The HINDU Notes – 27th March 2020 - VISION

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Friday, March 27, 2020

The HINDU Notes – 27th March 2020

πŸ“° G20 commits $5 trillion amid COVID-19 scare

PM calls for bigger mandate and more funding for WHO that has ‘failed to adapt itself to deal with the new challenges’

•The world needs to “redefine” its conversations on globalisation to include social and humanitarian issues such as terrorism, climate change and pandemics along with financial and economic discussions, said Prime Minister Narendra Modi, speaking at a video-conference of leaders of the world’s top 20 economies, the G20, hosted by the Saudi King, Salman bin Abdulaziz Al Saud, to discuss the novel coronavirus pandemic.

•According to a release, the G20 countries committed on Thursday to inject more than $5 trillion into the global economy, and contribute to the COVID-19 solidarity response fund led by the World Health Organization (WHO).

•“The unprecedented COVID-19 pandemic is a powerful reminder of our interconnectedness and vulnerabilities. The virus respects no borders. Combating this pandemic calls for a transparent, robust, coordinated, large-scale and science-based global response in the spirit of solidarity,” said a joint statement issued at the end of the extraordinary summit.

•“We will share timely and transparent information; exchange epidemiological and clinical data; share materials necessary for research and development; and strengthen health systems globally, including through supporting the full implementation of the WHO International Health Regulations.”

More interactions

•The leaders agreed to have more interactions of G20 Foreign Ministers, health officials and the respective Sherpas before the Riyadh Summit of the G20 nations in November 2020.

•In his opening remarks, King Salman spoke of the impact of the COVID-19 pandemic on global growth and financial markets. He said that the G20 must send a “strong signal to restore confidence in the global economy by resuming, as soon as possible, the normal flow of goods and services, especially vital medical supplies.”

•In the effort to control the pandemic, most countries have acted individually he said, stressing the need for a more coordinated effort.

•Prime Minister Modi, who had first suggested the video-conference, also called for a bigger mandate and more funding for the World Health Organisation, which he said had failed to “adapt itself to deal with the new challenges the international community has faced.”

WHO’s ‘failure’

•Many countries have been critical of WHO’s failure to alert the world quickly enough of the potential threat from the pandemic, even after it had been informed of its spread in Wuhan by China on December 31 last year.

•Others, most notably the United States, have been particularly critical of China for not having been transparent and shared information about the pandemic, and have even called for the virus to be named the “Chinese virus” or the “Wuhan virus,” a move China has opposed strongly.

•Finally, there have been differences in the approach by G-20 countries towards lockdowns in order to control the pandemic spread through social distancing.

•Last week, Mr. Trump had hinted that he wanted to lift the shutdown in the US as it was impacting the economy, saying that the “cure cannot be worse than the problem itself.” Brazilian President Jair Bolsonaro has called state-imposed lockdowns a “crime”, while countries like India have imposed a stringent 21-day lockdown across the country.

πŸ“° Rs. 1.7 lakh cr. lockdown package rolled out

Rations doubled for three months; we do not want anyone to remain hungry: Nirmala Sitharaman

•The Centre on Thursday announced a Rs. 1.7 lakh crore relief package in response to the COVID-19 pandemic and countrywide lockdown, providing free food and cash transfers to support the poorest and most vulnerable citizens during the crisis.

•Announcing the details, Finance Minister Nirmala Sitharaman said the foodgrain rations for 80 crore poor people would be doubled for the next three months and supplemented by 1 kg of local pulses.

Cover for healthworkers

•The Centre will provide Rs. 50 lakh medical insurance cover for the next three months for about 22 lakh health workers in government hospitals, including ASHA (Accredited Social Health Activist) staff, medical sanitary workers in government hospitals, paramedics, nurses and doctors.

•The Pradhan Mantri Garib Kalyan Yojana had been announced within 36 hours of the lockdown and it would take care of the needs of poor and migrant workers, farmers, women, pensioners, widows and the disabled, said Ms. Sitharaman.

•“We do not want anyone to remain hungry, so we will be giving enough to take care of their foodgrain requirement, protein requirement in terms of pulses. On the other hand, they should also not remain without money in hand, so several measures through DBT are being taken so that money reaches them,” she said.

More wheat, pulses

•Over the next three months, each person who is covered under the National Food Security Act would get an additional 5 kg wheat or rice for free, in addition to the 5 kg of subsidised foodgrain already provided through the Public Distribution System (PDS). One kg of pulses a household would also be provided for free.

•Cash transfers — a mix of advances via existing schemes and additional sums — would also be given to vulnerable groups under the Pradhan Mantri Garib Kalyan Yojana.

•About three crore poor pensioners above 60 years, widows and disabled people would be given Rs. 1,000 in two instalments over the next three months. The 20 crore women holding Jan Dhan Yojana accounts would get Rs. 500 a month over the same period.

•Wages were hiked under the MNREGA scheme from Rs. 182 to Rs. 202 a day. The Minister said this would provide an additional Rs. 2,000 per worker.

πŸ“° How can India contain the economic impact of COVID-19?

The government must focus on health and livelihood issues at the same time

•The COVID-19 pandemic has effectively brought normal life to a halt in India. The importance of social distancing and a lockdown in curbing the spread of the virus cannot be stressed enough, but these measures also have huge repercussions on livelihoods and the economy at large, which has already been seeing a slowdown over the past year. In a conversation moderated by Vikas Dhoot , Naushad Forbes and M. Govinda Rao talk of ways in which India can tackle this humanitarian and economic crisis. Edited excerpts:

Do you see a parallel in recent history to the situation we face globally due to the novel coronavirus?

•Govinda Rao:This is the mother of all challenges in recent memory. The International Monetary Fund (IMF) says that the 2008 financial crisis comes close, but I think this is much bigger than that. Possibly, one has to go to the times of the Great Depression. Even qualitatively, it’s a very different challenge, because first you have to save lives, then you have to save livelihoods, then you have to meet with other costs like loss of jobs and production, and supply chain disruptions. It’s not just confined to one sector or country; it encompasses the entire economy and the world. So, I think there is no immediate policy instrument that you can put in place because you don’t even know how long the problem will last. The depth of the problem that you are going to face is dependent on the length of the period for which you are going to close down and the extent to which the virus spreads.

•Naushad Forbes:Every country is either already deeply affected or is at the start of being more affected. This is unprecedented in terms of its immediate impact on the lives of individuals from all walks of life. We have a few additional factors in India: an economy which relies very heavily on informal employment, so our reliance for people’s well-being on the broader economy performing and the markets performing is high, whatever role the state may try to play. And anything that you change in the functioning of the economy has unintended effects.

•We sometimes have, I think, a tendency to act and then plan. I worry about that. For example, on Saturday, all manufacturing companies in Pune were told to shut down. On Sunday, all trains were stopped. And on Monday, all companies were told, ‘Look, you must keep supporting your staff and contract workers.’ Now, the sequence should have been the reverse: first, you work out which companies will ensure support for everyone across the board and how. Then you stop the trains so that you contain populations [moving]. And then you close the actual sources of employment. If you do it in the opposite sequence, you end up with what we saw on Saturday and Sunday, which is thousands of people crowding into train and bus stations, heading out of town, potentially spreading the virus across the country. This is obviously an unintended consequence. We sometimes act first without going into what we actually want to achieve. The way to achieve ‘social distancing’ is not to announce something which then brings suddenly crowds of people together in a panic [but] to do something for their own security, well-being and longer-term success. A little bit of thought before we act would really help.

Over the last few days, both the formal and informal sector have come to to a virtual halt. Lakhs of truckers are held up across States and most manufacturing firms have shut down. How will this impact our output and incomes?

•NF:Everything’s come to a halt. The lockdown is the right thing to do for the country. From everything one reads, [we get the idea that] a lockdown is the way to ensure social distancing and contain the virus.

•How do you then limit the economic impact and who do you need to buffer the impact for? Without question, it is the people who are most vulnerable, those who live from day to day and have no savings to fall back on. Then you look at medium to small companies with very limited staying power. The only way they can actually survive is by not paying people. You don’t want that to happen, otherwise you’d spread that distress in the economy. You need to address their concerns, either through moratoriums on principal and interest payments or direct salary support, as we’ve seen happen in the U.K., Switzerland and France, to ensure some employment is sustained. Then you need to extend it to larger labour-intensive companies if they employ 20,000 people and if they don’t have enough money to pay salaries next month we’re going to see something rather critical happen within a week.

•GR:One of the biggest problems in the system is the capacity of the state to deal with the problem. The reaction that we have is a knee-jerk reaction. Today, you cannot worry about issues such as fiscal deficit. You have to save people’s lives. There is a 21-day lockdown and redistribution is a major issue. Thankfully, you have a much better targeting device [Jan-Dhan accounts and Aadhaar] than before. Augmenting the state’s capacity... I don’t know how you’re going to do it.

•At 8 p.m., the Prime Minister says we are closing down for 21 days, and everyone runs to the shops and panics. Couldn’t this have been done in a smoother way? One could have said essential supplies will be available — simply saying there’s a lakshman rekha outside your house, that really scares people.

•The immediate issue is to focus on health, which we have never done, and see how you can establish the public health system. And the second is livelihood issues.

Regulatory compliance deadlines have been extended, but non-performing asset recognition norms remain 90 days (of defaults). Would you say this regulatory forbearance is sufficient?

•NF:It’s a classic case of ‘necessary but not sufficient’. These are all the right things to do. You can have regulatory forbearance and extend regulatory forbearance for returns that have to be filed, but if there is some question on whether you will survive long enough to file your returns, then you need to address that.

•If we start by recognising that we have very limited state capacity, then we can think about how to get the desired outcome with an assumption of limited state capacity. For example, I would like to see a massive publicity campaign on what social distancing means and why it’s important to do. Regardless of what announcement comes, people should know not to crowd outside a shop together.

•And if my action in announcing something is going to prompt just this, let me first send out all the reassurances that grocery stores will be open. The government has said that, but if you read the actual notification, it doesn’t say how groceries will get to homes. There are some vague references to it being delivered. That sounds to me like a horrendous task to take on if state capacity is limited... delivering groceries to 1.3 billion people. Instead, rely on people going and doing the right thing. So, you say, ‘grocery stores are going to be open and here are the rules under which people can go and buy groceries. Grocery stores can decide for themselves if they wish to be open 24 hours. We will allow a maximum of so many people per square foot. We are counting on the grocery stores themselves to maintain this for their own health. We will encourage everyone not to go in a group.’ You can specify all of this ahead of time and reassure people that there’s going to be no issue.

There has been a lot of clamour for shutting down the stock markets.

•GR:A lot of things can now be done at home with online trading. To the extent that crowds can be avoided, it is important. But that doesn’t mean that you should shut down the stock market. It is a barometer... in the immediate context, it may not tell you what your economy’s doing if something is happening the world over. But you don’t kill the messenger, it gives you a message.

Three weeks from now, what would be the best-case scenario for us to be in?

•NF:We should, by the way, do some scenario planning for what’s the best- and worst-case scenario and what’s in between. For those scenarios, we must have action plans in place that are transparent so people can prepare accordingly. The best-case scenario to me is that the three-week lockdown delivers. We shouldn’t expect the rising trend of cases to change for a minimum of 10 days before a successful lockdown can have an effect (because of the gestation of the virus). The best-case scenario is that 10 days from now, we start seeing a flattening of the growth rate. A few more days later, we see the curve starting to turn down. Then we can say the lockdown is working, now how do we start working towards recovery. We should put those plans in place now.

•We will not go back to normal from day one, where everyone can do whatever they wished. Can all manufacturing start again? Does everyone show up at work all at once? If you have the curve pointing down sharply, maybe 50% can come back and we’ll see for another two or three weeks how that sustains. Shops can open again, but with limited operations and all the social distancing in place. You probably should not allow anything which involves mass gatherings of people even in the best-case scenario. So, you’re not going to have large conferences, movie theatres, sports stadiums. Those will come last. I really think there’s a lot of value in this plan being as transparent as possible.

•GR:The first thing that the government will have to do immediately is massively ramp up testing. We have not done enough testing as yet and do not know the magnitude of the problem. Even if you take the best-case scenario after three weeks, this will be different in different places. You may have to look at differential relaxations in a calibrated and transparent manner and say that areas with these trends can allow some of these activities. My own feeling is that after 21 days, there will be some areas where you can have economic activities without much movement, and restrictions will have to continue elsewhere. But we should be prepared for the long haul. Life is not going to be easy.

•My big concern is about children not going to school. Some from well-off families may learn on the computer, but what about those children who cannot go to school, can’t play, or do anything. About 40% of the population is in the age group of zero to 14. We really have a crisis brewing there.

πŸ“° Standing with the needy

The relief package is a good start, but more might need to be done sooner than later

•The Rs. 1,70,000 crore relief package announced by Finance Minister Nirmala Sitharaman on Thursday — Pradhan Mantri Garib Kalyan Yojana (PMGKY) — is a good first step towards alleviating the distress caused to vulnerable sections of the population by the 21-day lockdown imposed to combat the spread of the coronavirus (SARS-CoV-2). What is noteworthy about the package is not the amount but the innovative ways in which the government is seeking to offer relief. It covers various sections of the vulnerable, ranging from farmers and women Jan Dhan account holders, to organised sector workers, to the most important of all — healthcare workers, who will now get a sizeable insurance cover of Rs. 50 lakh. The doubling of foodgrain allocation offered free is a good idea that privileges the hungry poor over rodents and pests devouring the stocks in Food Corporation of India godowns. So is the move to provide free cooking gas refills to the underprivileged who are part of the PM Ujjwala scheme. The offer to pay both employer and employee contributions to the Provident Fund for very small business enterprises is welcome and will offer relief to those businesses that have been forced to shut down operations, and also to employees earning small salaries for whom the PF deduction may hurt at this point in time. The salary limit could have been set higher at Rs. 25,000 per month — there’s no cash outgo for the government anyway because this is just a book entry transaction.

•The effort appears to be to keep the funding within the budget as much as possible and retain control over the deficit. For instance, the PM Kisan transfer has been already budgeted for and the increase in MGNREGA wages can also be accommodated within the budget. Ditto with the Jan Dhan account transfer of Rs. 500 per month for the next three months which will cost the government Rs. 30,450 crore. It is possible to argue here that the transfer could have been a little more generous — at least Rs. 1,000 a month. The government may have wanted to stay within the budget for now. It could also be to preserve firepower, as there is no saying how long this uncertainty will last. But, at some point soon, the government will have to break the fiscal deficit shackles. Also, it needs the financial bandwidth to support businesses in trouble. In fact, ideally the government ought to have announced a relief package for the corporate sector and the middle class along with the PMGKY. It should now turn its focus towards businesses that are running out of cash and may soon default on even salaries and statutory commitments if relief is not given. There are enough ideas to borrow from others such as the U.S. which is in the process of finalising a $2 trillion package. Part II of the economic relief package should not be delayed beyond the next couple of days.

πŸ“° Devising a people-centric response to COVID-19

We urgently need an economic stimulus to protect livelihoods in the period of lockdown

•India is at an extremely critical stage in its fight against the COVID-19 pandemic. A lockdown was inevitable. About 21 States, including Kerala, had already announced lockdowns of various durations before the Prime Minister’s announcement. It is important that we stand united in facing this grave crisis.

•As we make our way through the lockdown, the State has major responsibilities. It must take a leadership role in enforcing the lockdown while upholding the rights and dignity of people, it must educate the citizens on the dos and don’ts of rules to follow, and it must take all sections of society with it.

•The health machinery has to work round the clock. At the same time, it is imperative that citizens shoulder their responsibilities and follow the rules of the lockdown strictly and diligently. Each life is precious, and any drop in our guard can quickly raise the number of the infected, thereby undermining the gains achieved.

•The lockdown period should be used by the Centre to not just break the infection chain, but to isolate the infected from the general population and treat those who require it with varying degrees of hospitalisation, including intensive care. I welcome the announcement of the Prime Minister to set aside Rs. 15,000 crore for emergencies. However, we need clarity on how this money will be spent and on how States will be helped by the Centre in the expansion of health infrastructure.

Working together on Health

•The Union Government has made some important announcements on March 26. While I welcome the relief package, I also urge that it be expanded in the coming days.

•While we must build up national-level preparedness, we must also remember that health is a State subject, and that State governments are an integral part of the governance of the nation. Fiscal federalism, decentralised governance and flexibility to the States to meet their particular needs and requirements should be a part of the fight against the virus, including coping with the lockdown and the economic recovery to follow. The Central government should create consultative bodies consisting of Union and State Ministers to identify bottlenecks and assess progress. My colleagues in different States are taking different initiatives. We may all have something to learn from each other.

•In Kerala, we are making the utmost efforts to ensure that the supply of essential commodities, particularly food and medicines, is maintained and that the vulnerable sections of society are specifically protected. As soon as the Kerala government closed pre-schools and schools on March 10, our Women and Child Development Department made available, without missing a day’s allotment, the mandated quantities of rice, pulses, broken wheat/semolina, peanuts, jaggery, oil to all pre-school children in each anganwadi centre. It also took steps to distribute ‘Take Home Ration’ for pregnant/lactating mothers and children aged six months to three years. We undertook this intervention for 33,115 centres, and we were able to protect the nutritional needs of close to 8.3 lakh children. In some anganwadis, vegetables and eggs were also distributed. We are happy to note that the Supreme Court of India expressed appreciation for our efforts in this regard.

The Kerala approach

•Kerala will ensure availability of essential goods and services, and our government will not permit a single person to starve during the lockdown. We have energised our Public Distribution System (PDS) to ensure that all households that do not figure in the priority list get 15 kg of free food supplies for a month. This is in addition to the allocation of 35 kg per household for those in the priority category. We also plan to distribute food kits, with basic grocery items and vegetables. To the deserving people now in quarantine, the government is already distributing such kits. Home delivery is being arranged to avoid crowding of people in PDS outlets and grocery shops. We plan to engage our local bodies to lead this effort at the ground level. Further, nutritious meal plates at Rs. 20 per plate are being served through 1,000 canteens of the State government.

•Our Industries Department directed its public sector enterprises (PSEs) to raise the production and supply of hand sanitiser bottles; they immediately responded by producing an additional one lakh bottles per day. The Kerala State Drugs and Pharmaceuticals Ltd., a PSE, has been provided with Rs. 25 crore to ensure adequate supply of medicines required for COVID-19 treatment. Inmates of our prisons, self-help groups under the government’s Kudumbashree Mission, and enterprises operating from our rubber parks were mobilised to increase the production of N95, triple layer and double layer face masks as well as surgical gloves. Our Khadi PSEs have been asked to supply adequate number of bed sheets and towels for disposable use in the hospitals. We have asked Internet Service Providers in the State to increase their network capacity by 30% to 40% to ensure that people can work from home.

•While we enforce the lockdown in all its seriousness, we should not lose sight of the other major challenge in front of us. India has a high share of poor in its population, most of whom suffer from multiple economic and social deprivations. They earn their livelihoods from the informal and unorganised sectors, where there is neither job security nor continuity of income flows. Their livelihoods have to be protected through the lockdown period.

Economic package

•This is where the Kerala government has taken an initiative and come forward to announce a Rs. 20,000 crore economic revival package. We have a borrowing capacity of about Rs. 25,000 crore during the financial year 2020-21. We have requested the Central government to allow us to borrow half of this debt (about Rs. 12,500 crore) in April 2020 itself. This will be a major source of the Rs. 20,000 crore package the government has announced. This frontloading should not mean less expenditure later in the year. So, we are also requesting the Central government to provide us with flexibility under the Fiscal Responsibility and Budget Management (FRBM) Act. We are hoping that the Centre will permit this.

•Our economic package of Rs. 20,000 crore will be spent roughly as follows. Two months of welfare pensions will be paid in advance to the pension beneficiaries. For those not eligible for welfare pensions, Rs. 1,320 crore has been set aside for providing an assistance of Rs. 1,000 per family from the BPL and Antyodaya sections. Another Rs. 100 crore has been set aside for providing free food grains to families in need, while Rs. 50 crore has been set aside for the provision of subsidised meals at Rs. 20 per meal. Around Rs. 500 crore has been set aside for a comprehensive health package, where focus will be on improving public health infrastructure and equipping the State to face such epidemics. Loans worth Rs. 2,000 crore will be distributed through the Kudumbashree Mission. Rs. 2,000 crore has been set aside for the expansion of the employment guarantee programme. Further, around Rs. 14,000 crore has been set aside to clear all the arrears of the State government till April 2020.

•Passenger vehicles have also been given tax relief. Autos and taxis have been given relaxation on payment of fitness charges. There is relaxation in the deadlines of water and electricity bill payment for affected firms. Entertainment taxes for cinema halls have been reduced.

•Let this be the period in which we end fiscal conservatism. Extraordinary times require extraordinary action. The strict rules of the Fiscal Responsibility and Budget Management (FRBM) Act should be set aside. We urgently need an economic stimulus to protect the people and livelihoods in the period of lockdown.

•Today the world must stand together in the battle for the safety and well being of humanity. We must draw strength and lessons from global and national experiences even as we redouble our efforts in building a people-centric response to the challenge of the COVID-19 pandemic.

πŸ“° Safeguarding the vulnerable among us

The effectiveness of our response will be judged by what we do to protect the weakest sections of our society

•The human dimensions of the COVID-19 pandemic reach far beyond the critical health response. All aspects of our future will be affected — economic, social and developmental. Our response must be urgent, coordinated and on a global scale, and should immediately deliver help to those most in need.

•From workplaces, to enterprises, to national and global economies, getting this right is predicated on social dialogue between government and those on the front line — the employers and workers, so that the 2020s don’t become a re-run of the 1930s.

•The International Labour Organization (ILO) estimates that as many as 25 million people could become unemployed, with a loss of workers’ income of as much as $3.4 trillion. However, it is already becoming clear that these numbers may underestimate the magnitude of the impact.

•This pandemic has mercilessly exposed the deep fault lines in our labour markets. Enterprises of all sizes have already stopped operations, cut working hours and laid off staff. Many are teetering on the brink of collapse as shops and restaurants close, flights and hotel bookings are cancelled, and businesses shift to remote working. Often the first to lose their jobs are those whose employment was already precarious — sales clerks, waiters, kitchen staff, baggage handlers and cleaners.

Weak safety nets

•In a world where only one in five people are eligible for unemployment benefits, lay-offs spell catastrophe for millions of families. Because paid sick leave is not available to many carers and delivery workers — those we all now rely on — they are often under pressure to continue working even if they are ill. In the developing world, piece-rate workers, day labourers and informal traders may be similarly pressured by the need to put food on the table. We will all suffer because of this. It will not only increase the spread of the virus but, in the longer-term, dramatically amplify cycles of poverty and inequality.

•We have a chance to save millions of jobs and enterprises, if governments act decisively to ensure business continuity, prevent lay-offs and protect vulnerable workers. We should have no doubt that the decisions they take today will determine the health of our societies and economies for years to come.

•Unprecedented, expansionary fiscal and monetary policies are essential to prevent the current headlong downturn from becoming a prolonged recession. We must make sure that people have enough money in their pockets to make it to the end of the week — and the next. This means ensuring that enterprises — the source of income for millions of workers — can remain afloat during the sharp downturn and so are positioned to restart as soon as conditions allow. In particular, tailored measures will be needed for the most vulnerable workers, including the self-employed, part-time workers and those in temporary employment, who may not qualify for unemployment or health insurance and who are harder to reach.

Flattening the curve

•As governments try to flatten the upward curve of infection, we need special measures to protect the millions of health and care workers (most of them women) who risk their own health for us every day. Truckers and seafarers, who deliver medical equipment and other essentials, must be adequately protected. Teleworking offers new opportunities for workers to keep working, and employers to continue their businesses through the crisis. However, workers must be able to negotiate these arrangements so that they retain balance with other responsibilities, such as caring for children, the sick or the elderly, and of course, themselves.

•Many countries have already introduced unprecedented stimulus packages to protect their societies and economies and keep cash flowing to workers and businesses. To maximise the effectiveness of those measures, it is essential for governments to work with employers’ organisations and trade unions to come up with practical solutions, which keep people safe and to protect jobs.

•These measures include income support, wage subsidies and temporary lay-off grants for those in more formal jobs, tax credits for the self-employed, and financial support for businesses.

•But as well as strong domestic measures, decisive multilateral action must be a keystone of a global response to a global enemy.

•In these most difficult of times, I recall a principle set out in the ILO’s Constitution: “Poverty anywhere remains a threat to prosperity everywhere.” It reminds us that, in years to come, the effectiveness of our response to this existential threat may be judged not just by the scale and speed of the cash injections, or whether the recovery curve is flat or steep, but by what we did for the most vulnerable among us.