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Can non-pharmaceutical interventions help India come out of Covid-19 crisis?

By Baikunth Roy, Satyendra Kumar*
The pandemic-led lockdown has started affecting the economy and society in many ways. It has derailed economic activities through the demand and supply shocks. On the supply side, government-imposed restrictions and the fear of infections have affected the labor supply.
On the demand side, it has increased uncertainties about future incomes and employment prospects which has depressed current consumption and aggregate demand. Besides, the lockdown has taken more lives than the the COVID-19 infection itself.
Economic instability incites political disturbance, social unrest and conflict in society. A report published by the International Institute for Labour Studies, the research arm of the International Labour Organisation (ILO), shows that the social unrest index in majority of countries increased after the global financial and economic meltdown.
As per ILO, COVID-19 has affected 81 per cent of the world’s workforce (2.64 bn) and 2.3 bn people are under lockdown. For the economically weaker sections, it has raised a question of survival, whereas it has affected the psychological condition of the relatively affluent/ better-off sections of society. However, regardless of the social strata people belong to, a recovery to the pre-epidemic times appears far.
The Indian COVID-19 infection marginal curve has still not reached a saddle point, but the good news is that the recovery curve has started steepening. Economists and health experts have highlighted that lockdown was inevitable, given the current crisis that the world is facing to flatten the infection curve; however, only lockdown does not and has not been sufficient to control the pandemic.
The benefit of lockdown is flattening infection curve, but the cost is multidimensional. It has caused social unrest and economic chaos. Longer lockdown is giving more time to the government to test, detect, and isolate infected persons. However, in the process, it is forcing farmers, migrants, daily wagers, poor, and businessmen into a situation of crisis.
ILO in its recent report, “COVID-19 and the world of work”, noted that almost 90 per cent of people work in the informal sector, suggesting about 400 million workers are at risk of falling deeper into poverty during the crisis in India. Big business groups like Reliance, Aditya Birla, Tatas and Adanis have been affected in terms of loss of market capitalization of their listed stocks. Thus, it has not only implications for poorer households but investors, too.
Some FED economists have studied the economic consequences of 1918 influenza pandemic on America and analyzed the economic costs and benefits of non-pharmaceutical interventions (NPIs). Their research, published recently, reveals that the areas that were more severely affected by the 1918 Flu Pandemic saw a sharp and persistent decline in the real economic activities.
Secondly, they found that the cities which implemented early and extensive NPIs suffered no adverse economic effects over the medium term. On the other hand, the cities which intervened earlier and more aggressively experienced a relative increase in real economic activity after the pandemic subsided.
Their finding suggests that pandemics can have substantial economic costs, NPIs can lead to both better economic outcomes and lower mortality rates, and that NPIs like lockdown is beneficial in the short-run in stopping mortality rate due to pandemic and helpful in the medium run in the revival of economic growth. However, the paper has not highlighted any supportive health and economic measures taken by government during that time.
Death rates may be a more accurate measure of the severity of the social and economic disturbance. A procyclical relationship between economic activities and mortality rate has been demonstrated by various scholars.
Durkheim (1897) argued that suicides rise as the economy deteriorates, possibly because of increased mental stress. Further, Christopher Ruhm (2000) in “Are recessions good for your health?” has investigated the relationship between economic performance and health and found a positive relationship between unemployment and suicide rate. In America, A 1 per cent increase in the state unemployment rate in year t was associated with a 1.1% increase in suicides and the suicide rate increased by 1.4% in year t+1.
The benefit of lockdown is flattening infection curve, but the cost is multidimensional. It has caused social unrest and economic chaos
A similar positive relationship between unemployment and suicide rate is also expected in India. The weekly tracker survey of the Centre for Monitoring Indian Economy (CMIE) shows that urban unemployment rate soars to 30.9 per cent and the overall unemployment rate rises to 23.4 per cent.
However, there is no conclusive evidence of suicide due to job loss in the short run. But every economic disturbance has some lag effects. The recent available data, although inadequate, indicates a rise in the number of suicide cases.
Deaths due to COVID-19 infection is significantly visible. However, the deadly virus has indirectly taken lives, and a large number of deaths/suicides are happening but are generally ignored or underreported. These are mostly due to the failure of timely interventions and policies before the announcement of lockdown.
There is evidence that a number of deaths were caused due to exhaustion or hunger, migrants killed in road accidents, deaths due to police atrocity/retaliation, death due to transport blockade, sexual assault and deaths of sanitation workers. In addition, suicide/homicide due to fear/stigma, suicide/death related to alcohol withdrawal, honour killings/suicides during lockdown and suicides due to loss of unemployment have risen.
Assessing interlinkages between lockdown, livelihood and social unrest is crucial to design public policies accordingly in the times of COVID-19. The longer the economy is suppressed, the more long-lasting structural damage is done to it.
Aggressive intervention in the short run will control the virus spread and mortality but it will heavily damage the product and labour market. However, it is expected that securing public health may expedite the revival of economic health in the medium run.
Various experts have suggested direct cash transfers through the Jandhan-Aadhaar-Mobile (JAM) trinity; however, its efficacy raises serious concerns in the rural India due to weak banking infrastructure. Further, it is recommended that the lockdown can be instrumental with a package of employment and social protection. Thus, the survival package in the short run and stimulus package in the medium run is crucial. Such measures also work as market signaling and reduce uncertainties.
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*Respectively: Assistant professor of economics at the Patliputra University, Patna; research scholar at the Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi

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