Lockdown exit Plan: PM Modi, kaam hai toh jaan hai!

Garment and leather-wear exporter Matrix Clothing has repurposed three of its plants to produce personal protection clothing for healthcare workers deal- ing with COVID-19 patients. The assembly line at the Gurgaon based plants has employees working three to four feet apart.

Now they work on alternate machines with a gap of 6-7 feet, wear masks, wash their hands four times a day and subject themselves to temperature checks when they arrive in the morning and after lunch, informs Gautam Nair, the founder and managing director. An official from the Textile Commissioner’s office visits frequently, he says, to verify compliances. Nair says “the economic cost of the lock- down is horrendous.” He expects garment and leather export industries, which employ large numbers of people moving out of agriculture, to take a “significant” hit.

He estimates that half of the units may not survive owing to the cost of the lockdown, deep discounts sought by overseas buyers who have been unable to sell the apparel because of closed stores, and delayed payments. The garment export business is very competitive. The margins are thin. If an exporter making a profit of Rs 5 on a piece of garment worth Rs 100 is told to discount the price by Rs 70, they will not stay afloat, he explains.

A businessman who has been quite vocal in his criticism of the government’s “not-so- smart” and “disproportionate” response to COVID-19 is Rajiv Bajaj, the managing director of Bajaj Auto, the fourth largest auto-rickshaw and motorcycle manufacturer in the world. “All lockdowns are not born equal,” he said in a TV interview.

India, he argued, has overreached given the rate of spread of the infection, the warm weather, and the large share of young people in its demography. Bajaj believes India’s response has actually weakened its ability to fight the epidemic. In the automotive industry, Bajaj says, small component manufacturers will have to cut salaries, lay off people and save other costs as they struggle to cope. Bajaj Auto, being large, profit- able and debt-free has avoided job losses but a wage cut for the period of the lock- down, proposed by the workers’ unions, is being considered.

Bajaj says factories which are in rural areas and outside the municipal limits should be allowed to open first. Bajaj Auto’s plants in Chakan near Pune and Waluj in Aurangabad have been allowed to restart. But the conditions - sealing of the factory for three months if even one COVID-19 positive case is detected – are so onerous that only a foolhardy manager would take the risk. Lockdowns in India, Rwanda and Syria have been the severest, says former Chief Economic Adviser Kaushik Basu quoting a study by Oxford University’s Blavatnik School. Many countries – China, Taiwan and Italy – have announced quick unwinding of the lockdown, while keeping social distancing rules intact, to get their economy running.

“We have to take intelligent precautions and follow rules to cut risk,” said Basu in a tweet, “a society that tries to drive today’s risk to zero, simply paves the way for tomorrow’s grief and penury.” Any extension of the lockdown beyond 3 May would push India’s GDP growth rate into negative territory.

While India’s thaali banging, diya lighting and firecracker-bursting middle classes have accepted the enforced idleness as an inconvenience preferable to the risk of contracting infection, for those on the margins of poverty there is no ‘jaan hai toh jahaan hai” binary choice. As the thousands of migrants walking home to villages after the lockdown announcement made clear, a city without work opportunities is dead to them. Pronab Sen, the former Chief Statistician of India says restart- ing the manufacturing sector is essen- tial because of its backward linkages.

Within the services sector, retail and wholesale trading have a sizeable share of employment. These should be allowed, he says. E-commerce in essentials has been permitted; it should be extended to non-essentials as well. The movement of goods and allied activities – like dhaba services along highways – should be permit- ted. There should be no restrictions on informal activities like hawking. Food take- aways may be allowed, but the opening up of hotels, restaurants and train and flight services will have to be delayed.

Rajiv Bajaj also favours calibration of restrictions based on age groups of persons and the prevalence of infection in an area. Those between the ages of 20 and 60 should be permitted to work to begin with, because experience shows that COVID-19 infection is the least fatal for them. The government will also have to provide a wide safety net especially for small and medium enterprises. Since banks will be risk averse and will lend only to prime borrowers rather than risk default, the government must guarantee them capital protection.

This will ensure that the enterprises don’t go bust, says Sen. Sen says the government must get the RBI to print money in order to stimulate demand. Borrowing from the market is not advisable as it will drive up interest rates – and costs. He sees little risk of rupee depreciation because other countries are also following expansion- ary policies. Crude oil, a big import item, is trading at historic lows, so a weak rupee will not stoke inflation.

The Prime Minister and the Chief Ministers must be less risk averse. Health is a state subject and they should be allowed to exit the lockdown in the manner they think is prudent. While the states’ healthcare costs have risen, their revenues are under strain, because collections of goods and services tax are down.

The clampdown on sale of liquor, which pro- vides a big chunk of state taxes, has also affect- ed their finances. Fighting the epidemic without more economic dislocation will require the centre to be more of a team player in the spirit of cooperative federalism than it has been so far.