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Photo: PTI
Photo: PTI

Opinion | Hit the reset, it’s time to look at a pandemic budget

Public policy will need to start reflecting mitigation steps against covid-induced risks

Last week, the Union government extended the programme to distribute free foodgrains to 800 million citizens by another five months to November; this is estimated to cost the exchequer, already committed to bankrolling a 1.7 trillion relief package to mitigate the impact of the covid-19 pandemic on livelihoods of the poor, an additional outgo of 90,000 crore. In a separate development later in the week, the Kerala government increased fares of public transport by 25% to stem mounting losses as the pandemic kept most people off the roads.

The two developments, seemingly unlinked, are actually different sides of the same coin: they reflect the fiscal shock and consequences accruing from mega disruptions like the covid-19 pandemic. It forced the government to implement a nationwide lockdown to contain the spread, knocking the bottom out of the economy. Not only did revenue receipts shrink to record lows, expenditure commitments skyrocketed as both the Union and state governments rushed to protect both lives and livelihoods. The fiscal shock has been unprecedented.

If this was a one-off event, it would be cause for worry, not despair. Unfortunately, what we are discerning is a risk pattern, of a kind we have known but never acknowledged. Consequently, this kind of risks will have to be assessed, priced and factored into public policy -- something very similar to what individuals have begun to do to cushion against a health shock emanating from the growing incidence and spread of non-communicable diseases.

In short, public policy in countries, particularly India, will need to start reflecting mitigation measures to cushion against risks arising from this ‘new-normal’. Easier said than done. It means junking the accepted mindset and retuning public policy to embrace a new paradigm.

Remember covid-19 is just one among many emerging threats. To cite a few: extreme weather conditions have started occurring in frightening regularity (According to the Centre for Research on the Epidemiology of Disasters, extreme weather incidents have begun to spike, from 71 in the 1970s to 224 in the 1990s and 350 in the first decade of the millennium.), terrorist attacks are commonplace and last but not the least, countries need to fear getting into prolonged low-intensity conflicts with troublesome neighbours (like what India has ongoing with Pakistan on the Western border).

It is tragic that it has taken a once-in-a-century pandemic originating in Wuhan, China to put the spotlight on this trend of growing risks from such disruptions. Covid-19 has unequivocally demonstrated that geography is no defence in a globalized world against vector-borne infectious diseases. In the last two decades, we have had two pandemics and three epidemics sweep the world—an average of one outbreak every five years. Not only are they causing increased morbidity and mortality, the economic damage is accruing through multiple channels -- exactly why they are so devastating.

In the Indian context, the challenge is that much more acute. The legacy of public policy neglect of the last seven decades means the country is bereft of any worthwhile social or economic infrastructure—leaving both lives and livelihood extremely vulnerable to such unpredictable risks. Consequently, that much more heavy-lifting will have to be required to pull the country up by its bootstraps.

In the short run, there is no option other than continuing to fund social safety nets—like providing free foodgrains—for the poor and vulnerable. But in the medium to long term, the country has to explore the option of hitting a mindset reset and prioritizing delivery of basic health, social and economic infrastructure—the best safety net for people to absorb the first round impact of disruptions like covid-19—even while creating a risk cover to deal with a mega disruption.

Undoubtedly, this crisis offers an opportunity laced with risk. On the other hand, status quo is no answer; the response has to be proactive and not defensive.

Prime Minister Narendra Modi has earned enormous social capital by winning back-to-back general elections; he has also shown appetite to pursue out-of-the-box solutions. The big question is whether he will expend his social capital on such a big bet. Only time will tell.

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

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