The lockdown in Maharashtra and curfew in Delhi as well as some other states is likely to be a setback to the country’s overall economic recovery. The retail sector along with the restaurant and hospitality industry that had been witnessing a gradual return to pre-pandemic activity levels is facing yet another slide-back. The manufacturing sector has already reached a seven month low in March, according to the IHS Markit Purchasing Managers Index (PMI). The latest set of curbs on economic activity are expected to worsen the situation, even though double-digit growth is still expected for the rest of the current fiscal.
There is a sense of fatality among the general public in accepting the new restrictions, given the severity of the second wave of the Covid virus. The fact is, however, that state governments have not played their due role in ensuring that basic protocols are observed in public. Markets have been opened and crowding has been visible for several months in most states. There is apparently little effort at ensuring that shoppers wear masks and observe social distancing in popular markets.
Instead, there is a move to catch the easy targets of people in cars not wearing masks. Even the courts have given the mandate that lone drivers in vehicles wear masks which is an unexceptionable directive on the grounds that cars are also public spaces. The only anomaly is that there may be hundreds of persons walking around on the same streets either without masks or with masks hanging on their chins. Not to forget the absence of social distancing in a maha Kumbh or in political rallies in all the poll-bound states.
It would have been in the fitness of things for state governments to have clamped down on these issues right from January onwards, rather than taking draconian measures now that will hurt the livelihoods of millions of people. What is worse is that it will be business as usual for the police which had treated the general public with disdain during the lockdown last year. Transporters and delivery workers will become targets for venality and corruption. Small factories that have to work on a continuous basis require workers on a shift basis throughout the day and night. These are the people who will have to face the wrath of enforcers as they try to go about their business with the ubiquitous e-passes.
Maharashtra is the worst affected state as shops, restaurants, gyms and salons have also been closed down. Rough estimates are that there are 5 million workers in the retail sector in Mumbai alone and there are 1.2 million shops. This is apart from the millions who work in the hospitality industry as well as other establishments. Most of these are contractual migrant workers who have no savings to fall back on especially after the difficult year gone by. What is the social safety net for these workers who are once again adrift as shops and restaurants have been closed, is the question that needs to be asked to state authorities.
The situation, fortunately, is not likely to be as bad in cities like Delhi where shops will remain open. But traders are rightly pointing out that purchases are carried out late in the evening during the summer heat, for which reasons shops are normally open right up to 10 pm. In the current scenario, shops will have to close by 8.30 to give employees enough time to reach home before the curfew sets in by 10 p.m.
Several other states have also imposed night curfews either in districts or selected cities. These include Punjab, Odisha, Gujarat, and Rajasthan. The impact of the curfew will be greater in an export hub like Jodhpur than in others. Extension of curbs on movement in this industry centre could affect exports of furniture and handicrafts which have just recently seen a revival.
An encouraging sign, however, is that despite the Covid surge and the prospects of an economic setback, the International Monetary Fund has raised its growth forecast for the current fiscal for India. From 11.5 per cent earlier, it is now projecting growth of 12.5 per cent despite the resurgence of the virus. This will make India the fastest growing economy in the world and the only one to achieve double-digit growth after the pandemic in 2020. China, on the other hand, is expected to grow at 8.4 per cent in 2021 and 5.6 per cent in 2022.
While this is surely good news, it must be tempered by the fact that India’s economy was also among the worst hit in 2020. Growth collapsed by 24 per cent in the April-June quarter of 2020-21, though it recovered somewhat subsequently. The last fiscal is thus likely to end with a contraction of eight per cent. Hence the high growth in the current financial year comes on an extremely low base. No wonder that the IMF does not expect the country to get back to pre-pandemic levels of economic activity for quite some time. In contrast, China recorded positive growth even during the year of the pandemic and will continue on a high growth path in 2021 as well.
The IMF chief economist, Gita Gopinath, is also reported to be concerned over the absence of direct income transfers to those at the bottom of the pyramid by the Indian government. While commending the budget for its focus on capital expenditure, she has said in interviews that there is also a need for revenue expenditure in the form of income transfers to those who have been badly affected by the pandemic. This need will become even greater after the regional lockdown in Maharashtra and curfews in several other states
It is high time for state governments to focus on measures that are scientifically proven to contain the spread of the coronavirus. These are primarily ensuring most of the population goes about its work wearing masks properly, make handwashing a priority and ensure social distancing in all public places. In addition, they must ramp up RT-PCR testing and contact tracing. These are steps that experts say will contain the virus till the country reaches herd immunity. The other measures of lockdowns and curfews are temporary band-aids that can only have an adverse effect on the livelihoods of the general public. Health and economic well-being need to be considered together in formulating policies in the near term.