What steps the government can take to restart the economy

The country is under lockdown for a month now. Since then, India’s economy has gone into the sleep mode. All of us, including policy makers, doctors and experts are grappling for some definite way out to overcome the Covid-19 pandemic.

There are voices in the media and industry against any further extension of the lockdown period. Some argue that the extent of impact of Covid-19 is far less in India as far as the number of deaths is concerned.

Even if we assume that number of actual positive cases is 20 times more than what is reported today, the number of corona-affected people flocking to hospitals and deaths thereof has so far been contained. This should be seen against our lackadaisical approach towards the lockdown and our attitude to ignore social obligations and commitments. Of course, there will be other views which suggest that we are nowhere near the peak – any relaxation at this point could actually lead to the pandemic going out of hand.

Whichever side of the debate we argue for, there is very little doubt that the lockdown has effectively brought the economy to a standstill. Therefore, any further extension has severe repercussions on the lives of millions of citizens, particularly the poor and vulnerable. It sounds like overcoming the Covid-19 death threat is potentially possible only at the expense of suffering and death from hunger and malnutrition. Instead, can we think of possible ways to restart the economy, albeit in a staggered manner, given all the precautions and safeguards in the form of compulsory masks, gloves, handwashing, cleanliness and social distancing are in place? Some of the options are already in practice – we need to formalise them. Here are some possible alternatives, including some suggestions:

1. Industry and offices should be asked to work with one-third of staff and let two-thirds work from home. Gradually this proportion should be increased to 50-60 per cent in three to four 4 months’ time. Feasibility of the older workforce working from home should be examined and given preference. All meetings, within and between offices, should be conducted online so that the pressure of business travel by flights is minimised. A large number of offices has already implemented a similar plan.
2. Wherever feasible, offices/industry should be asked to work beyond standard office hours with staggered timings.
3. Make a compulsory pay cut of 25 per cent for a quarter in the formal sector so as to ensure that there is no laying off of jobs.
4. Increase the working hours of banks, particularly for the cash transaction operations so that DBT customers are not affected. While doctors and health workers are fighting the war at the frontline, bank staff are the foot soldiers. Together they will eventually win the war against the Covid-19 outbreak.
5. Postpone the academic calendar of all schools/colleges/universities at least by a quarter. The outbreak has happened during the summer break – so some delay in academics can be adjusted. In the meantime, online classes, however sub-optimal, can continue.
6. All the restaurants should be allowed to open, but services should be restricted for home delivery or take-away only.
7. Run more public transport, including bus and local trains, with 1/3rd-2/3rd rule in place.
8. Ask every establishment/supermarket to take the responsibility of implementing social distancing rules.
9. Keep the rural economy fully functional to the extent possible so that basic agricultural and other economic activities are not interrupted. Restrictions must be imposed against gatherings in rural haats, tea shops and market places. Local administration including panchayats to play a significant role here.
10. Oil prices are at an all-time low. With subdued demand, inflation is expected to be subdued. However, acute supply constraints against dwindling inventory may put pressure on prices, particularly for urban consumers. Government must ensure such price escalations do not take place.
11. With low crude prices, the running and variable cost of domestic airlines is expected to be low. So opening domestic flights keeping the middle seat empty is a viable option. This will make social distancing possible for flights as well. Passengers may be asked to report three hours prior so that necessary checks can be done before flying.
12. Finally, liquidity provision and timely reach to the end consumers is vital. With limited fiscal space, RBI must come up with better alternatives for adequate liquidity provisions. Extraordinary times demand extraordinary measures. If provisions through banks are not working out for whatever reasons, options of liquidity provision to other non-bank financial entities may be explored. This is particularly important for the MSME sector.

By no means, are these the most exhaustive possibilities nor do they cover all economic activities. These are just some suggestions to ponder over.

The writer is Faculty, Economics Area, and Member, Misra Centre for Financial Markets and Economy, IIM Ahmedabad