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Photo: PTI
Photo: PTI

Opinion | Covid challenge and rise of the fear economy

The lockdown has only reinforced the sentiment of panic caused by covid-19

Beginning Monday, the country will launch its staggered exit strategy or Lockdown 3.0 as some would put it. The plan is quite simple: While the red zone remains in lockdown mode, economic activity in the green and orange zones have been permitted, provided social distancing norms are adhered to. This fresh re-balancing of the livelihood versus lives trade-off at the time of covid-19 pandemic comes about 41 days after the country first went into lockdown.

The problem is that in these six weeks elements of fear, anecdotally at least, seem to be setting in; almost all consumers visiting markets for their daily groceries are sporting masks, preferring to open doors with their elbows and are constantly soaking their hands in sanitiser solution. The 65-years-plus demography, particularly vulnerable given their inherent risk to co-morbidity, are visibly absent in public spaces. An additional challenge to public policy that has emerged is to tackle this growing sentiment of fear without sacrificing the precautions that have been adopted to avoid contracting covid-19. To be sure the withdrawal of the lockdown had to happen, sooner if not later. In fact, the shutdown which has caused widespread loss of livelihood is now threatening lives. Besides, loosening of restrictions on business is a precondition for the rollout of the long overdue fiscal relief programme from the Union government; makes little sense to inject a stimulus when more than half the economy is shut down. Once the economic wheels are set in motion, the supply chains are cranked into action the fiscal relief will go a long way in alleviating the economic pain; it is clear though that timing is critical as several industries like aviation are just about hanging in there.

The problem is that the fallout of the fear economy will pose an additional burden on these sectors which went out of business overnight as demand evaporated abruptly. The contact economy—particularly with respect to service led business like restaurants, salons and so on—is in the line of direct fire. Even after the staggered withdrawal kicks in, the social or physical distancing norms will remain in place for a long time. In this period the fear of contracting covid will only worsen.

At the cost of sounding self-serving take the example of newspapers; most resident welfare associations have suspended deliveries just because the mostly make-believe world of WhatsApp circulated a claim that newspapers were potential carriers of the virus—there is no evidence supporting this claim, but then people will naturally prefer to play safe. This would hold true of flying, public transport and eating out.

The knock-on effect of these rapidly diminishing footfalls on investments can be well-imagined. India Inc, which has been in funk ever since the global meltdown in 2008 and on account of the crackdown in the last five years on crony capitalists, would be unwilling to embrace new risks. A version of this fear is reflected in the reluctance of banks to lend; having been burnt by the record bad debts in their books, banks will, in the current circumstance of heightened uncertainty, not be willing to extend loans.

The thing is that the covid-19 pandemic, which in less than five months has spread from ground zero in Wuhan, China to devastate the entire world (about 60,000 people in the US have succumbed to the virus), has caused immense panic in the present. The lockdown, a strategy deployed worldwide, has only reinforced this sentiment.

The apprehensions about an uncertain future in a new normal world is only compounding the problem. Global growth forecasts have been slashed and in the case of India some have even forecast a contraction in this fiscal year. This is precisely the problem the fears are now dangerously poised to becoming a self-fulfilling prophesy. It may well still be early days yet for the fear economy; but it can’t be wished away The first step to exploring the solution is to acknowledge the problem. In short it is time to get real.

Anil Padmanabhan is managing editor of Mint and writes every week on the intersection of politics and economics.

Comments are welcome at anil.p@livemint.com

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