The HINDU Notes – 24th March 2020 - VISION

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Tuesday, March 24, 2020

The HINDU Notes – 24th March 2020

📰 Pandemic is accelerating, says WHO

To win, we need to attack the virus with aggressive and targeted tactics, says agency chief Tedros

•The new COVID-19 pandemic is clearly “accelerating”, the World Health Organization (WHO) warned on Monday, but said it was still possible to change its trajectory by going on the attack. The remarks came as the number of deaths soared past 15,000, with more than 3,41,000 people infected worldwide, according to a tally compiled by AFP from official sources.

•“The pandemic is accelerating,” WHO chief Tedros Adhanom Ghebreyesus told a virtual news conference. He said it took 67 days from the beginning of the outbreak in China in December for the virus to infect the first 1,00,000 people worldwide. In comparison, it took 11 days for the second 1,00,000 cases and just four days for the third 1,00,000 cases, he said. The number of officially recorded cases is believed to represent only a fraction of the true number of infections, with many countries only testing the most severe cases in need of hospitalisation. “We are not helpless bystanders. We can change the trajectory of this pandemic,” Mr. Tedros said.

•Physical distancing could buy time by slowing down the spread, “but they are defensive measures that will not help us to win,” he warned. “To win, we need to attack the virus with aggressive and targeted tactics,” he said, reiterating a call for “testing every suspected case, isolating and caring for every confirmed case and tracing and quarantining every close contact.”

On lockdown mode

•Some 1.7 billion people have been asked to stay home in over 50 countries and territories around the world, according to an AFP tally on Monday. Some countries have imposed mandatory lockdown measures, while others have issued stay-at-home recommendations to stem the spread of the virus.

•Lockdowns in parts of India alone have kept some 700 million people hemmed in. At least 34 more countries and territories have also established mandatory lockdown measures ordering people to stay in their homes, accounting for some 659 million people. France, Italy, Argentina, the U.S. State of California, Iraq and Rwanda have also rolled out enforced lockdowns. Greece is the most recent country to impose mandatory confinement measures, which came into effect on Monday morning. Colombia will enforce an obligatory lockdown on Tuesday and New Zealand will follow suit on Wednesday. In most cases, it is still possible for people to go to work, buy essentials or seek medical care.

📰 Centre amends law to enable excise duty increase on fuel

Changes made to Finance Bill to raise the levy on petrol, diesel by Rs. 8 per litre

•The government on Monday amended the law to get enabling powers to raise excise duty on petrol and diesel by Rs. 8 per litre each in future.

•Finance Minister Nirmala Sitharaman moved an amendment to the Finance Bill, 2020, to raise the limit up to which the government can raise special excise duty on petrol and diesel to Rs. 18 per litre and Rs. 12, respectively.

•The amendment, along with the Finance Bill, was passed without a debate in the Lok Sabha.

•The government had on March 14 raised excise duty on petrol and diesel by Rs. 3 per litre each to raise an additional Rs. 39,000 crore in revenue annually. This duty hike included Rs. 2 a litre increase in special additional excise duty and Rs. 1 in road and infrastructure cess.

•This hike took the special additional excise duty to maximum permissible in law — Rs. 10 in case of petrol and Rs. 4 in case of diesel.

•Now, through an amendment of the Eighth Schedule of the Finance Act, this limit has been increased to Rs. 18 per litre in case of petrol and Rs. 12 in case of diesel.

No hike planned for now

•This is an enabling provision and no change in excise duty is being done as of now, an official said.

•The amendment gives powers to the government to raise the duty by up to Rs. 8 per litre in petrol and diesel at any time it wishes.

•Earlier in the day, the Lok Sabha passed the Finance Bill, 2020, without any discussion as the House curtailed its sittings in the wake of the COVID-19 outbreak.

•More than 40 amendments were introduced by the government to the Finance Bill, which was moved for consideration and passing, by the Finance Minister.

•The decision to pass the Bill without any discussion was taken at an all-party meeting convened by Speaker Om Birla. Some amendments moved by the Opposition were negated. The Bill gives effect to the financial proposals of the Central Government for fiscal 2020-21.

📰 RBI advances second tranche of OMO

•The Reserve Bank of India (RBI) has advanced its liquidity infusion plan by purchasing government bonds.

•The RBI had announced open market operations (OMOs) of Rs. 30,000 crore in March 2020 — the first tranche was scheduled for March 24 and the second tranche for March 30.

•“On a review of current liquidity and financial conditions, the Reserve Bank has decided to advance the second tranche of purchase of government securities under OMOs for Rs. 15,000 crore to March 26, 2020,” the RBI said.

•The RBI also said to tide over any frictional liquidity needs due to COVID-19, it had decided to conduct the variable rate repo auctions for Rs. 1,00,000 crore in two tranches.

📰 A pandemic, an economic blow and the big fix

A package for ₹5-lakh crore-₹6-lakh crore targeted across different sections of society and the economy, is feasible

•India has just finished a day of curfew and clapping to practise ‘social distancing’ and to express gratitude to the millions of health and essential services workers amid the COVID-19 pandemic. It was a laudable initiative by the Prime Minister to rally the nation together. The nation is truly at war, as he alluded to, and it can be won only by everyone coming together in this ‘tragedy of the commons’.

India lags

•But just two days before our clapping, the Indian-origin Finance Minister of the United Kingdom unveiled the U.K.’s biggest economic recovery package in its history, as an antidote to the crisis; there is no fixed cost to it. The United States is finalising a trillion-dollar economic recovery package, while Germany is going ahead with ‘unlimited government financing’ for the disruptions due to the outbreak. France, Spain, Italy and the Netherlands have all launched a half-a-trillion dollars combined in recovery measures. If this reads like panic, consider this one data point — the number of people who lost their jobs, in just the last two weeks in America is the highest ever weekly job losses recorded in its history. These large, developed economies are expected to not merely slow down, but to contract and experience negative growth. The economic devastation will be much more painful and longer than the health impact.

•While the rest of the world has sprung into action, India has merely announced the setting up of a task force under the Finance Minister to explore economic recovery options. This lackadaisical approach is unconscionable. Contrary to rhetoric, neither will India be immune to this imminent economic crisis nor will some ‘preternatural force’ insulate us from this epidemic. It is prudent to swing into action right away to soften the inevitable economic blow.

•There are already reports that a third of all restaurants could shut down in the formal sector alone and shed more than 20 lakh jobs, in the coming months. The entire automotive sector is shutting down its factories, putting at risk the incomes of a million people employed in this sector. When people lose their jobs, entire families suffer, consumption drops and overall demand collapses. When businesses close down, then they default on their commercial obligations down the chain and to their financiers. This freezes up credit flow in the economy and halts production. Since this is a global crisis, it is not even possible for India to import and export its way to recovery. Under such painful conditions, India needs a comprehensive recovery package that will first cushion the shock and then help the economy recover.

A three-step plan

•In my discussions with former Finance Minister P. Chidambaram and economists, there was near unanimity that the package should rest on four pillars: providing a safety net for the affected; addressing disruptions in the real economy; unclogging the impending liquidity squeeze in the financial system, and incentivising the external sector of trade and commerce. So here is a broad plan for a ‘COVID-19 Economic Recovery Package for India’.

•The destruction of jobs, incomes and consumption can be addressed through a direct cash transfer of ₹3,000 a month, for six months, to the 12 crore, bottom half of all Indian households. This will cost nearly ₹2.2-lakh crore and reach 60 crore beneficiaries, covering agricultural labourers, farmers, daily wage earners, informal sector workers and others. It is important that this is not just a one-month income boost but, instead, a sustained income stream for at least six months for the millions who have lost their incomes, to provide them a safety net and a sense of confidence. The Pradhan Mantri Kisan Samman Nidhi (PM KISAN) programme with a budget of ₹75,000 crore can be subsumed into this programme.

•The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) must be expanded and retooled into a public works programme, to build much-needed hospitals, clinics, rural roads and other infrastructure. This can be achieved by integrating MGNREGA with the Pradhan Mantri Gram Sadak Yojana and the roads and bridges programme. These three programmes together have a budget of nearly ₹1.5 lakh crore. This must be doubled to ₹3 lakh crore and serve as a true ‘Right to Work’ scheme for every Indian who needs it.

•In addition, the Food Corporation of India is overflowing with excess rice, wheat and unmilled paddy stocks — enough excess stock to provide 10kg rice and wheat to every Indian family, free of cost, through the Public Distribution System.

•This combination, of a basic income of ₹3,000 a month, a right to work and food grains, will provide a secure safety net.

•COVID-19 testing, treatment, medical equipment and supplies capacity can be expanded through the private sector and be reimbursed directly for patient care. This will need a budget of ₹1.5- lakh crore for testing and treating at least 20 crore Indians through the private sector. This will help create a large number of jobs in the private health-care sector, with trickle-down benefits.

Steps for the central bank

•The Reserve Bank of India (RBI) announced a ₹1.5-lakh crore liquidity and credit backstop facility on Monday, which is a very welcome move. Further, the RBI should show regulatory forbearance and also set up a credit guarantee fund for distressed borrowers for credit rollover and deferred loan obligation.

•The central bank must also immediately reduce interest rates drastically to spur business activity. A two-year tax holiday and an appropriate incentive scheme must be designed for exports and service sectors that have been devastated (airlines, tourism, hospitality, entertainment, logistics, textiles, leather). This could cost the exchequer between ₹1-lakh crore and ₹2-lakh crore.

Finding the money

•In sum, the total incremental expenditure for the recovery package will be between ₹5-lakh crore to ₹6-lakh crore for FY2021. The next obvious question is: Where is the money for this?

•The ₹5-lakh crore to ₹6-lakh crore recovery package can be funded largely thorough three sources — reallocation of some of the budgeted capital expenditure, expenditure rationalisation, and the oil bonanza.

•Given the extraordinary situation the world is facing, it is important to reprioritise our expenditure plan in the near term. The government had budgeted more than ₹4-lakh crore in capital expenditure for FY2021. This will, unfortunately, have to be reworked and some part of it allocated to the COVID-19 recovery package. For example, there is a budget of ₹40,000 crore for the revival of the telecom public sector units which can be delayed and the amount reallocated.

•Similarly, the budget of nearly ₹1-lakh crore for national highways, roads and bridges can be rationalised to reallocate this to the recovery package. It is possible to extract a total of ₹1-lakh crore for the package out of the ₹4-lakhcrore budgeted capital expenditure for FY2021.

•Fifty-four ministries in the Union government of India made a demand for grants and a total of ₹30-lakh crore has been budgeted as total expenditure for FY2021. Of these, 13 large ministries account for as much of the Budget expenditure as the remaining 41 ministries combined. There is ample scope to rationalise expenditure in these 41 ministries to extract ₹2-lakh crore for the recovery package.

•The blessing in disguise for India is the dramatic fall in global crude oil prices —from $40 a barrel to an estimated $20 a barrel — which can help save nearly ₹2-lakh crore; this can be used to fund the recovery package or make up for shortfall of tax revenues.

•To be sure, there will be a fiscal implication of this stimulus package and the fiscal deficit will rise driven both by increased expenditure and shortfall of revenues from the slowing economy. But now is not the time for fiscal conservatism.

Helping States

•It is often asked why the States cannot embark on an economic stimulus plan. The States combined incur an expenditure of ₹40 lakh crore. There can be some sharing of expenditure of the recovery package of ₹1-2 lakh crore by the States. But after Goods and Services Tax (GST), States do not have the fiscal freedom to raise tax revenues on their own. They are largely dependent on the Centre for their tax revenues through direct taxes and GST.

•In summary, India needs an immediate relief package of ₹5-lakh crore to ₹6-lakh crore targeted across all sections of society and sectors of the economy. Though daunting, the money for this can be found through detailed analysis and some bold thinking. The global economy is headed for a dark phase and it is our duty to rise to the challenge to secure the future of all Indians.

•It is time to think big, bold and radical to pull our economy out of this crisis. This is India’s moment for the equivalent of the “New Deal” that U.S. President Franklin Roosevelt launched in America after the Great Depression of 1929.

📰 COVID-19: Many tasks at hand

India has a formidable challenge ahead as it needs to control the disease, combat misinformation and protect civil liberties

•As COVID-19 continues its global rampage, India has taken drastic steps to stem its spread. It has banned incoming international commercial flights till March 31, established rules of quarantine for those returning from abroad, and put its healthcare system on high alert. All this is justifiable given that its high population density makes ‘social distancing’ difficult. Also, a vast number of people depend on public healthcare, so tracking the spread of the disease is a formidable challenge. But to truly contain this pandemic, we need to make a distinction between scientific information that can support a balanced epidemiological response and misinformation that will adversely affect our efforts.

Access to healthcare

•From an epidemiological perspective, the weakest links during a pandemic are testing, control, and engaged community participation. So, the first step is to shore up the healthcare system and, as the World Health Organization has recommended, create capacity in hospitals (public and private) for everyone who shows symptoms to access testing facilities. Providing full and free testing to all who need it is critical for effectively controlling the spread. The variable (or differing) experiences of Italy, France, Switzerland and the U.S. highlight that COVID-19 tests and treatment should particularly be available and accessible to people in high-risk groups (those suffering from HIV/AIDS, drug-resistant tuberculosis, or have underlying medical conditions) and from low-income backgrounds. In this regard, although access to healthcare has improved to a large extent in India, the polarisation of healthcare facilities between the private and public sector does not provide the right framework to channel timely medical services during a pandemic. In the short-run, public healthcare services will be hard-pressed to provide the requisite support to low-income groups. In the absence of clear and targeted actions to replenish their capacity, they will not be able to cope with the pressures in the longer run. This needs to be urgently addressed, in the absence of which the poor — whom privatisation and the market economy have systematically excluded — will now be the weakest link in any effort to contain the virus.

•The inexorable rise of fake news is a big threat to engaged community participation and public morale. COVID-19 is already deeply affecting economic activity, and fake videos linking its spread to the meat and poultry sector have led to a low demand for these products and, consequently, large-scale losses. Advocating particular cures or linking the virus to factors such as stress without underlying scientific evidence can cause a lot of damage as such misinformation creates confusion and prevents communities from following instructions from authorities and being united against the threat. Fake news also diverts attention from grim realities. The truth is that the economy will suffer drastically, and we need a clear plan of how we will tackle this over months. The poor will be the worst affected, including informal workers, workers in the gig economy, or those running small businesses, and social safety nets are not adequately in place. Sharing information on how we can address these issues and promoting democratic deliberations should become a policy and social priority. A crucial role of the government at this time is to offset panic, and to promote a sense of solidarity, stability and confidence. There can be no room for empty political statements and no space for errors.

Civil liberties

•There is also the risk that in the guise of disease tracking and control, we will fall into the trap of eroding more civil liberties. Lockdowns, curfews and travel bans are already a suppression of civil rights. We need to be clear of what measures we are embarking on, and how that affects all of us. For example, is it logical to suspend rights of our own people to return in case of absolute necessity, and does the epidemiological reason justify separating people from their families for any amount of time?

•As we move ahead, we need to employ mechanisms that tackle the pandemic no doubt, but do so while protecting civil and personal rights of citizens. The Chinese have massively re-purposed their surveillance system for epidemiological control to reduce infection rates, and the U.S. government has announced that it is in talks with tech companies to access phone location data to map the spread of the virus. The U.S., a democracy, has many checks and balances in place to ensure that this kind of data is not misused, but India does not. Indians therefore need guarantees that the use of surveillance in the name of disease control does not end up serving other purposes, now or in the future.