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Home / Opinion / Columns /  Opinion | India’s covid-19 trade-off: Lives versus livelihood

Over the last week or so, several rating agencies and multilateral institutions have revised their forecasts for global growth and countries to factor in the economic fallout of covid-19—the once-in-a-century pandemic. In the case of India, the most pessimistic projection pegs the growth in the current year to about 2%, while the optimists maintain it will top 4%. Regardless of the exact growth numbers, it is clear that the pandemic-triggered lockdown will result in an economic shock.

At the same time, India, with its high population density combined with poor hygiene standards and creaky health infrastructure, is very vulnerable to the pandemic, which originated in Wuhan, China, and has since spread to 175 countries, infecting over 1 million people, with more than 65,000 fatalities. So far, despite the fear mongering among sections of the media and experts mostly based in the West, India, which is in the midst of a three-week lockdown, has succeeded in evading the brunt of the pandemic. It is still early days though because the feared stage-3 entailing community transmission could still kick in.

The two challenges, together, sum up the difficult trade-off facing the country. So far, by undertaking a 21-day lockdown, India has prioritized saving lives over livelihood, but halfway into the lockdown it is clear that this trade-off is reaching a critical juncture. Beyond a point, the economic damage caused by the lockdown will become unsustainable. At the same time, lifting the lockdown entails the risk of a fresh spike in the national spread of covid-19. Going by PM Narendra Modi’s recent remarks it is clear that the immediate priority continues to be saving lives. Addressing a gathering of the G20 leadership Modi said: “We need to put the human beings rather than economic targets at the centre of our visions of global prosperity and cooperation." Later, in an interaction with state chief ministers, Modi further signalled the need to be watchful and even mooted a staggered withdrawal of the lockdown, particularly in states such as Maharashtra, at present the ground zero in India for the pandemic.

If indeed this is the strategy, the cost of funding the recovery is going to be that much bigger. In this, the biggest public policy challenge will be the potential return of poverty. Since the turn of the millennium, because of a combination of factors, poverty levels had steadily declined. From about 42% of the population, it has dropped to about one-fifth. The slowdown in the economy preceded by the winding down of the farm economy after the collapse of international commodity prices beginning 2008 had already started exerting economic pressures. The lockdown may just have tipped things over. Not only will it require enormous resources but it also poses a potential social challenge. The government has done well in earmarking 1.7 trillion as an interim relief package covering 60% of the population. However, if the poverty trend does set in as feared, then the fiscal effort would have to be substantially greater and sustained, causing that much more strain on the exchequer. It is also a no-brainer that the government will simultaneously have to ready a stimulus package to revive the rest of the economy, the benefits from which could also accrue to the bottom of the pyramid. Already a debate has broken out over the quantum of the stimulus. Like in the case of lives versus livelihood, the authorities will once again face another trade-off challenge: provide direct resources to the struggling units in the formal economy, or instead work closely with small and medium enterprises to engineer a quicker economic recovery and spread the social gains. A clearer picture will emerge over the next 10 days, once the health authorities have a better prognosis of the spread of covid-19, especially if the lockdown succeeds in flattening the curve.

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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