In a bid to flatten corona curve, India may end up flattening its economy

Nobody can put a finger to the financial cost of the pandemic, but the US government’s $2 trillion package is a good indicator

Narendra Modi
The most optimistic outlook on the coronavirus epidemic would be that after 21 days of lockdown ordered by Prime Minister Narendra Modi | PTI File photo

Do you flatten the coronavirus curve at the risk of flattening the economy? Be prepared to face this question as the initial relief over the 21-day lockdown ordered by Prime Minister Narendra Modi gets replaced by concerns over livelihood, unemployment and fears of a prolonged recession.

The most optimistic outlook on the coronavirus epidemic would be that after 21 days of lockdown, the disease would disappear and India would get back to normal life. But, from the evidence on offer, it is quite unlikely that the goal of virus suppression would be achieved by April 14, the day the current round of lockdown is scheduled to end.

In China, Hubei province had been completely shut for more than eight weeks. In Italy, the death toll rose by 743 in one day to hit 6,820, reversing a declining trend observed over the last two days. Spain’s deaths increased by 514, bringing its total to 2,696, and the number of infections rose by 6,600, taking the toll to 39,673. Both these European countries are in the middle of a lockdown that began 2–3 weeks ago. So, the current trajectory of the epidemic in Europe, England and the United States suggests the restrictions in India may have to be extended beyond April 14.

The classical signs of an evolving epidemic are visible in India. The number of infections is doubling every 4–5 days and new states are reporting infections as testing is extended to new areas. The next critical level to watch out for would be 2,000. If India reports this number by April 5 — a nearly four-time increase over 10 days from the existing 560 cases on Wednesday — we would be at the beginning of a protracted lockdown and bigger numbers.

By the time coronavirus reached India, other countries had already experimented with containment strategies and realised the only effective solution was a complete lockdown. By the time Indian governments started turning the keys in locks across India, people were ready for a life of confinement at home. In a way, the government had the support of its people.

Flattening the Economy

If the cases do not come down fast, if a cure is not found, the GDP growth will turn negative. In 2017, the lack of cash in the system because of demonetisation led to around 2% cut in growth, and India is still reeling under its impact. A complete lockdown for a month would have a similar impact on the GDP numbers which are already at the lowest in several years.

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The government will have to bail out businesses that will collapse because of the lockdown, especially the aviation, hospitality, manufacturing, construction, auto and finance industries. In addition, the government will have to transfer cash to millions of families, distribute foodgrains free and make massive investments into the healthcare sector to equip hospitals with protective equipment, life-saving drugs and ventilators.

Nobody can put a finger to the financial cost of the pandemic, but the US government’s decision to give $2 trillion package (almost a tenth of its GDP) is a good indicator of the extent of intervention required. India, incidentally, is a $2.94 trillion economy; its population is nearly 4 times that of the US.

So, for how long can the government shut down India? When will people start losing patience, get worried about falling incomes, salary cuts and jobs? When will businesses start clamouring for opening up the country? Nobody knows the answer at the moment because we have just started coming to terms with the magnitude and ferocity of the epidemic.

Modi has been lucky so far because people have accepted his decision to lock down the country for medical reasons without asking him about the collateral damage to their life and livelihood. His government is reportedly working on a ₹2-3 lakh crore package to bail out businesses and support the Indian masses through direct transfer of cash and distribution of foodgrains.

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But his real challenge will begin when people start facing problems and become restless. If that happens, the lockdown will become another demonetisation moment for India — something that started with a lot of hope and euphoria but turned into a financial crisis.

Unfortunately, COVID-19 is not going away in a hurry. Most scientists and health experts believe it would circulate in the community till a vaccine is found. So, even if India manages to suppress this wave of infections, it may not be the end of the crisis. The virus may return again, forcing the government to enforce another round of lockdown. The fight with COVID-19, if it continues to return, will continue for at least 18 months.

The Herd Immunity theory

The doomsday predictions could, of course, be exaggerated. In the best-case scenario, the virus may just disappear in April and never return. Also, since several drug trials are at an advanced stage, experts may soon discover a treatment protocol that would stifle mortality rates.

Another big hope is that the virus may not be as lethal as we believe. This hypothesis is based on a new test that checks for antibodies for the virus among a large number of people. A new study coming out of London claims 50% of Britishers may have already been infected with the virus without having any symptoms and their bodies may have already cleared it without any medical intervention. But this theory has to be tested in other countries and on larger groups.

By locking India down for 21 days, the government has managed to buy crucial time for fighting the virus. At the moment, India is two months behind China, a month behind Europe and three weeks behind the US on the pandemic curve.

If a cure is found, or if the virus proves to be just mildly lethal over the next few weeks, India would have managed to flatten the curve without destroying the economy.

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