13 APR,2020 | MEDC
An economic backlash (as is happening today) has the potential to create easily as much devastation in terms of ruining human lives as any medical crisis. Some of history’s biggest faux pas’ have been caused by policy inadequacies, intentional or otherwise. For example, the over two million death toll of the Bengal Famine of 1943 occurred not as much due to food shortages as due to disruptions in supply chains from farms to homes – basically, a coordination issue. What is novel about Covid-19 is not just its magnitude, but the fact that it is probably the first pandemic occurring in a truly globalized world, with unfettered movements of people, digital connectivity and social media. That is a double-edged sword, with hope and risk balancing out each other. Synchronised policy actions all over the world will have implications for the domestic economy that no one has yet fully understood.In this regard, India’s lockdown has to be carefully managed as there is a fear of the medical impact of the virus being dwarfed by its economic impact. Of course, there can be no compromise as far as public health is concerned, and the lockdown should be lifted only when there is compelling scientific evidence in favour of doing so. However, the lockdown should be lifted in stages, and in such a way that it minimizes the inevitable economic downturn. A social trade-off is involved in containing the medical and economic fallout of Covid-19, and that needs to be understood by policymakers.A range of policy responses are required both in the short term as well as over the coming years. In the short term, central banks need to ensure that an economic collapse is averted while the pandemic continues. In the long-term sufficient investment should be made in healthcare infrastructure, which is still in a fledgling state in India. We will need to use fiscal incentives (taxes and subsidies) to facilitate a shift of resources from the hospitality and leisure sector to the medical and biosciences sector. The fiscal deficit will rise in this period but we will have to learn to live with it, and take remedial action subsequently. All easy options are now exhausted.
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