COVID-19 in India: Status, Policy Impact and Government Response

COVID-19 in India: Status, Policy Impact and Government Response

By Aarthi Raghavan | March 19 2020, 10:20 PM SGT

Current Status

The number of Covid-19 cases has surged to 169 in India. Clearly, the country is fighting against all odds to stay put in stage 2 of COVID-19 and avoid stage 3, which is community transmission. In this regard, Prime Minister Narendra Modi will address the nation on 19 March at 8 pm. The numbers are increasing steadily with more than 20 new cases in a single day. More than 4000 people who came in contact with the confirmed cases are under surveillance and more than 1.3 million people have been screened at airports across the country. India is currently experiencing Stage 2 of the outbreak whereby disease transmission is limited to those with a travel history to the affected countries and others in contact with the affected persons. The Indian Council of Medical Research (ICMR) is conducting surveillance of 20 random samples from nearby public and private hospitals to confirm whether there has been any transmission of the disease in any community. India is currently the fifth country to isolate a strain of Covid-19. Steps are being taken to develop drugs, vaccines and rapid diagnostic test kits.

Economic Impact

Current

Many large corporations in India have asked employees to work from home and those in the tech industry who have recently visited affected countries have been kept in 14 days quarantine. According to Dun & Bradstreet, Indian companies might be impacted due to their direct and indirect linkages of trade and commerce and global supply chain. This can also lead to an increase in inflationary pressures in the short term. The economic slowdown in recent months which have been showing signs of recovery is expected to be further delayed due to the impact of Covid-19. Weak demand alongside high inflationary pressures and geopolitical issues might affect industrial production.

While aviation has seen a drastic decline (585 international flights cancelled as of March 6), further domestic slump is expected. Other sectors impacted and seeing significant declines include hospitality (35 per cent), apparels (35 per cent), consumer durables and electronics (15 per cent) and poultry and seafood exports (30 per cent).

Potential

The potential impact of the pandemic can be $348 million, especially across industries like chemicals ($129 million), textiles and apparel ($64 million), automotive sector ($34 million), electrical machinery ($12 million), leather products ($13 million), metals and metal products ($27 million) and wood products and furniture at ($15 million). Other sectors that will be affected in the long term are shipping, auto, pharmaceuticals, textiles, solar power, electronics, IT industry, tourism and aviation.

On March 4, OECD estimated that India’s GDP would grow at 5.1 per cent in the 12 months to March, down from its previous estimate of around 6 per cent. Also, Fitch trimmed its growth estimate for the same period to 4.9 per cent from 5.1 per cent. However, Reserve Bank of India (RBI) governor Shaktikanta Das has stated that the impact of the disease on the Indian economy would be relatively low. Moreover, based on the statement of Finance Minister Nirmala Sitharaman, the government plans to announce measures to deal with the impact of Covid-19 on the domestic industry.

Policy Impact and Government Response

The overall government response has been to work towards delaying the progression of the disease to the next stage. Currently, the government is focussing on identifying additional quarantine facilities, development of isolation wards, training of health workers and doctors, ensuring adequate testing kits and personal protective equipment (PPE) like masks and sanitizers across all States and Union Territories (UTs). As per the Essential Commodities Act, masks and hand sanitizers have been declared as essential commodities, till June 30, 2020, to control for shortages and black-marketing. According to this act, state governments can ask manufacturers to enhance the production of these commodities and make the supply chain smooth.

A few states are also enacting the provisions of the Epidemic Diseases Act, 1897, according to which state governments “may take, or require or empower any person to take some measures and by public notice prescribe such temporary regulations to be observed by the public.” With Covid-19 being declared a notified disaster by the central government, the State Disaster Response Fund, constituted under Section 48 (1) (a) of the Disaster Management Act, 2005, is also available with state governments to fight the epidemic. India has also initiated a SAARC meeting (on March 15, 2020) at the highest level to coordinate efforts to contain Covid-19 in the region and proposed a Covid-19 relief fund of $10 million as part of the initiative.

Stimulus Package

The government has not yet announced a stimulus package for Covid-19 but is watching the situation closely. The MSME sector has called for a stimulus package to overcome the impact of the disease on the supply side, particularly in terms of raw materials coming from China.

Interest Rate

No rate cuts have been announced so far by the RBI, this might be due to the sharp rise in retail inflation in the last few months. However, it may plan to push more liquidity in the market in order to ease repayment issues to sectors which have experienced supply chain disruptions. Any potential rate cuts at this point, though hard to comes across, may take shape only after the March 31st meeting of the Monetary Policy Committee.

Travel Bans

Government has curbed travel across the border, including buses and railways from all neighbouring countries. On March 11, the government announced a temporary suspension of all tourist visas and stated that only official, diplomatic and employment visas will be issued from March 13 until April 15. However, exceptions will be made for foreign and Indian nationals who want to travel to India owing to “compelling reasons” for which they can approach their nearest Indian consulate. All such travellers, who have travelled from China, Italy, Iran, South Korea, France, Spain and Germany any time after February 14, will be quarantined for a period of 14 days.

Social Distancing

The Union Health Ministry has announced that social distancing measures including the closing of educational establishments, swimming pools, gyms, malls, theatres, cultural and social centres, as well as allow employees to work from home, less use of public transport, and 1-metre distance between people should be maintained till March 31. The ministry has recommended online tuition for educational institutions and video conferences for meetings, and advised against non-essential travel, especially by public transport. Similarly, the organizers of sporting events and competitions involving large gatherings have been advised to postpone such events.

Image credits: Rajanish Kakade/AP