Experts in the ICMR believe the entering of the pandemic in third stage is ‘inevitable’ and the whole strategy is to at least delay the time. If it is delayed by a month beyond April 15, India will have enough time to put the required medical facilities, supply of drugs and implements, deployment of doctors and other medical staff, and of course financing the health infrastructure for the purpose, to take on any eventuality. Testing of patients for ‘community transfer’ is still at negligible level. However, the testing facilities available are still underutilized. Need of quarantine of Kerala doctors indicate that the country needs more to do even for our medical centres where the patients are to be treated and quarantined. Tests for community transfers should begin in a big way as soon as possible to ascertain the real status of the spread.

As for the impact of corana crisis on Indian Economy and common people, the Ministry of Finance, Reserve Bank of India, and other entities has initiated several policy steps, but they have been very slow in their response and have done a little. They need much more to do before the third stage of the disease hit the country. Invocation of Disaster Management Act, Epidemic Act, and other rules are among the good steps to stop entry and spread of the disease in the country. Shutting of the places of gathering like malls and educational institutions are also in the right direction. However, the domestic movement of people from corona affected 13 states to others require urgent step of commencement of large scale testing for its community transfer.

Monitoring, containing and mitigating the effects of the corona virus are of course the top priorities for the government. Timely and decisive actions by health authorities, RBI, fiscal, regulatory, and supervisory authorities are needed much more than the present level to help contain not only the spread of the virus but also to offset the economic impact of the pandemic. As per the policy paper titled ‘Policy Steps to Address the Corona Crisis’ released by IMF on Monday, Central banks must support demand and confidence by preventing a tightening of financial conditions, lowering borrowing costs for households and firms, and ensuring market liquidity. In this context, RBI’s announcements are but a little. Fiscal policy must step up to provide sizable support to the most affected people and firms, including in hard-to-reach informal sectors. Regulatory and supervisory responses must aim to preserve financial stability and banking system soundness while sustaining economic activity. However, the government of India is visibly slow in response as we have been witnessing for the last several years while economic crisis touched the nadir in the last decade. It is unacceptable.

Monitoring and containment measures are essential to slow the spread and reduce the peak load on our health system. WHO is providing guidance on health measures. Any delay in early monitoring for the impending third stage will prove counterproductive. Ensuring sufficient paid sick leave will help to curb contagion, the IMF policy paper says. In countries, such as India is, with less reliable social safety nets, health interventions must be targeted to reach informal sector and those living in extreme poverty. Systematic testing is necessary to document progress and inform when it is safe to resume activity.

Urgent ramping up public health expenditure is needed because overwhelmed systems can amplify the initial shock through social anxiety, reduced detection and treatment, and heightened need for quarantine. Key steps included supporting medical tele-consultations and extra-ordinary recruitment in the health sector, complemented by coordinated industrial response in medical supplies production and steps to reduce negative cross-border spillover from excessive hoarding.

Stopping rumours is needed which is possible by timely and regular communication of information from credible sources, including daily update on severity. National directives and transparent policy advice will help guide the efforts and resource allocation of firms and the public sector to monitor, plan and respond to the pandemic.

RBI must take note of the policy recommendation of the IMF which says that Central banks should provide liquidity to support market functioning and ease stresses in key funding markets through open market operations, expanded term lending, and other measures such as outright purchases and repo facilities. Monetary easing will support demand and confidence while reducing borrowing costs for households and firms. In addition to rate cuts (where there is policy space), stimulus can be provided through forward guidance about the expected path of monetary policy, and expansion of asset purchases, including risky assets. To complement generalized policy measures, more targeted support for certain asset classes should be considered. Monetary policy will need to balance cushioning growth with tackling external pressures, including commodity price shocks and capital flow reversals.

Government should take note of the other fiscal policy recommendation to urgently provide sizable support for affected people and firms during the pandemic. Additional fiscal stimulus is necessary to prevent long-lasting economic damage. However, we are sorry to hear from our Finance Minister that the officials are still assessing the extent of the damage, and RBI’s committee will decide certain measures after due consideration in future. Obviously they are very slow to respond to the impending new crisis even at the time when Indian economy has already been in severe crisis.

Wage subsidies for business affected by shutdowns can help prevent cascading bankruptcies and massive layoffs that will have lasting effects for future recovery and negative impact on aggregate demand. Cash transfers to low-income households can support consumption and preserve minimum living standards. Broad based fiscal stimulus must not be too late.

The regulatory and supervisory response should be quick, because the economic impact will affect borrowers’ capacity to service loans, and depress bank’s earnings, which could eventually impair bank soundness and stability. Steps are needed to maintain market discipline and orderly recovery.
(IPA Service)