A virus that infects everyone – young and old, women and men, across race, religion, geography or privilege.
A virus that affects every economy – developed and developing, rich and poor.
A virus that influences every political system – democratic or authoritarian.
And while different countries have different strategies to counter it, India has chosen to go all in – physical, fiscal, monetary, executive (in Union and the States), legislature and judiciary, State and non-state actors.
First, on the physical front, India has gone into a lockdown for 21 days. “From 12 midnight today the entire country, please listen carefully, the entire country shall go under complete lockdown,” Prime Minister Narendra Modi said in his 24 March 2020 address to the nation. In order to protect the country, and each of its citizens, from midnight tonight, a complete ban is being imposed on people from stepping out of their homes.” For a country the size of India, containing within itself a huge population density and cultural diversity, this lockdown is arguably the policy action of the last resort.
Modi had tested the waters in an earlier nudge called the Janata Curfew, a people’s curfew. Under this, citizens were advised to remain home from 7 am to 9 pm. “During this curfew, we shall neither leave our homes, nor get onto the streets or roam about our localities,” Modi said in his 22 March 2020 address to the nation. Only those associated with emergency and essential services will leave their homes.” Additionally, he urged people to give a standing ovation to those giving essential services. “On Sunday at exactly 5 pm, we all stand at the doors, balconies, windows of our homes, and give them all a 5-minute standing ovation. We clap our hands, beat our plates, ring our bells to boost their morale, salute their service.”
It worked. Perhaps this was an experiment to assess the receptivity of difficult decisions. Standing on the success of this experiment, he then raised the stakes to a complete lockdown. Modi set the ball rolling by initiating and organising an interaction of SAARC leaders (six leaders and one proxy from Pakistan) on fighting Covid-19. Further, the Extraordinary G20 Leaders’ Summit too was held on video. Barring some individuals who are homeless and a few rebels who continue to think the lockdown is just another policy excess by the Modi government that must be opposed not on merit but by habit, this too is working.
Second, all State governments have put the lockdown in place. This might seem counter-intuitive, given the highly-argumentative and oppose-Modi-at-any-cost politics that we have got used to seeing in states that are not governed by the NDA. But such is the nature of this virus, that the lead from the Union has trickled down to the States in a harmonious governance unity. From Maharashtra and West Bengal to Tamil Nadu and Punjab, all state governments are following and executing the lockdown.
This is a welcome change. It tells us that while politics may be played on the chessboard of rifts, at a pinch that threatens mass destruction, Indian leaders have the capacity to come together to execute a preventive action. We believe, this is the best the governments can do now: managing a spread and then taking action would be very difficult because of the inadequate healthcare system across India.
Third, on the fiscal front, the Union government has announced a Rs 1.7 lakh crore relief package under the Pradhan Mantri Garib Kalyan Yojana. Unveiled by Finance Minister Nirmala Sitharaman on 26 March 2020, the package includes the following:
All these put money in the hands of the poor. We believe this is the first tranche of fiscal easing and a second package is expected. Had Covid-19 been a routine challenge, Sitharaman would have focussed on keeping the fiscal deficit under control. That she is willing to step out of the crease and hit the economic infection hard shows a quick adjustment in policy thinking and nimble-footed action. Fiscal deficits and GDP growth can wait: for now, we stand with her.
Fourth, on the monetary policy side, the Reserve Bank of India Governor Shaktikanta Das announced huge loosening of policy. He has reduced the policy repo rate (the rate at which banks borrow money from RBI) by 75 basis points to 4.4% and the reverse repo rate (the rate at which banks lend money to RBI) by 90 basis points to 4.0%. “The purpose of this measure relating to reverse repo rate is to make it relatively unattractive for banks to passively deposit funds with the Reserve Bank and instead, to use these funds for on-lending to productive sectors of the economy,” Das stated in his 27 March 2020 seventh bi-monthly monetary policy statement. Further, he has reduced the cash reserve ratio by 100 basis points to 3.0%. This is big: it releases Rs 1.37 lakh crore of primary liquidity into the system.
While RBI’s intentions are noble, excess money in the system is unlikely to spur commercial operations in the short term. For now, all economic activity has come to a standstill. Perhaps Das is looking at Day 22, after the lockdown is over. While the nation is preparing itself for a longer lockdown, whenever we unlock, liquidity not be an issue, RBI seems to be saying. That shows economic optimism in a time of biological pessimism.
The overall idea of RBI is directed towards ensuring “normal functioning of markets, nurture the impulses of growth and preserve financial stability” – all three priority actions. While taking these actions, Das has done well to alert us on the incoming recession: “Expectations of a shallow recovery in 2020 from 2019’s decade low in global growth have been dashed. The outlook is now heavily contingent upon the intensity, spread and duration of the pandemic. There is a rising probability that large parts of the global economy will slip into recession.”
RBI’s actions are realistic. True, it could have gone for deeper cuts. But since inflation is expected to fall, largely due to the collapse of crude oil prices and softening food prices but equally as prices fall to accommodate lower demand, we can look at these cuts as one part. Together with a cut in interest rate and a fall in inflation rate, the effective cost of money in the system will be lower. The small confusion around repayment of home loan EMIs notwithstanding, this too is an all-in response. “We don’t know if this is enough,” argues Monika Halan. “But what is comforting is that the government and the RBI are working in tandem to deal with this giant killer of a virus.”
Fifth, sixth and seventh, all three arms of the State are all in. Parliament and State Assemblies are closed. The Executive is ensuring essentials are in place; otherwise, most are working from home. While anecdotes of bureaucratic inertia and entitlements are springing out, mostly, they are on course – the initial hiccup of not allowing people or essential services on roads notwithstanding. And for a change, even the Judiciary is on board: the Supreme Court will hear “only matters involving extreme urgency”. A presiding Judge would decide the urgency, based on a “prayer made by Advocate-on-Record/party-in-person” through a signed and verified application “containing a synopsis of extreme urgency not exceeding one page”. Matters would be taken on video conferencing. High Courts across the country are following through, as are lower courts.
Eighth, outside the purview of the State, other non-state actors too are playing their part.
The challenges of overcoming Covid-19 has brought India and Indians, institutions and individuals, together like never before. All hands are on board. Some are active hands delivering essentials – professionals and workers in healthcare and other essential services. Most are passive – staying at home with minimum outside interface is equally a test of resilience, and every individual is playing her part. All institutions of the State are working together – another new phenomenon which we are not used to seeing; gone for the moment is the inertia, the turf wars, the power politics. Once we come out of this crisis, we need to study and think about how this unity can be leveraged to deliver a deeper governance, a better citizenry and higher economic growth.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
Gautam Chikermane is a Vice President at ORF. His areas of research are economics, politics and foreign policy. A Jefferson Fellow (Fall 2001) at the East-West ...
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