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“India must start mass testing for Covid-19 with greater speed”

Dr. Parthajit Kayal, Madras School of Economics tells TPCI that the real impact of the 21-day lockdown may be much higher than is being estimated and may last much longer. He also spoke about the need to be more empathetic towards the immigrants, informal workers and the people from other marginal section of the society.

TPCI: What impact would the halt of production in the wake of Coronavirus outbreak in India have on its GVA?

Dr. Parthajit Kayal (PK): A lockdown of three weeks due to the Coronavirus outbreak has brought a complete halt to economic activity in India. It may be too early to estimate the impact of it. If you read newspapers and other dailies, you might see different numbers for the estimated impact and these numbers will change on a daily basis. In my view, we might see a more than one percent drop in GDP growth in the current half-year. However, the real impact may be much higher and may last much longer. It is not just India, which is going to see the fall in GDP. Coronavirus outbreak is going to impact the GDP of all the countries and that will pull down the global GDP number also.

TPCI: Which are the key sectors that are most likely to be hit due to this?

PK: Major sectors will get hit including automobiles, pharmaceuticals, textile, electronic, chemicals, agriculture, transport, tourism, etc. India is heavily import-dependent on China for electronic items, machinery, automotive parts, pharmaceutical requirements, chemicals, fertilisers, etc. Transport, tourism and hospitality sectors will also feel the pain due to forced travel restrictions. We may have to restrict international travel for a prolonged period. However, low oil prices could give them some breathing space due to a fall in the oil import bill. The present lockdown has brought a complete halt to economic activity. Therefore all the sectors will get affected adversely. However, there could be low consumer demand for non-essential products for an extended period. In that case, impact of coronavirus on economic activity would last longer than expected.

TPCI: What is your view on the efforts being taken by the Indian government to minimise Pthe impact of Covid-19 on the economy? What more can be done in this regard?

PK:The Indian government is trying its best to do as much as possible. The present extended lockdown is certainly a bold step taken up by the present government. Restrictions on movement, closure of international and domestic travels would certainly help us to contain the outbreak of the Coronavirus. However, the condition of immigrants is vulnerable as they cannot travel back to their home and they don’t have income now. Overall, people in the unorganized sector will be affected most. Central and the state governments should take up steps to help them and also ensure availability of necessary items (food and medicines) to everyone in the country.

However, we need to do more in this regard. We need to start mass testing with greater speed and make a large network of labs and quarantine facilities across the country as soon as possible. Government should connect more with the people through media to make them aware. Citizens who don’t follow the government’s instructions should be punished severely.

TPCI: The pandemic is expected to hit those at the bottom of the pyramid the hardest. What measures do you suggest to contain the impact for them?

PK: We need to be more empathetic towards the immigrants, informal workers and the people from other marginal sections of the society. They do not have enough savings. It is a very difficult time for them to run their family as they can’t work now to earn some money. We should do our part to help them with some money, food, and medical needs. Corporates, NGOs, and state governments should also contribute and take action to help them as much as possible. 

TPCI: What can we learn from countries like South Korea, who have been better at managing this crisis?

PK: The key lessons are:

• Start mass testing with greater speed
• Make the tests extensive and affordable (set up a large network of labs across the country)
• Trace and isolate- (tracing all who might have been contacted with the virus)
• Track self-isolated people (using smartphone GPS, credit card/debit card transactions, etc.)
• Fool proof social distancing


• Government should connect more with the people through media
• Severely punish them who doesn’t follow the government’s instructions
• Lock-down should not be ended early

TPCI: What is your take on the relief measures announced by the Finance Minister to help people sail smoothly through this crisis? What effect will it have on the economy?

PK: Relief measures announced by the Finance Minister would help corporates and small firms to get some breathing space but it’s not enough. Extended deadline for GST, waiver of penalty, late fee and interest on GST, the lower threshold level for default, etc. are certainly needed for the firms to resume their business after the lockdown.

However, the whole economy is going to face severe liquidity crunch, banks might see an increase in its NPA level, consumer demand could remain low for longer period and industry would need time to get out of the supply disruptions of raw materials. Therefore, we definitely need a much bigger and broader stimulus package to minimize the negative impact on the economy. We expect to see an economic booster package announcement by the government and central bank very soon. Greater push should be given to increase liquidity and credit.

Dr. Parthajit Kayal is currently an economics professor at Madras School of Economics. He has several insightful research papers to his credit. Financial markets, mathematical finance, behavioural finance, fixed income & wealth management are some of his interest areas.

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