While India fights the spread of coronavirus (COVID-19) at all fronts, the economic cost of the disease has already set alarm bells ringing. Prashant Girbhane, director-general, Mahratta Chamber of Commerce Industries and Agriculture talks to The Indian Express about the fight against the virus and the economic body blow it can deal later on.
Excerpts from an interview:
What is the current state of the response to COVID-19? Is the impact on the economy being dealt with?
World Health Organisation (WHO) has recently pronounced India’s leadership in effectively dealing with the coronavirus spread, at least thus far. The proactive, decisive and coordinated steps taken by the Centre, state and local governments are indeed praiseworthy. Health workers, administration and police must be deeply appreciated. People at large have been cooperative towards the effort of the government and administration while recognising that even more needs to be done to support these. While human lives are important, so are livelihoods. The economic slowdown and part-shutdown have impacted many livelihoods. This health crisis has caused a great economic crisis across the world.
What is the impact on the world economy?
The United Nations Conference on Trade and Development (UNCTAD) says this slowdown could cost close to $1 trillion to the global economy, which was otherwise expected to rise above that of last year but is now expected to be in the recessionary zone of 1 to 1.5 per cent, as per rating agency S&P Global. While the Chinese economy is expected to grow at 2.7 to 3.2 per cent, the Eurozone economy is expected to contract by 0.5 to 1 per cent in 2020 and the US is already almost in a recession.
How are different countries responding to this?
Understandably, the response has been quick and timely from different parts of the world. Stimulus packages of trillions of dollars have already been announced by governments and multilateral agencies. While the UK has announced a $ 38 billion stimulus, China has put together a $28 billion package. World Bank has pledged $14 billion and the International Monetary Fund (IMF) has demonstrated readiness with a $50 billion emergency fund.
What is the impact on the Indian economy?
While India’s COVID-19 cases are lower than that of most G20 nations and the efforts are timely, it isn’t the same with China and Europe. This has meant disrupted supply chains with a sizeable negative impact on our exports. According to Asian Development Bank (ADB), the impact of COVID-19 on the Indian economy could be anywhere up to $30 billion. Most economists and rating agencies have forecast India’s growth to be closer to 5 per cent as against 6 per cent as projected before COVID-19. With every passing day, even 5 per cent is looking optimistic. While the almost 50 per cent drop in crude oil prices from the recent peak will boost the GDP (gross domestic product) by around 1 per cent (depending upon how long crude oil prices stay at this level), negative impact on incomes and consumptions could bring this down by approximately 2 per cent.
Recently (on March 15), the US Federal Reserve cut interest rates to zero. Did Reserve Bank of India miss an opportunity in its recent meeting (on March 16)?
The global response in managing the economic slowdown and almost certain recession has been to take some swift steps. China has already taken steps to reduce tax burdens on small firms. The US is expanding its food assistance programme. South Korea, France and Japan are giving wage subsidies. Given the nature of this impending recession that has its roots in supply shock, most economists have understandably argued for more fiscal action like the above-mentioned, where the government needs to loosen its purse strings. Monetary action alone will not be sufficient on this occasion. Also, most economies like that of the European Union and other European countries do not have much space for monetary action with already near-zero rates. Whatever space it had, the US has used most of it by bringing the benchmark interest rate to 0 to 0.25 per cent along with a significant quantitative easing/stabilising (a way to loosen monetary policy when rates are already too low) worth $700 billion to top that. Fortunately for India, given the record low prices of crude oil and lower inflation, there is space for some monetary action (rate cuts) that is more than announced by the RBI governor on Monday. We are hopeful of seeing it well before the scheduled monetary policy committee meeting in April.
Would RBI action on rate cut work?
That’s necessary but not sufficient. More is needed. Like the Chinese and UK central banks, the regulator must instruct the lending agencies to provide a limited moratorium period towards loan repayments and reduce late fee charges. This is especially useful for more than six crore MSMEs (medium and small enterprises) that contribute to 30 per cent of our GDP and 45 per cent of manufacturing exports but are facing major challenges due to these disruptions.
What should the priorities of the government be in this situation?
In addition to the owner promoters and employees of MSMEs, those who work as contractual staff or on daily wages are being impacted the most. The government needs to work in coordination with the private sector to ensure that there are no supply constraints on healthcare, including virus sample collections, testing, isolation wards and medical equipment and consumables. For daily wage earners, BPL (below poverty line) families and small farmers, it needs to provide more through the public distribution system and leverage JAM (Jan Dhan Yojana+Aadhaar number+mobile number) for direct cash transfers.
Pune is known for its large number of MSMEs. What will the impact on them be and what more can the government do?
Indeed, Pune is one of the largest MSME hubs in India and, unfortunately, the impact will be negative and they need best possible support. For the MSMEs in Pune and across India, there is a need to provide for higher credit limits, relaxation on NPAs (non-performing asset) and delayed payments for the defined limited time. The lowest hanging fruit on this tree is the dues by PSUs (public sector undertaking) that run into lakhs of crores. Swift action on this front will certainly reduce impending liquidity woes. The time for large-scale fiscal stimulus is now. We may take a cue from other affected countries; the UK has announced a $420 billion lifeline for corporates, France will guarantee 300 bullion euros worth of loans. These interventions are 5 to 15 per cent of their respective GDPs. During these uncertain times, it’s even more important that the backbone of business transactions, the GST (Goods and Services Tax) system, provides additional bandwidth to reduce, rather than eliminate long-pending irritations on tax filing and refunds. While the entire economy is hit by this epidemic, some sectors that are affected more than others, including tourism, pharmaceuticals and automotive, do deserve special attention from the government as well as RBI. Of course, while putting together the package to deal with the economic downturn of the epidemic, we also need to take into account lessons learnt from managing the post-2008 slowdown. State-owned banks used their discretion and pressures from other stakeholders to lend to sectors and firms it wanted to favour and that created foundations for the credit crisis that ensued. In these trying times, while lives and, hence, healthcare is of utmost importance, the second most important thing will be to plan for mitigating disruptions in livelihoods. That planning will need the same proactive, decisive and coordinated alacrity that healthcare is receiving.
City may lack crucial element in fight against outbreak: not enough private ambulance drivers
As the city gears up to intensify its fight against novel coronavirus (COVID-19), it may face an unexpected stumbling block. Private ambulance services across Pune are likely to be hit as scores of ambulance drivers, many of whom hail from neighbouring towns and villages, have been leaving the city amid the COVID-19 scare.
Gopal Jambhe, secretary of the Pune District Ambulance Association, said they are able to manage only two calls per day with resident drivers, but are not well prepared for when the situation worsens and more calls come in.
“In 90 per cent of the cases, the pressure is from the (drivers’) families. The representation in media and the messages circulating on social media has created a sense of fear, as Pune has become a focal point of COVID-19. Additionally, with the janata curfew announced on Sunday, many of our drivers have left for their hometowns. Several of them come from places like Aurangabad, Parbhani or smaller villages around Pune district. Some, however, have stayed back as they wish to fulfill their moral duties,” he said.
Currently, while the average calls for private ambulances is limited to two or three, Jambhe said with fewer drivers, they will not be able to cope if the situation worsens. “For now, the owners and resident drivers who are here are managing the load shift-wise. If we have, say, 10 ambulances and four drivers, we can attend to maximum four calls. But if the number goes up to eight, sadly, we will not be able to do much,” he said.
He also pointed out that due to the lack of coordination between public health authorities and private bodies, they are unable to offer required help. “This is a time when we need to come together to provide our services. The authorities should have made access to N95 masks and sanitising material easier for people involved in healthcare, even the private ones. Since there is a lack of supplies in the market, it is quite possible that the remaining drivers might leave as well since the situation is of deep concern and we can’t ask them to stay back,” said Jambhe.
He said the association has reached out to the Ambulance Help Rider, Pune, a volunteer group which helps give way to ambulances stuck in traffic.
“We are a volunteer group of over 750 and are generally involved in easing the way for ambulances or attending to any blood donation required. Now, the situation is such that there are ambulances but no drivers and the Ambulance association has approached us for help. We have coordinated with them and will have our volunteers, who can be ready for service,” said Prashant Kanojia, president of Ambulance Help Rider, Pune.
Jambhe said the association has asked all resident drivers to ‘work from home’, under the government’s guidelines. “We had asked the drivers to park their ambulances in their private property space or garages and come to duty when the call comes. The vehicles are sanitised after every trip that is made. It is standard protocol,” he said.
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