R Srinivasan

It’s time for some hard decisions

R Srinivasan | Updated on April 29, 2020 Published on April 29, 2020

A graded exit is neither a workable solution for the economy nor for tackling the pandemic

We are now approaching the end of the extended lockdown period. With just a few days to go, though, there is no sign of a clear exit strategy from the lockdown. The Centre is shifting between trying to run everything on a command-and-control fashion to placing the burden of decision-making on to the States.

The States, which are in the vanguard fighting the pandemic, have fewer doubts. Most States — particularly the ones grappling with large outbreaks, like Maharashtra, Gujarat, Delhi, Tamil Nadu — and those who are now facing a rising trend, like Madhya Pradesh, Uttar Pradesh, Telengana and Karnataka, have all more or less indicated their intention to extend the lockdown.

Dismal state

While some States made good progress in creating Covid isolation facilities and in beefing up intensive care facilities, others are so far behind that some analysts estimate that with the current rate of addition of new cases, the top eight most burdened States will run out of Covid isolation beds and ventilator facilities by as early as the middle of May.

And then there is the critical lack of facilities — Uttar Pradesh has only 29 beds per lakh population available in public facilities, Bihar just 17; while even in the better-equipped South, the numbers range from a high of 123 beds per lakh population in Andhra Pradesh to 100 in Tamil Nadu and a low of 92 in Karnataka.

Given these abysmal numbers, most States are pretty clear that they would rather deal with the economic consequences of an extended lockdown later, because the imperative to avoid the immediate threat of a Covid catastrophe is much more pressing.

Graded lifting

The Centre, meanwhile, has indicated that States can consider a graded lifting of the lockdown, allowing economic activity to start in ‘green’ zones, where either no infection or new case has been reported for 28 consecutive days. Limited activity can be resumed in ‘orange’ zones — where the cases are doubling in more than four days — while lockdown will continue in ‘red’ zones, identified as districts with the highest case-load, contributing to over 80 per cent of cases in India, or to more than 80 per cent of cases for a State, or with a case doubling rate of less than four days. As of April 29, there were 129 red zones in the country.

The trouble is, that even if an industry falls in the green or orange zones, it does not mean that it will be back to business as usual. I am not even talking about the restrictive guidelines in place for manufacturing facilities allowed to open — only 25 per cent of staff per shift, social distancing on the shop floor, staggered meal breaks, sanitising premises and so on — but of the fallacy of considering any manufacturing industry, no matter how big or small, as a standalone entity which only needs a bureaucratic green signal to start being productive again.

For starters, it is not enough if one business is in a green or orange zone and is allowed to restart, for work to actually start happening. For it to restart, all its suppliers and vendors must be similarly situated. The supply chain must work for raw materials and components to come in and finished products to be evacuated. It is also equally necessary that all its staff are themselves living outside containment zones and have access either to personal or employer-provided transport to reach the workspots. With the number of containment zones topping the century mark in most of our metros and large cities near manufacturing hubs, that is a highly unlikely possibility.

Cash problems

Then, there is the question of money. Most businesses in India (other than telcos, internet providers, hospitals and largely ‘prepaid’ sectors like education) have done little or no business since the first ‘janata curfew’. That’s more than a month with zero cash flow.

On top of that, most business have been unable to collect on their receivables, whether from the government, other businesses, or customers. This means that they have stopped paying the bills they owe to others. The extent of the problem is reflected in the fact that, as this paper reported recently, the three entities who run the TReDS (Trade receivables electronic discounting system) have warned of defaults and written to the RBI for a 90-day moratorium on all receivables on the platform falling due in March and April.

Since TReDS was a key source of liquidity for MSMEs, and with banks showing little sign of pushing any of the RBI-provided additional liquidity into the hands of actual borrowers, there is a massive liquidity problem for businesses in general and MSMEs in particular. No cash, no work.

Then there is the not-so-small problem of selling their output. Automobile companies have drawn up elaborate plans to restart manufacturing, but their dealerships are shut and the pipelines already bursting with unsold stock (apart from the unsold BS-IV inventory, that is). They can’t keep manufacturing cars and trucks if there is no offtake. This is equally true of all sectors dependent on physical retail outlets. For those who retail through online channels, the recent flip-flop by the government on allowing ‘non-essential’ items to be sold by online retailers has pretty much sealed their fate.

On top of all this, there is the massive pressure from government on businesses to not lay off staff, not cut wages and to continue paying them. Most have managed to pay for March. April is another story. And by all indications, lakhs of organised sector employees will finally join the ranks of their unorganised sector brethren in looking at a ‘cashless’ future.

Clearly, this cannot go on. There is no point in pussyfooting around coloured zones and graded easings of lockdowns. It is swiftly becoming an all or nothing choice – do we unleash economic misery on virtually everybody, or do we take our chances with the virus?

Actually, that choice shouldn’t be that difficult to make. By spending just a little over 1 per cent of GDP on healthcare for decades, successive governments have already made that choice when it comes to other diseases — more than 1,200 people die every day in India of tuberculosis alone. Why should the coronavirus be treated differently?

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Published on April 29, 2020
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