COVID-19: The Micro and Macro Perspective of Pandemics
As we all face yet another pandemic, called COVID-19, at our homes in partial or complete lockdown, let’s try to evaluate the effects of this global health crisis on the Indian economy.
According to the World Health Organisation, it took 67 days to infect the first hundred thousand COVID-19 cases, 11 for the next hundred thousand and only 4 to get to three hundred thousand cumulative cases. As the figures unfold, the nations are fighting this pandemic with utmost cooperation. On the academic front, the theory of flattening of the curve has gained popularity, and so has social distancing.
Irrespective of the global health crisis we face today, the world economy was headed for a slowdown that has got aggravated in this particular case. Pandemics have a long way to come and go. The SARS outbreak mainly led to a reduction in service demand, interrupted production, a fall in investment and exports, increased unemployment and the deterioration of the fiscal and financial environment as a result of restricted flows of people. Our experience during SARS (2003) could have led to a better-prepared health facility at present. However, it did not make us completely invincible now, and it might not make us even in future. It leaves us with the hope of finding a cure to the novel coronavirus yet again.
Until then, here is an analysis of the micro-level and macro-level standpoints of COVID-19, and pandemics in general.
As several countries locked down, there was an emerging fear and panic in the people regarding their daily supplies, which is rational to have. To begin with, it led to people hoarding groceries, eatables and other essential goods. As the stores shut down, transportation curbed, and the supply chains disrupted, it restricts the availability of these essentials. There have been cases of shortages of toilet papers in the west. But for nations like India, where a large fraction of people is poor, this problem is further intensified. Moreover, most of them are casual labourers employed in the informal sector, who have now fleed to their villages with the outbreak of the disease. As they were daily-wagers, it is difficult for them to retain their jobs after we are back to normalcy. Depending on the extent their vulnerability, some would stay put to the rural economy for a while and others forever.
A massive migration to the rural areas would lead to a high rate of unemployment in the unorganised urban sectors, primarily in the Micro Small and Medium Enterprises (MSMEs) and the construction sector. And this effect will backlash even months after the pandemic ends. Another factor worth considering is the spread of the virus can intensify in the slums as people out-migrate from urban areas. We would only know about these positive cases if testing conducted extensively or a huge outbreak of symptoms reported.
Another sector hit hard is that of travel and tourism. With all flights cancelled an imposition of a travel ban, it is difficult for a tourist guide to earn his wage. In addition to this, even international trade is put to halt. Only the items of medical emergency make it through the borders today.
It is not a problem until the state can fulfil its food requirements with enough supplies. So is the case for India. Although our farm output is in surplus, disruption of the supply chain of the farmers’ market and the constant fear of maintaining hygiene in the consumers has led to this problem of misallocation of resources. In some time, there might be a food-riot in our country, which should be avoided in any shape or form.
Now is time for the government to step in and lay out a roadmap to overhaul the economy. With the use of schemes, like MNREGA and Jan Dhan accounts, cash should be availed to facilitate consumption of essentials. A Direct Cash Transfer to their accounts is the need of the hour. Layoffs should be prohibited and stringent action, maybe a fine, should be taken to implement it effectively. The migrants who lose their job must be provided with social security and helped to find new jobs. Moreover, small-scale entrepreneurs should be duly compensated.
A broader picture shows that the wheel of government expenditure, not consumption, investment or net exports, has to steer the economy out of this crisis. Fiscal policies like subsidies to poor, tax holidays to enterprises are required to support the economy. If need be, a monetary policy to boost the economy should be put in line. It would inject liquidity as well as ease the fiscal pressure by expanding the scale of financing and reducing the cost of capital.
On the social development aspect, there should be facilitation of not only hospitals but transportation too. Given that a large number of people migrate to rural areas, who are the potential carriers of the virus, district hospitals ought to have sufficient testing kits.
The only positive that one could find in this situation is less traffic on roads, leading to less pollution and a higher Air Quality Index. An environment crisis solved by a health crisis. It is an opportunity for governments to expend well on healthcare and better their access to the poor. Also, it is the time when NGOs team up to expand the reach of assured relief, food and medicines being the primary items of distribution, to the poverty-stricken.
The evolution of the coronavirus depends on the speed and breadth of spreading of the virus, the development of effective treatment plans, and the efficiency of the public health departments. Thus, it is highly probable that the pandemic could last into the second quarter as well. China, with its communism, has been victorious in spreading as well as containing the pandemic. India, with its democracy, should be able to do the same soon. The policy interventions and the response to its enforcement will naturally differ, even while fighting the same health crisis.
