An air of relief afforded by the gradual reopening of India’s economy after the entire country went into lockdown for 68 days, as spring turned to summer, could slowly be giving way to another pall of gloom. Imposed first for 21 days on 25 March and then extended thrice, that shutdown was unable to flatten our curve of coronavirus infections. So, it made sense to unlock, as we did in June. Spooked by swelling caseloads, however, state authorities have been falling back on the tried, tested but mostly failed strategy of confining people at home and halting almost all activity outside of it. A prickly patchwork of local lockdowns is firmly in place. The other day, the Karnataka government ordered Bengaluru shut for a week, just as Maharashtra locked the key industrial belt of Pune-Pimpri-Chinchwad for 10 days, along with some adjacent rural areas. On Sunday, Uttar Pradesh (UP) barred weekends. Such localized curbs exist in at least 10 states. They directly impact just over a third of India’s people, but their knock-on effects on supply chains threaten our entire economy.
The Pune-Pimpri-Chinchwad zone is an automobile cluster, for instance, with a sprawl of vehicle and component makers. Bajaj Auto, Mahindra & Mahindra, Tata Motors, Volkswagen, and Mercedes Benz are among the companies with operations there, besides thousands of small enterprises. This disruption alone may have thrown an entire sector out of gear. Similarly, UP’s Noida-Greater Noida cluster, which was under a weekend lockdown, has smartphone makers such as Samsung, Oppo, Vivo and LG. In general, sudden orders to stop assembly lines have made it virtually impossible for managers to rely on production plans and thus achieve targets. Today, classic ideals of efficiency seem like cruel jokes. Just-in-time management, which insists on no input lying idle and everything coming together by clockwork exactly when needed, turned into a magic elves’ tale at the very onset of the corona outbreak. Now, as myriad restrictions push production chains into uncertainty and local permits are needed even for trivial things in big output centres, executives worry about a throwback to the era of “just-in-line" management. Trouble looms over other aspects of business, too. Corporate finances have got squeezed, sales have lost predictability, and demand in most markets will likely be in for a prolonged slump. Whether localized lockdowns are effective against covid-19 remains unclear, given the country’s patchy record on this front, but their adverse impact on economic processes is amply evident.
Like any economy, ours is a complex web of inter-dependencies that span the country. The abrupt dislocation of a single link can cause havoc in other places and endanger value creation as a whole. The International Monetary Fund’s recent downward revision of its expectations for India’s output this year was based partly on the severity of our earlier lockdown. The Fund expects us to lose almost one rupee of every ₹20 generated as income last year. Without a coherent easing of curbs, we may risk losing more. To salvage the situation, we need far better coordination among states as they struggle to get the pandemic under control. At this stage, policy cohesion is a must. This may call for a big rethink of our national response to the covid shock. A proper analysis of the role of State interventions in stopping contagion flare-ups could help us rework our plans. Are State directives really more effective than individual incentives? This pre-1991 question has returned to haunt us.