are chairman and member secretary, Economic Advisory Council to the Prime Minister (EAC-PM). Views expressed are personal.