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We are not in an ideal world, worldwide and within India. Scylla’s health is obvious, with many heads and legs (as a metaphor for heterogeneous states) increasing the numbers of infection and death, although India’s death rates are still low. The increase in numbers is due in part to more testing and better reporting, but increased transmission plays an important role. There is only so much that governments (Union, state, local) can do and government capacity varies. Citizens may have shown their support for the confinement, but there are several cases of violation of social distancing.
Therefore, we are not close to the Covid-19 peak, not to mention a possible second phase. The infection numbers of 200,000 in a month are not unlikely guesses and these are symptomatic cases, perhaps 25% of all infections. Any risk-averse sailor would walk away from the Scylla monster, with a prolonged, undiluted lockup that will last until September or more. But there is Charybdis, the whirlpool of a cheap toll.
Mortality and morbidity also apply to companies; MIPYMES more pronounced than most. Baseline GDP growth was already in a slowdown mode and a capital constraint was compounded by the blockade’s labor constraint. There were supply and demand shocks. That Scylla / Charybdis metaphor is adequate, because Homer’s account tells us what Odysseus did. He passed closer to the sea monster Scylla and lost some sailors, instead of losing the entire ship due to proximity to Charybdis.
The phased opening can be interpreted as that. Pareto’s 80/20 rule applies to many phenomena. If 80% of India’s geographical area is virus free or has been maintained to contain it, why subject it to a blackout? The red / orange / green template is not just for states or districts, it’s even thinner. Therefore, if a place is not a containment zone, why not open there, recognizing that this is not ideal? It is the second best. Comparing it to the first best is useless.
Unfortunately, 80% of productivity, growth, and income also occur in infected areas, red light districts, and even containment zones. If one takes Maharashtra, Gujarat, Delhi, Tamil Nadu and Uttar Pradesh, what is left of contribution to growth and government revenue? If one takes Mumbai, Pune and Thane, what will be the answer for Maharashtra? If one takes Ahmedabad, Surat and Vadodara, what will it be for Gujarat? With a rural / urban lens, until now, symptomatic infections are correlated with urban agglomerations. This is where the secondary and tertiary sector activities are also concentrated.
The extensive economic revival will be a long journey, which will require at least two years. Meanwhile, since solid employment figures are not available, the piecemeal evidence is scary. With a partial opening and a focus on the rural, the door opens a little.
What is produced has to be distributed. Like employment, trucking data is also imperfect. For what it’s worth, it shows that average transportation activity is now 40% of what it was, preblock.
It is understandable that this reversal is concentrated in agriculture and food and beverages. Can the rural approach generate growth and employment? No one argues that it is enough. Rural areas cannot provide employment for returning migrants. The orange / red zones will be limited by restrictions on labor mobility and migration. Both industry and services require labor, and MSMEs will struggle to bear additional health-related compliance costs. But, as I said, there is a rock and a hard place. The green / orange / red identifications are dynamic and depend on the spread of the contagion.
At the moment, the ship has moved away from Charybdis a bit.
(President, Prime Minister’s Economic Advisory Council)
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