Covid-19: Why Indian economy needs a comprehensive-complementary plan to recover

Deepanshu Mohan
Deepanshu MohanApr 12, 2020 | 10:54

Covid-19: Why Indian economy needs a comprehensive-complementary plan to recover

While one end of the C-C approach is a fiscal strategy for aiding an economy to recovery, the other end is a comprehensive public health response to the infected hotspots.

Two weeks have passed since PM Modi announced a 21-day nationwide lockdown. With less than a week to go for the lockdown to end, a few state governments have decided to extend it.

It seems clear that the three-week lockdown was lacking adequate preparation and notification. But, the consensus amongst public health experts remains on how it was a necessary preemptive measure to take at the time.


Necessary steps

A prolonged shutdown for the nation may seem unsustainable now. The PM’s Economic Advisory Chair, Bibek Debroy, presented a strong case for a graded economic (re)opening up while urging the government to make a decision on hard-data than on epidemiological worst-case scenarios.

The unemployment rate for the organised sector seems to have gone up three times (to 23 per cent) in less than a month and the condition of the unorganised sector, where there is a lack of any reliable data, is in deeper-jeopardy. Food supply chains amongst other goods and services remain broken and the price-effect of this may worsen if a shutdown is extended. What is needed at this stage is a comprehensive-complementary (C-C) plan for a medium-to-long period (unless a permanent vaccine is found). One end of this C-C approach requires a fiscal strategy for aiding an economy recovery — catering to all stakeholders of the economy. The other end requires a comprehensive (public) health response for Covid-19 infected hotspots and other areas. Both of these need to be planned and put into execution at the same time.

A far-reaching spending strategy that is designed in collaboration with the states for fast-tracking economic recovery can no longer be delayed. (Representative photo: Reuters)


On the fiscal front, a far-reaching spending strategy that is designed in collaboration with the states for fast-tracking economic recovery can no longer be delayed. Prof. Rathin Roy’s idea to have a GST-like Fiscal Council urgently to ensure a cooperative framework between States-Centre, and more importantly, ensuring that assigned outlays in public spending on targeted areas actualise into their intended outcomes, is critical.

The way forward

A calibrated plan with multiple fiscal incentives can help restore greater confidence in firms and investors, especially the SMSE segment. Devesh Kapur and Arvind Subramanian, in a recent column, offer a list of measures which can be considered as part of a macro-spending plan, while keeping fiscal-deficit scale in check. On the other end, comprehensive health-care response and strategy needs equal attention. For the economy to start recovering, and workers to become mobile, all states must keep the number of Covid-19 infected cases low and continue with an aggressive strategy to test, trace, segregate and treat.

So far, the states that assertively test more have been able to trace more positive cases and have been in a better position to segregate (and treat) the infected clusters. States like Maharashtra, Rajasthan, Kerala stand out. Delhi, Karnataka and Tamil Nadu are now making more localised efforts to ramp up testing. Other states must follow the pattern.


Maximising the use and decentralised allocation of two types of testing is essential in the months to come. The first test, which relies on the Polymerase Chain Reaction, or PCR, can detect the virus before a person has symptoms. This is acknowledged as one of the best ways to identify who is infected. The second test looks for the antibodies that the immune system produces to fight the virus. Since antibodies remain after the virus is gone, it shows who was infected in the past. Data from these results will help policymakers to make more informed decisions on which areas require longer isolation and more resources.

Comprehensive public health response to the Covid-19 pandemic is urgently required. (Representative photo: Reuters)

To ensure this, district hospitals across states must be equipped with these testing facilities. Establishing Covid-19 test centres across all districts can help ensure better accessibility to rapid testing for results. The same tests could be given to all essential workers, such as police officers, emergency technicians, and then to other critical workers, like pharmacists and sanitation staff. The next step would be to test people throughout India at random scales to get up-to-date information about who all are or were infected.

A new structure

This system requires resources and reliance on hard-data. For ensuring a one-stop financial resource centre for this effort, there must be a time-bound, government-owned special purpose vehicle: National Health Finance Corporation (NHFC). Allocations to NHFC can be assigned from the PM’s National Relief Fund. The chances of an economic recession leading into a depression will gradually come down if the fiscal-monetary measures are announced now. Firms, households will become mobile and restore economic activity and hard-data on testing-tracing shall enable better state-wide policy-interventions to isolate and treat affected clusters. This will also help improve the nature of public-private health capacity in many states over the longer run.

States with poorer public health systems can utilise this crisis opportunity to invest and transform their local health systems through greater public investment and provisioning of medical services. Therefore, to save lives, and avoid the economy from entering a depression, a C-C approach is critical for the PM to ensure a graded process of human mobility and sustain a credible (and urgent) path to economic recovery.

(Courtesy of Mail Today)

Last updated: April 12, 2020 | 10:54
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