The Hindu Editorial Analysis
27 March 2020

1) Standing with the needy: On coronavirus lockdown package


  • CONTEXT:
  • ₹1,70,000-crore relief package was announced by Finance Minister Nirmala Sitharaman on March 26 — Pradhan Mantri Garib Kalyan Yojana (PMGKY).
  • It is a good first step towards alleviating the distress caused to vulnerable sections of the population by the 21-day lockdown imposed to combat the spread of the coronavirus (SARS-CoV-2).
  • ALLOCATION TO VARIOUS SECTORS:
  • What is noteworthy about the package is not the amount but the innovative ways in which the government is seeking to offer relief.
  • It covers various sections of the vulnerable, ranging from farmers and women Jan Dhan account holders, to organised sector workers, to the most important of all — healthcare workers, who will now get a sizeable insurance cover of ₹50 lakh.
  • The doubling of foodgrain allocation offered free is a good idea that privileges the hungry poor over rodents and pests devouring the stocks in Food Corporation of India godowns.
  • So is the move to provide free cooking gas refills to the underprivileged who are part of the PM Ujjwala scheme.
  • The offer to pay both employer and employee contributions to the Provident Fund for very small business enterprises is welcome.
    • It will offer relief to those businesses that have been forced to shut down operations, and also to employees earning small salaries for whom the PF deduction may hurt at this point in time.
  • The salary limit could have been set higher at ₹25,000 per month — there’s no cash outgo for the government anyway because this is just a book entry transaction.

  • FUNDING WITHIN BUDGET:
  • The effort appears to be to keep the funding within the budget as much as possible and retain control over the deficit.
  • For instance, the PM Kisan transfer has been already budgeted for and the increase in MGNREGA wages can also be accommodated within the budget.
  • Ditto with the Jan Dhan account transfer of ₹500 per month for the next three months which will cost the government ₹30,450 crore.
  • It is possible to argue here that the transfer could have been a little more generous — at least ₹1,000 a month.
  • The government may have wanted to stay within the budget for now. It could also be to preserve firepower, as there is no saying how long this uncertainty will last.
  • But, at some point soon, the government will have to break the fiscal deficit shackles. Also, it needs the financial bandwidth to support businesses in trouble.
  • In fact, ideally the government ought to have announced a relief package for the corporate sector and the middle class along with the PMGKY.
  • It should now turn its focus towards businesses that are running out of cash and may soon default on even salaries and statutory commitments if relief is not given.
  • There are enough ideas to borrow from others such as the U.S. which is in the process of finalising a $2 trillion package.
  • CONCLUSION:
  • Part II of the economic relief package should not be delayed beyond the next couple of days.
  • The relief package is a good start, but more might need to be done sooner than later.

 

2) Terror unlimited: On Kabul gurdwara attack


  • CONTEXT:
  • The attack on a gurdwara in Kabul on March 25 killed at least 25 people, mostly members of Afghanistan’s persecuted Sikh minority.
  • ATTEMPT TO REVIVE FORTUNES:
  • This is a barefaced attempt by the Islamic State (IS) to revive its fortunes in the country at a time when it is politically divided and the peace process is hamstrung by the Taliban’s continuing violence.
  • The IS, which is concentrated in the eastern parts of Afghanistan, carried out several attacks in the past targeting the country’s minorities.
  • But, in recent months, the jihadist group suffered setbacks in the wake of sustained military operations by both Afghan and U.S. troops.
  • In some parts, the Taliban had also attacked the IS, as the insurgents, who are tribal Islamist nationalists, see the latter as a threat.

  • INTERNAL TURMOIL:
  • But the war-torn country’s security situation is as fluid as ever.
  • It now has two governments, one led by Ashraf Ghani, who was declared winner of the September presidential election, and the other by Abdullah Abdullah, who has disputed the results and formed a rival administration.
  • The peace agreement reached between the Taliban and the U.S. failed to bring any halt to violence, with the insurgents and the government not being able to reach an understanding even on a prisoner swap.
  • Besides, the country has also seen a jump in the number of SARS-CoV-2 infections, with the Herat Province, which shares a border with Iran, emerging as the epicentre. The attack couldn’t have come at a worse time.
  • ATTACK ON MINORITIES:
  • Afghanistan is notorious for violence against its minority communities.
  • The Hazara Shias were brutalised during the Taliban regime in 1996-2001. Most Hindus and Sikhs, once spread across the country in hundreds of thousands, have fled the country.
  • With the resurgence of the Taliban and the fear of the insurgents taking over Kabul and undermining the Constitution, which at least in theory guarantees rights to all communities, the remaining minority groups are already in an abandoned state.
  • By attacking the gurdwara and an adjacent housing complex, the IS has not just terrified the country’s minorities further, but sent a message to the Afghan authorities that it remains a potent security threat.
  • CONCLUSION:
  • Afghanistan has too many problems, ranging from terrorism to the breakdown of the administration, which demands absolute resolve from the government.
  • But, unfortunately, the country’s political leadership appears to be concerned less about resolving any of them than about keeping power.
  • The leadership should realise the magnitude of this crisis, and take a united approach to tackle it.
  • It should kick-start the peace process with the Taliban, fight the IS cells more aggressively and work towards at least ensuring the minimum rights of its citizens guaranteed by the Constitution.
  • However, the IS attack is another reminder that there is no end to the Afghan violence in sight.

 

3) Safeguarding the vulnerable among us


  • CONTEXT:
  • The human dimensions of the COVID-19 pandemic reach far beyond the critical health response.
  • All aspects of our future will be affected — economic, social and developmental.
  • Our response must be urgent, coordinated and on a global scale, and should immediately deliver help to those most in need.
  • From workplaces, to enterprises, to national and global economies, getting this right is predicated on social dialogue between government and those on the front line — the employers and workers, so that the 2020s don’t become a re-run of the 1930s.
  • IMPACT ON ECONOMY:
  • The International Labour Organization (ILO) estimates that as many as 25 million people could become unemployed, with a loss of workers’ income of as much as $3.4 trillion.
  • However, it is already becoming clear that these numbers may underestimate the magnitude of the impact.
  • This pandemic has mercilessly exposed the deep fault lines in our labour markets. Enterprises of all sizes have already stopped operations, cut working hours and laid off staff.
  • Many are teetering on the brink of collapse as shops and restaurants close, flights and hotel bookings are cancelled, and businesses shift to remote working.
  • Often the first to lose their jobs are those whose employment was already precarious — sales clerks, waiters, kitchen staff, baggage handlers and cleaners.

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  • WEAK SAFETY NETS:
  • In a world where only one in five people are eligible for unemployment benefits, lay-offs spell catastrophe for millions of families.
  • Because paid sick leave is not available to many carers and delivery workers — those we all now rely on — they are often under pressure to continue working even if they are ill.
  • In the developing world, piece-rate workers, day labourers and informal traders may be similarly pressured by the need to put food on the table.
  • We will all suffer because of this. It will not only increase the spread of the virus but, in the longer-term, dramatically amplify cycles of poverty and inequality.
  • We have a chance to save millions of jobs and enterprises, if governments act decisively to ensure business continuity, prevent lay-offs and protect vulnerable workers.
  • We should have no doubt that the decisions they take today will determine the health of our societies and economies for years to come.
  • Unprecedented, expansionary fiscal and monetary policies are essential to prevent the current headlong downturn from becoming a prolonged recession.
  • We must make sure that people have enough money in their pockets to make it to the end of the week — and the next.
  • This means ensuring that enterprises — the source of income for millions of workers — can remain afloat during the sharp downturn and so are positioned to restart as soon as conditions allow.
  • In particular, tailored measures will be needed for the most vulnerable workers, including the self-employed, part-time workers and those in temporary employment, who may not qualify for unemployment or health insurance and who are harder to reach.
  • FLATTENING THE CURVE:
  • As governments try to flatten the upward curve of infection, we need special measures to protect the millions of health and care workers (most of them women) who risk their own health for us every day.
  • Truckers and seafarers, who deliver medical equipment and other essentials, must be adequately protected.
  • Teleworking offers new opportunities for workers to keep working, and employers to continue their businesses through the crisis.
  • However, workers must be able to negotiate these arrangements so that they retain balance with other responsibilities, such as caring for children, the sick or the elderly, and of course, themselves.
  • Many countries have already introduced unprecedented stimulus packages to protect their societies and economies and keep cash flowing to workers and businesses.
  • To maximise the effectiveness of those measures, it is essential for governments to work with employers’ organisations and trade unions to come up with practical solutions, which keep people safe and to protect jobs.
  • These measures include income support, wage subsidies and temporary lay-off grants for those in more formal jobs, tax credits for the self-employed, and financial support for businesses.
  • But as well as strong domestic measures, decisive multilateral action must be a keystone of a global response to a global enemy.
  • CONCLUSION:
  • In these most difficult of times, I recall a principle set out in the ILO’s Constitution:
  • “Poverty anywhere remains a threat to prosperity everywhere.”
  • It reminds us that, in years to come, the effectiveness of our response to this existential threat may be judged not just by the scale and speed of the cash injections, or whether the recovery curve is flat or steep, but by what we did for the most vulnerable among us.

 

4) How can India contain the economic impact of COVID-19?


  • CONTEXT:
  • The COVID-19 pandemic has effectively brought normal life to a halt in India.
  • The importance of social distancing and a lockdown in curbing the spread of the virus cannot be stressed enough, but these measures also have huge repercussions on livelihoods and the economy at large, which has already been seeing a slowdown over the past year.
  • In a conversation moderated by Vikas Dhoot, Naushad Forbes and M. Govinda Rao talk of ways in which India can tackle this humanitarian and economic crisis.

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  • Do you see a parallel in recent history to the situation we face globally due to the novel coronavirus?
  • Govinda Rao:
  • This is the mother of all challenges in recent memory. The International Monetary Fund (IMF) says that the 2008 financial crisis comes close, but I think this is much bigger than that.
  • Possibly, one has to go to the times of the Great Depression. Even qualitatively, it’s a very different challenge, because first you have to save lives, then you have to save livelihoods, then you have to meet with other costs like loss of jobs and production, and supply chain disruptions.
  • It’s not just confined to one sector or country; it encompasses the entire economy and the world.
  • So, I think there is no immediate policy instrument that you can put in place because you don’t even know how long the problem will last.
  • The depth of the problem that you are going to face is dependent on the length of the period for which you are going to close down and the extent to which the virus spreads.
  • Naushad Forbes:
  • Every country is either already deeply affected or is at the start of being more affected.
  • This is unprecedented in terms of its immediate impact on the lives of individuals from all walks of life.
  • We have a few additional factors in India: an economy which relies very heavily on informal employment, so our reliance for people’s well-being on the broader economy performing and the markets performing is high, whatever role the state may try to play.
  • And anything that you change in the functioning of the economy has unintended effects.
  • We sometimes have, I think, a tendency to act and then plan. I worry about that. For example, on Saturday, all manufacturing companies in Pune were told to shut down.
  • On Sunday, all trains were stopped. And on Monday, all companies were told, ‘Look, you must keep supporting your staff and contract workers.’
  • Now, the sequence should have been the reverse: first, you work out which companies will ensure support for everyone across the board and how. Then you stop the trains so that you contain populations [moving].
  • And then you close the actual sources of employment. If you do it in the opposite sequence, you end up with what we saw on Saturday and Sunday, which is thousands of people crowding into train and bus stations, heading out of town, potentially spreading the virus across the country.
  • This is obviously an unintended consequence.
  • We sometimes act first without going into what we actually want to achieve.
  • The way to achieve ‘social distancing’ is not to announce something which then brings suddenly crowds of people together in a panic [but] to do something for their own security, well-being and longer-term success.
  • A little bit of thought before we act would really help.
  • Over the last few days, both the formal and informal sector have come to to a virtual halt. Lakhs of truckers are held up across States and most manufacturing firms have shut down. How will this impact our output and incomes?
  • Naushad Forbes:
  • Everything’s come to a halt. The lockdown is the right thing to do for the country. From everything one reads, [we get the idea that] a lockdown is the way to ensure social distancing and contain the virus.
  • How do you then limit the economic impact and who do you need to buffer the impact for? Without question, it is the people who are most vulnerable, those who live from day to day and have no savings to fall back on.
  • Then you look at medium to small companies with very limited staying power. The only way they can actually survive is by not paying people. You don’t want that to happen, otherwise you’d spread that distress in the economy.
  • You need to address their concerns, either through moratoriums on principal and interest payments or direct salary support, as we’ve seen happen in the U.K., Switzerland and France, to ensure some employment is sustained.
  • Then you need to extend it to larger labor-intensive companies if they employ 20,000 people and if they don’t have enough money to pay salaries next month we’re going to see something rather critical happen within a week.
  • Govinda Rao:
  • One of the biggest problems in the system is the capacity of the state to deal with the problem. The reaction that we have is a knee-jerk reaction. Today, you cannot worry about issues such as fiscal deficit.
  • You have to save people’s lives. There is a 21-day lockdown and redistribution is a major issue. Thankfully, you have a much better targeting device [Jan-Dhan accounts and Aadhaar] than before. Augmenting the state’s capacity... I don’t know how you’re going to do it.
  • At 8 p.m., the Prime Minister says we are closing down for 21 days, and everyone runs to the shops and panics. Couldn’t this have been done in a smoother way?
  • One could have said essential supplies will be available — simply saying there’s a lakshman rekha outside your house, that really scares people.
  • The immediate issue is to focus on health, which we have never done, and see how you can establish the public health system. And the second is livelihood issues.
  • Regulatory compliance deadlines have been extended, but non-performing asset recognition norms remain 90 days (of defaults). Would you say this regulatory forbearance is sufficient?
  • Naushad Forbes:
  • It’s a classic case of ‘necessary but not sufficient’. These are all the right things to do.
  • You can have regulatory forbearance and extend regulatory forbearance for returns that have to be filed, but if there is some question on whether you will survive long enough to file your returns, then you need to address that.
  • If we start by recognising that we have very limited state capacity, then we can think about how to get the desired outcome with an assumption of limited state capacity.
  • For example, I would like to see a massive publicity campaign on what social distancing means and why it’s important to do. Regardless of what announcement comes, people should know not to crowd outside a shop together.
  • And if my action in announcing something is going to prompt just this, let me first send out all the reassurances that grocery stores will be open.
  • The government has said that, but if you read the actual notification, it doesn’t say how groceries will get to homes.
  • There are some vague references to it being delivered. That sounds to me like a horrendous task to take on if state capacity is limited... delivering groceries to 1.3 billion people. Instead, rely on people going and doing the right thing.
  • So, you say, ‘grocery stores are going to be open and here are the rules under which people can go and buy groceries.
  • Grocery stores can decide for themselves if they wish to be open 24 hours. We will allow a maximum of so many people per square foot.
  • We are counting on the grocery stores themselves to maintain this for their own health.
  • We will encourage everyone not to go in a group.’ You can specify all of this ahead of time and reassure people that there’s going to be no issue.
  • There has been a lot of clamour for shutting down the stock markets.
  • Govinda Rao:
  • A lot of things can now be done at home with online trading. To the extent that crowds can be avoided, it is important. But that doesn’t mean that you should shut down the stock market. It is a barometer... in the immediate context, it may not tell you what your economy’s doing if something is happening the world over. But you don’t kill the messenger, it gives you a message.
  • Three weeks from now, what would be the best-case scenario for us to be in?
  • Naushad Forbes:
  • We should, by the way, do some scenario planning for what’s the best- and worst-case scenario and what’s in between.
  • For those scenarios, we must have action plans in place that are transparent so people can prepare accordingly.
  • The best-case scenario to me is that the three-week lockdown delivers. We shouldn’t expect the rising trend of cases to change for a minimum of 10 days before a successful lockdown can have an effect (because of the gestation of the virus).
  • The best-case scenario is that 10 days from now, we start seeing a flattening of the growth rate. A few more days later, we see the curve starting to turn down.
  • Then we can say the lockdown is working, now how do we start working towards recovery. We should put those plans in place now.
  • We will not go back to normal from day one, where everyone can do whatever they wished.
  • Can all manufacturing start again? Does everyone show up at work all at once?
  • If you have the curve pointing down sharply, maybe 50% can come back and we’ll see for another two or three weeks how that sustains.
  • Shops can open again, but with limited operations and all the social distancing in place. You probably should not allow anything which involves mass gatherings of people even in the best-case scenario.
  • So, you’re not going to have large conferences, movie theatres, sports stadiums. Those will come last. I really think there’s a lot of value in this plan being as transparent as possible.
  • Govinda Rao:
  • The first thing that the government will have to do immediately is massively ramp up testing. We have not done enough testing as yet and do not know the magnitude of the problem.
  • Even if you take the best-case scenario after three weeks, this will be different in different places.
  • You may have to look at differential relaxations in a calibrated and transparent manner and say that areas with these trends can allow some of these activities.
  • My own feeling is that after 21 days, there will be some areas where you can have economic activities without much movement, and restrictions will have to continue elsewhere.
  • But we should be prepared for the long haul. Life is not going to be easy.
  • My big concern is about children not going to school. Some from well-off families may learn on the computer, but what about those children who cannot go to school, can’t play, or do anything.
  • About 40% of the population is in the age group of zero to 14. We really have a crisis brewing there.