Dr. T. Jacob John and Prof. Arun Kumar, discuss with G. Ananthakrishnan the priorities to mobilise the economy during the pandemic.
As the lockdown phase comes to a close, can workers return to their jobs safely?
Jacob John: The idea is to restart normal life, but at the same time mitigate the problems of the epidemic. There are some things that people have not understood. One is that this epidemic cannot be prevented. It will happen as this has been transmitted during ordinary social contact. What we can do is to slow down the spread, people talk about flattening the curve. Even that, for a country like India, with multiple epidemics all started at different time periods asynchronously, can only work in some places at some times, not all places at all times. Our goal should actually be to flatten the mortality curve, reduce the deaths as far as possible, and allow the epidemic to grow but at a slower pace than nature would have it. Our population density is high, we have to reduce the speed and our primary focus should be to reduce deaths. That should be the question when we reopen normal life, social and economic.
The time to expose workers safely was April 15. We knew then, the downturn [from lockdown] was very obvious but the epidemic was not being slowed down perceptibly. Between March 25 and April 15, the numbers grew 20 times. So we knew the lockdown was not perceptibly effective. That was the time we had to go back to the war room and change our strategy. But that was not done. The easiest way for the government was to extend the lockdown. To me that was uncalled for, unwise, unnecessary. We did not use that time to plan our responses efficiently. Looking forward, we have to come out of the lockdown as soon as possible, but be careful not to let the epidemic take off like a deluge.
Arun Kumar: As Dr. John pointed out, lockdown is needed to slow the pace of increase of the disease. The apex has to be brought down to the capacity that we have and use the time of lockdown to build the capacity for health to cope with the emergency that is going to come. We need testing, more hospitalisation capacity, more doctors etc. Lockdown gave you time only for that. It is not a cure. In the lockdown, production completely stops, demand also correspondingly falls because of income decline. So what you have is a situation where both supply and demand are affected, the economy comes down, and only essentials are produced. In my judgment only 25% of the economy was working, so you had a minus 75% rate of growth, about 200 million people lost work because 94 % of the employment is in the unorganised sector. That completely stopped as they did not have working capital, supplies. So 94% of the workforce has lost employment. Those in agriculture can continue, and in mining and rural areas can continue work.
The unorganised sector cannot carry on because they have very low income, low savings. They are living in crowded conditions so they cannot practise physical distancing, they don’t have clean water. The imperative of the lockdown was they should have been provided with food wherever they were, allowed to migrate if they wanted to, those left behind should have been decongested to school buildings, tents etc. Unorganised businesses should have been supported so they don’t collapse because of lack of working capital. This is what I call a survival package. Because if half the population - if 200 million lost jobs, that means 800 million people are below the poverty line with zero income. You are in a situation where you have to support the consumption of essentials for 800 million people, decongest them, boost capacity for testing, boost the capacity of hospitals, and prevent businesses from collapsing. As long as you don’t do this, lifting the lockdown would be dangerous. Because we don’t have testing, so people are moving around, and when they do that there will be a problem. Organised sector workers you can have factories where there are facilities, but not for unorganised sector workers to restart work. So we have to disaggregate our analysis, and then decide what it is that we can do. Lockdown is very essential to see that we do it in an orderly fashion.
If herd immunity takes, and 60% people get infected, then you are talking of 2% people dying of that, which would be one crore people. If five crore people need intensive hospitalisation, we don’t have facilities for that, we don’t have testing facilities for that either. The lockdown should have been used better, it wasn’t. The question is, what do we do at the moment.
There are interesting questions here of testing, how the lockdown was used, the potential infections and mortality. What can we do now?
Jacob John: I have a slight difference of opinion. I agree with the physical distancing. Our density of population is so huge that physical distancing is virtually not possible. Back to the lockdown...if it was successful in slowing down the epidemic, in the first three weeks of lockdown, there was justification in extending it by two weeks or three weeks. But the three weeks showed the lockdown is not slowing the epidemic - the numbers increased 20 times in 30 days. That is because lockdown in India is not the same as South Korea or some other place where population density is lower and discipline of people is better. So our lockdown was [applicable to] some people, not for all. Given that, the lockdown was not effective.
In early April, I came up with the logic and now it is fully supported by science in other countries that universal mask wearing enforced for every man, woman and child outside home is better than lockdown. That should have been our immediate strategy, but then making people wear masks, convincing people...the technical answer to that is we have a lot of asymptomatic people who are spreading the infection. If they wear a mask, they are blocking the respiratory droplets. But we don’t know who they are. If everyone wears a mask, then they [the asymptomatic] do too. In spite of wearing a mask, infectious people could spread some infection, because a mask is not 100% foolproof, tiny droplets may escape, fomite transmission [by objects getting contaminated] may take place. But that’s where the uninfected wearing masks may reduce the possibility of picking up the infection. With universal mask wearing you don’t have to be strict about all socio-economic activities coming to a standstill. But that should have been our strategy from April 15. Even now lockdown is not slowing down the epidemic. Infection is out of control. In the last week or so, we have a record number of infections. We are on a fast ascending curve - I put up the graph on speed of India and Italy - since April 1, these two graphs are parallel. So we cannot expect to reduce mortality [to] 2% or 3%, by lockdown. And yet, when you release people from whatever little leaky lockdown it had, you must anticipate that the epidemic will grow slightly faster. Lockdown means we are tying our hands, and the virus is growing. We have to strike a balance between these two difficult things - a rock and hard place. So that is why we need to revive our economy. If the purpose of fighting the epidemic is for the welfare of people it should be for all people. Lockdown may be helping the rich, not the poor.
Our goal has to be to flatten the mortality curve, reduce the probability of death in those who are vulnerable. We know who is vulnerable - those over 60 or 65 years of age, those with chronic diseases, lung diseases, heart disease, hypertension, diabetes...We have to have a policy of protecting them from infection, not everybody. Younger people have no risk of life. So if you can reverse quarantine these vulnerable people, you could allow the real world outside to continue with the epidemic and protect people who are vulnerable, until the epidemic turns downward. That I predict is going to be between July first week and August second week. Lots more people will get infected even in the downward turn, so the reverse quarantine of the vulnerable should continue until the epidemic reaches the bottom line, which will probably be November-December or early 2021.
What are the concerns for the economy for productivity, with such special requirements and the contraction?
Arun Kumar: We don’t know enough about this virus. We thought children will not be affected but in New York City children are being affected. We thought the young will not be affected but data is coming in that those between 25 and 50, they are also dying in large numbers. We thought heat may prevent it, BCG may prevent it, but none of that has happened. So we should be careful about lifting the lockdown because it would affect a large number of people. If death takes place in large numbers there will be a societal breakdown. That’s why I say lockdown was not properly implemented.
The economy is down because supply is disrupted, and demand is gone. Demand means that consumers will not go out and continue to buy at the rate at which they used to earlier. Incomes are way down. Unorganised sector is down and also the organised sector is closed. RBI data in October last had suggested that consumer sentiment was already down. Capacity utilisation in industry was down to below 70% as per October data and now it is down to 25%. Indicators like the PMI Index show that activity is way down compared to nothing else before. So you are not going to have investment, consumption arising, and the unorganised sector cannot start work, and that is 30% of your production. Only agriculture and some essentials can work.
Even if you lift lockdown, it is not going to revive economic activity immediately because consumption will not revive, so demand will not. Investment will not revive, therefore demand will not revive. Only the government is spending, but it is going to lose massive tax revenue. My estimate is that the economy will not recover to January 2020 levels for several years because we are into a deep depression. It is not going to be a V-shaped recovery, it is going to be a shallow U-shaped recovery. But suppose very optimistically we go back to January 2020 in a year, then the average rate growth from (-)75% to 0% means we will have a (-)37.5% rate of growth of the economy. If the rate of growth is (-)37.5%, Tax to GDP ratio will become half of what it was earlier. It is easy to see why. GST collections largely come from non-essential goods and sin goods, those in 43% bracket, 28% and 18% brackets. Essentials are in zero per cent or five per cent brackets.
Businesses have been closed for two months so Corporation Tax will drop sharply, Income Tax will drop. So Tax to GDP ratio will fall from 16% to 8% and because GDP would have fallen from Rs. 204 lakh crore to Rs.130 lakh crore, the tax collection will come down from Rs.32 lakh crore last year to Rs.10.5 lakh crore. So you will lose Rs.22 lakh crore in taxes, plus now there are additional expenses to take care of poor people. Suppose 800 million have fallen below the poverty line, they need support, and that will cost you at least Rs.15 lakh crore of additional funds. So therefore, the fiscal deficit which was already running high, because the economy was slowing down in January 2020, that fiscal deficit will jump to 52% of GDP, unless cuts are there in other expenses. Government may have to cut salaries, cut defence expenses, and other expenses. It will not have the resources to boost the economy.
We need to see how to spread the income. Poor people have to survive, they need to be decongested, small and microbusinesses have to be helped to survive. Big business is facing problems, how they will survive, and the financial sector will be in crisis. RBI will have to adjust them somehow, the government will have to, by giving them capital. Postponement of loans and interest payment only deferred the day of reckoning. If you defer your EMI, you have to pay more later as interest is accumulating. You cannot write off the interest, because depositors will suffer and the financial system will collapse. Lifting the lockdown is not going to revive the economy.
In a modern-day economy, even during war, demand doesn’t go away. Here demand is gone, supply is a problem.
Jacob John: If you listen to Arun Kumar’s argument, I would say the argument is very strongly for reopening the economy as early as possible. It is a disturbing, dismal picture. We may have to repurpose some of our demand-creating approaches. Listening to you, we need to do that, so that they are part of the solution to the new situation.
On the health problems of the young, they are extremely uncommon. Media picks up a child who died here or a child who died there, but overall, we know so much about the virus behaviour, who it affects, the pathology, because we were fortunate as one of the last countries to have our epidemic grow, two months behind the European countries. We have an occasional example of a child getting infected and dying, but by and large, our mortality below 45 or 50 is extremely low, something that we can live with, and we have to accept that reality. Mortality will be very high in the upper age group and many of the business leaders, manufacturing company leaders are people who may be obese, may have diabetes, may have chronic diseases, and they and the senior citizens are the most vulnerable. Their morality goes into 10%, 15% or 20% whereas childhood mortality is going to be 0.1%. We have to strike a balance.
Probably, we have to strategically repurpose our economy for a short time. Perhaps never go back to the one-family-three-cars culture of the past, we have to learn a little bit of self-restraint, and distinguishing between what is essential and what is luxury, that kind of thinking will have to come into our culture.
Let poor people be socially interactive and productive and begin earning income to spend on essential things. Manufacturing should be on such things. Today, why are masks not available widely? We could repurpose all cottage industries to make millions of masks to ensure that everybody has half a dozen masks - of cloth - so you change your mask every four or six hours, wash and dry. That is the essential thing today, to protect my life.
Don’t worry about the younger generation. The more they get infected, the slower the epidemic is going to be later. We will reach our herd immunity threshold by July. Whatever you do, it will happen between July and August. You may tinker, a week or two weeks by heroic measures, through lockdown, Is it worth it? From the epidemic point of view, I doubt that.
We have not yet created infrastructure to test who all have the infection and who had it in the past? How can you assess who has the antibodies without the test?
Jacob John: Yes. If you want to be technically correct, yes. You can do IgG antibody, ICMR has approved NIVs kit, Biocon in Bengaluru has made a kit two or three weeks ago, and we hope that will be approved. You can do mass-based survey or individual antibody detection and anybody with IgG antibodies should be released from restraint but they should wear a mask. You cannot exempt anybody, but those individuals can boldly go around and do whatever economic activities they have to do without risk of infection or transmitting. Yes, antibody studies have a role, but they are not ready to roll it out to make a difference in our relaxation of the lockdown.
What would the components of a health survival package for workers be today?
Jacob John: The very word survival reminds me of the fact that we want to prevent COVID deaths. And if preventing COVID death...at the same time, death due to other causes, don’t we care about that? The package should benefit everybody, particularly low income groups. Economic and health packaging for everybody. People don’t have coronavirus infection but they have so many other problems that are not being attended to. Since we don’t have a robust registry under the health management system under every disease and death, health management systems don’t capture this. Without knowing what the health problems are today, the non-COVID problems, I am not able to think of a survival package in terms of health care.
I have an NGO that helps poor people with tuberculosis. The referral centres tell me that during the lockdown, no new TB tests are being done. That means there will be a huge backlog of people with suspected TB to be tested when lockdown is released. And TB kills far more people than any other disease. The focus on preventing coronavirus deaths should not be a mindset in which other deaths are accepted. That strategic balance is the government’s job, for all people, poor, middle class and rich.
On social determinants of health, we have not focused on that, and that is being exposed by the coronavirus.
Arun Kumar: You are absolutely right. I agree with Dr. John on masks, incomes for people to survive. What he is also pointing out is that our public health system is broken, not able to take care of the poor. For instance, rural and semi-rural areas have very poor facilities, and as the disease spreads there, the death rate could go up. What we needed to do was focus on building up our health infrastructure rapidly - doctors, nurses, testing. We have never paid attention to social infrastructure, on education, health, drinking water, etc and that’s why we are facing the problem, and could not implement the lockdown. Unlike China which could implement and control it and within three months there were no reports of fresh disease. It is because of the failure of governance, that we could not implement the lockdown better. We are paying for what we have not done for the past 70 years. I see the divide between the organised and unorganised sectors. The organised sector can use technology and work from home, but the unorganised sector does not have access to technology, or the capital for it. We need to rethink our social structures, the nature of work, why people have to work in uncivilised conditions, unorganised workers have no protection.
Now that people have gone back to the villages we need to provide the MGNREGA scheme in a very large way. We need to start an employment scheme in urban areas. If we are going to remove the lockdown, there’s a new set of work that has to be done. We need to have the opening up in a calibrated way, [so] people are prevented from dying and they have income and essentials. Agriculture produce is not able to move out, so prices have collapsed in rural areas but in urban areas because there are food shortages, prices have gone up.
The reaction to surplus labour has been to weaken whatever laws were available and make it less empowering for workers. What’s your view?
Arun Kumar: At the moment, since business will work at 25% or at most 40% of capacity will mean there’s a lot of surplus labour. The idea that we will have a 12 hour working day is not going to work. They can try to change labour laws, but at the moment that will not bite. All that it will do is deteriorate the condition of labour, create inequality and the demand problem will accentuate further. I don’t think what they are thinking is right. We are not going to recover to January 2020 quickly. The nature of production, the way people are working, will change. We need to factor that in, when we think of labour and land law changes.
It [policy] has changed the definition of MSME. It is now making small and medium also micro, but micro is nothing like small and medium. All the benefits will go to small and medium, but not to micro and the micro sector employs 97.5% of labour in MSME. We need to disaggregate policy and plan better.
Retail, malls, cinemas, hospitality, are badly hit. From a health standpoint, is there a reasonable time frame when they can get back on their feet?
Jacob John: I have some strong views on that. This coronavirus has made us all sit and think, inwardly and outwardly. This moment in history may not come in centuries, maybe. We need to think of health management and governance. We need socio-cultural thinking leaders as never before. In practical terms, I see great potential in red, orange and green zoning of districts, not because of zoning but to manage their own relaxation of lockdown.
Districts can have task forces representing major players, industry, agriculture, institutions available and can they open up, [with] standard operating procedures that they should develop for themselves and know exactly what to do if some person has fever etc.
It should not be one size fits all. District-level management of the lifting of the lockdown can leave a legacy for tomorrow, in terms of economy, health, social issues etc. We do need long term plans made - Arun said about the broken health system - it has been broken for 60 years. We have never addressed it with any seriousness of purpose.
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We always took the easy way out. Let the private sector play [we said], not realising that the private sector is essentially a profit-motivated sector and if you give a human right like health to a profit-oriented sector, we are asking for trouble. It is time now to look at every aspect of democratic governance in our country and remodel what we want for the future. This is the opportunity. One good thing is that people have now become aware of microbial causation and social determinants of disease, the need to cough or sneeze with a napkin, not to spit in public. We must perpetuate this with good governance.
The major failure of the government was to use this opportunity for effective social behaviour modification, education. Because the coronavirus demands all of this.
Sectorally and in terms of economic philosophy, how do we go forward, for growth, employment and social development?
Arun Kumar: I agree with Dr. John on giving districts greater opportunity to decide, but we need to tighten up governance. We see in many cases policemen demanding bribes when people [migrants] are walking etc. We need to tighten up public delivery of services. Education, health, drinking water...the disparities that are growing must be checked. Today our policies are elite-centric. It is not as if e-commerce can take care of everybody’s problems, maybe the middle class.
Regarding travel and tourism, it will come down dramatically for the moment, it may not take place for two years, Incomes will be down, and so people will spend on essentials.
The airline industry is facing huge problems, the hotel industry, restaurants, malls...therefore property prices will fall. About 30% of businesses could fail. Their property will come into the market. The stock market is going to decline and the wealth effect will mean real estate prices will decline. Consumption of well-off sections will decline. It will have a widespread impact.
The most important thing is, how does the voice of the unorganised get into policymaking. At the moment, it is like a police state. The whole thing is top down, the voice of the people is not there. The Opposition is decimated, it is unable to raise the concerns of the marginalised sector, the migrants who are moving in desperate conditions. Why can’t we get the Army out, and move people wherever they need to go. The Army is there, police is there, school buses are there. We are not concerned about the poor, and the unorganised sector. Today everything is under lockdown and there is a police raj. We need better governance and accountability.
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Can the government not access funds moved out of India to tax havens to meet some of its requirement for capital to spend on development at this time?
Arun Kumar: The capital that goes out does so using a process called layering, it moves from one tax haven to another. So the government is unable to track it. But the government should not allow more money to go out. These days wealthy people have a huge crisis. They are not going to bring their money back, due to risk averseness. They will use that money to support themselves. In the worst situation they will go abroad. In the last six years, 23,000 high net worth individuals have gone abroad, they have taken their wealth. We cannot tap that.
The real question is how to revive investment within. The investment in China, can it come to India? At this point, when globally everybody is running at a loss, no investment is going to come to India that easily. Our own investment is not going to increase due to huge capacity underutilisation. We need to see how to increase demand. Black income generation has also gone down substantially, because when overall production goes down, so does black income.
Jacob John: Arun Kumar, can I ask about value addition of agricultural products as an income generating, wealth creating process. Abroad, you can buy dried fruits. We throw our jackfruit away but you buy dried jackfruit in Thailand. We can have a lot of cooked food, buy off the shelf, heat it and you can eat. Will that work in economic terms?
Arun Kumar: I keep saying we have to disaggregate between the organised and unorganised sectors. The unorganised sector does not have the incomes to buy these high value added items. They can only buy low value items. We need to give them food first. There is malnourishment of 40%. But yes, food processing is important, so spoilage does not take place. Whether tomatoes, vegetables or fruits. That kind of value addition will help as it will help move them. At the moment, when food prices in rural areas collapsed and have risen dramatically in urban areas because of shortages, we are unable to stock them and there are reports of their rotting in the fields. We need to have an extended procurement and extended PDS. Whatever farmers are producing should be procured and should be supplied in urban areas. We can use public buses, school buses, Army trucks to do that.
The government is talking about a one lakh crore package for agro industries, that we have been talking about for a long time. Why are we not able to do it? There are a lot of things to do with credit, with policy.
Mobility is essential to the economy. Both from an economic and public health perspective, how can we provide safe transport in the future?
Jacob John: Once a vaccine becomes available, hoping that it will be available in the not so far future, then vaccinations should be taken more seriously than we have taken up in the past. Until that happens, the opening up of the travel sector has to be very carefully planned and slow growth allowed. Until that happens, I would strongly recommend that everyone wears cloth masks in trains and in buses. If everybody has a mask, physical distancing is not very important, you can sit in ordinary seats, not overcrowded. If you regulate seating, there is no reason people cannot travel safely. There must be hand hygiene available, as you get into the bus, someone gives you hand sanitizer, and when you get out, you hand sanitise. You are wearing masks all the time. Some discipline and behaviour change has to come in.
The kind of mass pilgrimages that we are used to should not be allowed until the whole thing settles down and we know where we stand.
Perhaps we should encourage bicycles and do some trips by walk?
Jacob John: Most definitely. That will do more good than we realise. Bicycling and walking. When we were children we walked two kilometres to school or college. Today when we go to the corner to buy something, we take a car or two-wheeler. That has added to our diabetes, obesity, hypertension. All those can be mitigated by more physical activity, not going to the gym and having sterile physical activity but physical activity with productivity at the end of it. These are all in need of rethinking. We need cultural leaders to guide our society.
Arun Kumar: I think we need a big rethink on consumerism and location of people in relation to their work, public transport and public services. If people lived close to their work, so much travel would not be required. We need to rethink the nature of urbanisation, the location of the rich in one area, and the poor in another area, far away from factories. Our roads and cities have to be replanned. Governance has to be more democratic and decentralised.
Jacob John: I would like to add.. there are profit-motivated schools and hospitals. People travel long distances, twenty kilometres from one end of town to the other end to that school, people from that school area will travel 20 km in another direction. We waste time and energy for not being able to organise neighbourhood schools and hospitals where you have the right of admission. That requires a lot of governance. You can’t have different standards of schools and hospitals where people can choose. If I fall ill, is there a rightful place where I can say, “Doctor, I am ill. Please take care of me.” He will say, “Who are you, why are coming here? Go to some other hospital.” I don’t have a place where I am registered, like many other countries where you have to be registered with a health care agency. Some kind of radical thinking has to come on redistribution of facilities.
Arun Kumar is the Malcolm Adiseshiah Chair Professor at the Institute of Social Sciences; T. Jacob John is retired Professor of Virology, Christian Medical College, Vellore.