Maneck Davar: Now for the fishing rod

While governments at the Centre and the states have been exemplary in the adoption and execution of strategies to contain COVID-19, especially in a country as difficult and diverse as India, the lack of any coherent plan and packages to resuscitate businesses and industry in its aftermath is distinctly worrying. As finely attuned as it has been to the consequences of COVID-19, and its spread, if unchecked, the government’s piecemeal approach to subsequent economic rehabilitation does not inspire confidence for the future.

And, it is a future fraught with human tragedy, which, if not immediately attended to, will result in unprecedented suffering and deprivation. Even now, days away from lifting the lockdown, starvation stares in the face of thousands who are subsisting on one meal in two and three days, their children lacking milk and protein-rich diets.

Union commerce minister, Piyush Goyal, and the commerce ministry have had a series of digital exchanges about the problems faced by exporters, and foreign exchange-earners. The action taken within the ministry has been literally lightning quick, with solutions and coordination being effective even before the meeting was over. While this serves to ease bottlenecks, the core issue of liquidity remains unsolved. India’s merchandise exports are largely powered by SMEs, especially, in sectors such as apparel, leather, textiles, carpets, handicrafts, sports goods, and gems and jewellery.

There is an opportunity to fill a vacuum created by trust issues with, and sentiment against, China. But, most of these sectors are labour-intensive, with thin margins. The signal they emit is clear—without an infusion of serious cash, it is a question of survival. And, exports are a microcosm of the industry at large.

The underlying message is that businesses will be shuttered if help is not at hand. A report estimated that 70% of those employed in the travel and tourism sector, including aviation, and food and beverage, will be on the streets. In the US, unemployment has increased from historic lows to over 15%, with more than 22 million people on the dole. In India, the situation will be catastrophic, with no safety net. If businesses fail, government diktats not to fire employees will be empty rhetoric.

The steps taken, though well-meaning, have had little impact. It is humane to provide immediate sustenance to the bottom of the pyramid, but what good is it to feed someone fish for one day, yet take away the fishing rod, using which, they can feed themselves for a long time?

RBI’s initial announcement of a moratorium and repo rate cuts gave the appearance of some succour, especially to the salaried class with EMI burdens, only to be dashed when banks charged interest on interest during the moratorium period. Further, there were no instructions to banks to pass on the benefits to consumers by compulsorily effecting a 2% rate cut on interest. Similarly, a suggestion made by the author, and also by others, of speedy release of IT and GST refunds was implemented only for the former up to Rs 5 lakh, a mere band-aid for businesses.

Most countries have come out with huge economic packages as percentages of their GDP, offering crucial support, especially to the MSME sector. It is time we also stepped up to end the uncertainty. Even neighbouring Bangladesh has announced a package for its apparel sector, offering to pay salaries as a loan to be repaid over a period with 2% interest.

There is another human dimension we have not considered as we grapple with the tangibles of containment. This is the huge psychological problem created by being cooped up at home. With little productive activity, the mind grapples with uncertainties of a future without employment and earnings, and the consequent responsibilities of a family. The psyche has been damaged, and only bold fiscal measures will ensure this damage is not permanent.

The battle against the virus will be won. Now, for the war for our future.

Re-published with the permission of Maneck Davar. This essay was first published on 21 April in The Financial Express