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Photo: PTI
Photo: PTI

Opinion | Synchronize policy interventions for better outcomes

The Centre’s healthcare and economic measures must be in tune for us to avert further hardship

With over 5,100 total nationwide reported cases of covid-19 as of 8 April 2020, India currently appears to be at the lower end of the distribution of countries affected by the novel coronavirus pandemic. However, the epidemic curve has steepened over the last few days, with the number of confirmed cases rising rapidly—and fatalities lag cases, as we know from international experience.

The biggest challenge is to prevent the community spread of the disease. Recent forecasts suggest that by the end of May, assuming social distancing is strictly observed, India could see between 100,000 and a million cases. At the upper end of this range, Indian healthcare infrastructure will be close to being overwhelmed. Hospitalization rates, conditional on infection are between 1% and 3% for those in their 20s and 30s, and up to 18% for those in their 80s, according to credible peer-reviewed research from Imperial College. The median age in India is 27, so at a million cases, there will be roughly 30,000 hospitalizations. India has 800,000 hospital beds, of which 80,000 are intensive care unit beds, and only about 40,000 of these have ventilators. These figures assume that private sector capacity will be commandeered—which is as it should be—by the government if the situation warrants it.

Social distancing slows down the rate of transfer of the virus between hosts, decreasing the number of patients hitting the healthcare system at any given point in time. Without it, projections indicate that India would face over 5 million cases by May. Grim choices then confront the nation—an overwhelmed healthcare system would struggle to handle normal morbidities, and spiralling death counts for reasons not only to do with covid-19. In this view, there’s no clear trade-off between public health and economic objectives; right now, they are the same.

Faced with the current scenario, an integrated strategy that deals with economic incentives to achieve public health outcomes is critical. Since 23 March, a lack of synchronization of economic and public health policy has generated challenges for the lockdown. In the first few hours after its announcement, the nation witnessed widespread panic-buying and crowding (leading to increased transmission opportunities), as ambiguity about the availability and access to groceries and medicines spiked. We have since seen unprecedented flows of reverse migration of workers back to rural areas. This worrying trend creates multiple opportunities for community transmission and spread of the disease, and more importantly, causes enormous suffering for workers. Those far from home, perceiving no economic cushion to protect them from the shutdown, decided that it would be better to retreat to the safety of their community networks.

Policy uncertainty over economic relief packages has played an unusually big role in these scenes. For instance, a first package of measures was announced three days after the lockdown on 26 March. The liquidity package announced on 27 March was four days post-lockdown. And a full six days after the lockdown, on 29 March, the government created empowered groups to assess the disease, rehabilitation, and supply of essentials. This seems swift relative to normally glacial processing times, but now, every hour is vital, and the perfect synchronization of announcements is critical. It is worth recalling from the 2017 Reserve Bank Of India Household Finance Committee Report that liquid financial assets account for less than 5% on average of Indian households’ wealth, which is substantially lower than comparable countries—meaning that a significant fraction of households, especially those at lower points in the wealth distribution, are simply unable to weather even a few days without income.

Unless there are enormous transfers made to support the public health strategy of a lockdown, financial incentives mean that households will leave their houses or retreat to their communities to generate income or access networks for survival. The need of the hour is to provide income support for all workers to justify compliance, and to incentivize corporations to keep workers on their payrolls. India currently plans to spend less than 1% of gross domestic product on fiscal stimulus measures. In comparison, China is spending roughly 3%, and the UK roughly 15%. India needs to spend more to support the massive expenditure needed on temporary hospital sites, ventilators and personal protective equipment for healthcare workers.

Overall, while the government has taken prompt action to enforce social distancing, the concern is that the timing of interventions on the economic side are asynchronous with public-health interventions. This will have consequences for public health and the economy, unless there is greater synchronization, complementing health directives with economic incentives to prevent hardships arising from lockdowns.

Such incentives will reassure citizens, especially those with low income, that they can eschew work opportunities knowing they will be provided for. Redistributive measures that promote economic solidarity at this time of crisis will result in better health outcomes for all. In sum, India needs to spend more and focus on synchronizing this spending to achieve the best possible public health and economic outcomes. Anything less could cost the country dearly.

Tarun Ramadorai and Marcus Ranney are, respectively, professor of financial economics at Imperial College Business School and a business professional in health and technology

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