Lockdown – The critical trade-off between lives and livelihoods

It was almost a foregone conclusion that the lockdown will be extended. Most of the states wanted it and the Centre was apparently not having a different opinion either. The virus was literally a bolt from the blue and the alleged lack of transparency of the Chinese authorities definitely aggravated the situation. The jury is out whether the mistake was inadvertent or intentional. That sounds immaterial as of now as the damage has already been done. Ironically, the complacency of many an economic and medical superpower of the world did a lot of disservice. The entire world is now spending sleepless nights trying to combat this invisible enemy which is highly contagious with no straightforward and pinpointed treatment as of now. The stress on the healthcare system is unprecedented with unmanageable patients being required to be sent to hospital and many of them requiring intensive care treatment where beds, ventilators, doctors, paramedics and other healthcare infrastructure are proving to be insufficient. Till the time an effective treatment or vaccine for the disease is in sight, social distancing through imposed lock downs seems to be the preferred temporary solution.

Experts say countries which took recourse to travel restrictions and lockdown at the appropriate time did reasonably well in containing the dreaded disease and accordingly imposition of lockdown has become the new normal. However, the economic impact of such restrictions is huge and far reaching. The economic hardships arising from a lockdown is very cruel on a section of people which consists mainly of daily wage earners, construction workers, casual employees and workers from unorganized sectors. It also affects those industries which become a direct victim of the lockdown such as construction, tourism, hospitality, real estate, aviation, manufacturing and most of the professional services. There are job losses, pay cuts, halt on Government expenditure on development and terribly weak consumer demand.

The trade off between lives and livelihoods is one of the toughest decisions that one has to make in such a situation since it affects precious lives on the one hand and equally important issue of providing livelihood on the other. It is simply a potential grave choice between ‘jaan’ and ‘jahan’. Needless to say, it is a double edged sword. A lockdown, which gives a lot of respite to the administration and the medical fraternity to wage a fight on the medical front, lacks purpose if it cannot provide equal, if not more, support on the economic front.

A section of the people in India favours a complete lockdown with no relaxations whatsoever. Possibly they think that most of the people have the financial cushion for the next 6 months or for them public health is of utmost priority leaving aside everything. Yes it is true that from a healthcare perspective, there is no second opinion about the utmost importance of lockdown. Others advocate calibrated and area centric relaxations with a view to providing economic respite to the poor and support the manufacturing and service sectors which have been badly hit by this crisis. These people think that till now India have handled the crisis reasonably well and therefore is in a position to go for some relaxation while strictly following the safety protocols.

In the first phase of the lockdown, the Govt. used a three pronged support package where apart from announcing various relaxation on the taxation compliance front, it tried to alleviate the economic hardships of the poor through free provision of additional foodstuffs, cooking gas, direct cash transfer to accounts, increased wages under MGNREGA, relief to construction workers, payment of first installment to farmers and ex-gratia payments to poor senior citizens, widows and disabled for the next 3 months, total cost of which to the exchequer was stated to be about 1,70,000 crore rupees. It was supported by the Central Bank announcing a 3 month’s moratorium on payment of EMIs and reducing the repo and reverse repo rates to inject liquidity into the system.

However, this support would not be sufficient in view of the extended lockdown and further support or stimulus will have to be announced. It is beyond debate that the economic scenario is absolutely gloomy now and is almost at a standstill which needs a hard push to restart. The Govt. now needs to support mainly three segments of society and business – the poor and marginalized, the unorganized sector including SMEs and the big industries. A reasonable amount of direct cash transfer to the needy would be of temporary help to them. Allowing the farmers harvest the Rabi crop and sow the Kharif crops would put some purchasing powers in their hands. It would however remain a challenge to provide the requisite support to the unorganized sector and the SMEs. This segment is even finding it difficult to pay salaries to their employees and start-ups are the first casualties. They require restructuring of their loans with a lower rate of interest and moratoriums to save them for insolvency. This is a policy matter and by doing so, the Govt. does not spend anything directly from its kitty right now but give them some breather. Export Oriented Units would simply lose foothold as the importers would search for alternatives. This segment also provides livelihoods to a huge number of migrant workers who are simply out of job now and prolonged unemployment may make them edgy. In addition, sector specific support as well as stimulus will have to be provided to organised sectors also otherwise in the worst case scenario, India may even face contractions in the economy. That may even encourage the predators to buy Indian companies at throwaway prices.

The moot question is where the Govt. finds the fund for this support or stimulus? The tax collections are not encouraging. Does it mean Govt would resort to external borrowing or mint money? Would there be budget reallocation? Would fiscal deficit go for a six? By the way, the current year Union Budget has lost relevance for all practical purposes and a budget where about 52% of the allocations are fixed and cannot be changed; there would hardly be any scope for maneuvering. Minting money is being advocated by many of the economists although minting money has some limitations and come with side effects.

All said and done, there is no doubt that lockdown is the toughest trade-off between lives and livelihoods. It is literally a challenge for the policy makers to decide between health pandemic and extreme economic stress. Balancing ‘jaan’ and ‘jahaan’ is indeed a challenging job and combining both is the most testing. While the people in power take a tough call, armchair critics can just take a breather. We can thank ourselves that we are not in the hot seat. In hindsight, we can always have the liberty to find faults with whatever happening. Till then, let us keep hope.