A time for extraordinary action (Government has to take big steps to save the country now)

Excellent study material for all civil services aspirants - begin learning - Kar ke dikhayenge!

 A time for extraordinary action (Government has to take big steps to save the country now)

---

Read more on - Polity | Economy | Schemes | S&T | Environment

---

• Economic impact of COVID-19: The health impact will be known over time, but the economic impact of COVID-19 is getting clear already. A slowed down economy was hit hard by the total shutting down of all activities, as it was needed scientifically and medically.
• Measuring the slowdown: Using Input-Output models (IO), a detailed picture can be drawn for output, consumption, wages, profits, savings, expenditures etc. by households, government etc.

1. This IO model was made by economist Wassily Leontief
2. It's very useful for disaster impact mapping, because it links all sectors together intimately (change in one impacting change in others)
3. Sadly, the last IO table known for India is for 2007-08 (so other sources have to be used for COVID-19 estimation)

• Number of workdays lost: Let us assume that estimated annual output is distributed uniformly through the year. So daily output can be found, and losses also (due to shutdown). Then apply the IO multipliers (constant) to find the impact of lockdown. Then the drop in GDP can be found as well.
• Findings:

1. Loss of GDP in India may be from Rs.17 trillion (7% of GDP) if 13 days are lost fully, to Rs.73 trillion (33% GDP) if 67 days are lost fully.
2. Intermediate range will be Rs.29 trillion (13%) to Rs.51 trillion (23%).
3. The OECD estimate for India is 20% of GDP loss.
4. All sectors are staring at massive losses in production volumes, as all are inter-related. If a 47 day lockdown happens, then mining sector will drop by 42% in value, even if it were shut down for less than 47 days (interdependence trouble).
5. Electricity sector is seeing a 29% drop although it has not been shut down!

• Agriculture report: The good news is that most of Rabi crops have been harvested properly. But the upcoming Kharif season may find sowing a trouble due to labour shortage.
• Informal sector: Perhaps this will take the biggest hit of all, although precise data are not available.
• Measures taken so far are insufficient: So far, the government has taken steps like - debt relief, revenue and tax postponement, cash and kind relief to the poor, PDS scaling up, etc. But these are small, compared to what Indian society will soon need - a huge fiscal stimulus package.
• The guiding principle: It is critical to preserve the productive capacities of the Indian economy across the board. Do whatever it takes - put cash into the hands of informal and formal sector people, and for businesses too.
• Forget fiscal deficit: At this juncture, the 2020-21 Budget has become meaningless because there was no pandemic back then. Do not cut back on govt salaries either, as private sector will get a very wrong message also.
• Do not be misled: Do not think that this is a "transformational moment" for Indian economy and we must go for "greening" it. This is a survival moment, not a transformational one, and if we bungle up, the outcome will be disastrous. The state has to save us all now.
• Summary : The economic loss in the form of a lockdown can now be turned back only through massive state intervention, nothing else.

Read more on - Polity | Economy | Schemes | S&T | Environment

Join UPSC Self Prep course | Online Course (PT Gurukul)  | Covid Special Course | Join PT courses

* Content sourced from free internet sources (publications, PIB site, international sites, etc.). Take your own subscriptions. Copyrights acknowledged.