View: Why spike in cases actually shows India must unlock

Many would argue that this commentary is injudiciously or perhaps even insensitively timed – just when India is seeing a worrying spike in covid-19 cases, there goes a journalist from a business newspaper wittering about opening up the economy.

We would humbly argue that this is absolutely the right time to ask for unlocking India – because the spike in infections is showing that our response to covid-19 should not be about confining it to some impossible minimum, it should be about managing it to a handlable limit.

There are two parts to this argument. One, the economy is at breaking point, and further district magistrate/local cops led economic regulation will produce horrifying outcomes, regionally and nationally. Two, it is possible to fashion a better covid-19 response that’s more economy-friendly.

The first point is easily made. ET’s pages over the last few weeks have carried dozens of data points, analyses and news reports on the unfolding economic crisis – a once in a century economic crisis, as fellow columnist Swaminathan Aiyar called it.

GDP growth may be negative for 2020-2021, a catastrophic event in a country with millions of poor people and small businesses. In job markets, we are witnessing the perverse simultaneity of growing unemployment (14 crore already jobless) and rising wages, as industry struggles to find replacements for back-to-village migrant labour. Lost output may be already Rs 15 lakh crore and is climbing. You get the picture.

As almost all non-government analysts and their asymptomatic uncles have argued India needs a throw-the-fiscal-rules-out stimulus. The only way, as ET’s data analytics, editorials and columnists have argued, is to print money, and ignore what credit rating agencies may say.

The fear that printing money will create macroeconomic instability down the line is based on the assumption that the government will be unable to roll back the stimulus in time and/or that the cash that comes in will be “misused”.

These are not unfounded fears. But they avoid the central question: should a government not help millions of its citizens and businesses facing never-before-levels of distress simply because it is scared it may not be able to manage a large stimulus? In those terms, the answer is clear.

Of course, the economy has to be opened up if a large stimulus is to work properly. Arguments that the stimulus should be timed with proper unlocking is correct. And that’s why it is crucial that we open up the economy after May 17, with few, micro exceptions (of this more later). If governments extend lockdowns because covid-19 cases are going up, even the most generous stimulus won’t get the bang-for-buck.

It is imperative therefore the lockdown ends in 10 days. And with it the Disaster Management Act is also withdrawn. With the DM Act in force true national unlocking will never happen because local authorities can scupper any big plan.

But what about spikes in infection, assuming the trajectory witnessed over the past week carries on. India may hit 100,000 covid-19 cases or more as the economy opens up, and the number may climb further.

That’s the second part of our argument. We can have a better covid-19 response that also economy-friendly. First, and as the Delhi government is reportedly planning, reduce the unit of epidemiological focus to wards, not districts. That will restore most of supply chains nationally and free up almost all major production hubs.

Second, use a large chunk of a big stimulus package to further upgrade emergency medical infrastructure – build makeshift but well-equipped hospitals, give doctors, nurses, paramedical stuff substantial extra pay for covid-19 work, increase procurement of safety gear manifold by generously incentivizing domestic producers.

In short, build up a huge capacity for medical response by spending lots of cash, and get that cash from printing money. Is this undoable? Beyond the capacity of the Indian state? No.

It’s a question of deciding that we will do what it takes to boost the economy and manage the crisis. It’s a question of deciding that we won’t look at covid-19 as an enemy to be vanquished but as a problem to be managed. It’s a question of removing district magistrates and local cops from their current starring roles in economic management.

We do not know when covid-19 will peak. It may be end-May, June or even August, as some experts said. We therefore have to learn to manage it. But we do know that the economy has hit rock bottom. We therefore have no choice but to rescue it. It’s that simple.