Calibrated Response, Profuse Testing, Gradual Easing of Lockdown Key to Bringing India Back on Track

Mumbai: The novel coronavirus has triggered a global economic bloodbath. In India, too, the situation looks grim and is set to become grimmer in the immediate future.

Prime Minister Narendra Modi has already decreed a 21-day lockdown, urging people not to move out of their homes unless absolutely needed. States like Maharashtra went into a lockdown mode much earlier, given the spectre of a rapid surge in virus-infected patients.

The economic costs of the lockdown are going to be huge. Preliminary estimates are that the direct loss due to this unexpected pandemic for India would be around Rs 10,00,000 crore.

The impact will persist even in an optimistic scenario that the Covid-19 threat subsides after mid-April. The affected sectors will take time to limp back to normalcy.

The non-performing assets (NPAs) with the financial sector are bound to surge and banks will be wary of extending credit, given the heightened risks. Fiscal targets will be missed, increased public borrowing necessitated, putting pressure on interest rates, further dampening private investments.

It seems highly unlikely that this rather optimistic scenario will materialise. We currently have no idea about the actual transmission of Covid-19 in the country since we are not testing enough.

In the unfortunate advent of a large case-load, our public and private health system could be completely overwhelmed.

It will be a double whammy if our economy too goes into a comatose state, something we simply cannot afford. As of now, there is no option other than a total lockdown. Our response must be to save lives, contain the spread of infection and limit the damage to the economy.

How does one achieve this?

Nobody has a magic wand. But it is important to have a sense, even if only a broad sense, of costs as well as benefits of various policy options. The cost-benefit structure is likely to be evolving, so we need continuous data, both on the economy as well as Covid-19 spread.

One possible response could be a gradual easing of the lockdown at a pre-determined date announced in advance to the people – for, surprises and sudden announcements are never a good public policy – once the novel coronavirus infection rate stabilises, after which, as it is now, testing is the key as returning to a steady normalcy. We can't shut the economy forever since it has huge, irreparable consequences. On the other hand, we can't allow Covid-19 infections to go out of bounds. While the current strategy is okay, we might need a calibrated approach to reopening our economy, including incentivising slow modes of transport wherever possible and staggered employee flows, among other things, investing heavily in testing, something we haven’t done so far.

Epidemiologists at the US-based Center for Disease Dynamics, Economics and Policy (CDDEP) had last week stressed the need for multiple but localised lockdowns.

Total lockdowns can never be fully achieved in a diverse country like India, as indicated by stories of thousands of poor migrants having to head back home by foot in the absence of any mode of public or private transport available. In fact, it could at times be counter-productive.

Besides, one may expect a second wave of infections later this year when winter kicks in.

“A national lockdown is not productive and could cause serious economic damage, increase hunger, and reduce the population resilience for handling the infection peak," the CDDEP report cautioned.

The CDDEP used an agent-based simulation model to show that even under moderate to full compliance, India could get 2 million hospitalisations at the peak of this epidemic, sometime in early May, continuing well up to July. If the virulence of the disease is reduced by the summer temperature, hospitalisations will peak at around 1.2 million by late June.

We could question the models, but looks like we are in for a long haul.

After the gradual easing of the lockdown, establishments and organisations could devise work schedules in shifts of two or three, to avoid overcrowding. Students with odd and even roll numbers could attend classes on alternative days. People could be encouraged to cycle or walk to work by imposing a fee on using autos/private cars/bikes and private buses wherever possible. In addition to raising revenue, this will be more advisable than shutting the fuel stations as is happening in some states now. Not selling fuel only deprives the State of revenues vital in these stressed time.

We must then test, test and test. As people would go back to work, we need to intensify testing for symptoms at work sites, schools, colleges, on buses and trains. Those showing symptoms should be made to undergo compulsory Covid-19 testing. Alongside, five per cent randomly selected people other than those showing signs of symptoms could undergo testing for Covid-19.

We have data on pensioners, and those senior citizens who are eligible for various government schemes. Since they are more vulnerable, we random test a larger sample from among them.

We quarantine all positive cases, with random testing of their contacts and monitor the data and take calibrated policy decisions.

Post the current lockdown, we have no idea of how the infections would spread, though some models show a surge even after the social distancing ends. In our current strategy we are hoping that the virus would go away once the lockdown ends. The costs of lockdown are going to be surely higher than the costs of testing. Of course, testing is costly, but the costs of not testing enough are even more. This strategy will have several advantages:

1. The economy will get back on track faster. Output and employment losses can be minimised, avoiding social tensions.

2. The costs of various relief packages to various sectors will be lower.

In any case, the government realistically does not have the resources to do much. In addition, several governance issues that will arise as we relax bankruptcy norms, loan repayment options etc., can also be minimised. Relaxing oversight to ensure viability of banks, as has been suggested, is not a good idea, and we need to minimise our recourse to such “turning a blind eye" policy. Loopholes once created tend to last a long time. It will be impossible to even evaluate, leave alone settle, all the claims for financial support that are now being made from various quarters. Restarting the economy sooner than later means fewer such challenges.

3. We will not be sacrificing future resources which are important for ensuring higher investments in public health and education among other things. A stronger public health system coupled with well-educated population is our best bulwark against more such challenges in the long run.

What is important is to evolve an inventory of approaches to our situation with a sense of their costs and possible benefits. That is what will enable sensible responses. For this purpose, the Centre and state governments should quickly put together a group of public policy experts, economists, epidemiologists along with senior bureaucrats to evolve quick responses to the emerging challenges in the Covid-19 crisis in a flexible and calibrated fashion.

(The author is Professor of Econometrics at the Mumbai School of Economic and Public Policy (MSEPP). The views expressed here are his own and not of the institution that he represents)​