The challenge of lockdown 3.0Citizens must know that the right to step out comes with duties

The first day of lockdown 3.0 has shown the challenges involved in the graded opening up of the country. On Friday, the Union government came up with a complex order — which categorised the country into red, green and orange zones; prohibited a set of activities nationally; and allowed other activities, in varying degrees, in the different zones. This made sense. India needed a calibrated loosening up to ensure that there wasn’t an immediate surge in cases.

But for this approach to succeed, there were two prerequisites. The first was proper bureaucratic implementation — and this was always going to be difficult because of the inability of local police officials or district authorities to distinguish between what was permitted and prohibited, and who to allow and who to stop. But the second, more important prerequisite was citizens exercising a high degree of responsibility.

On day 1, this was missing. The most egregious reflection of this was in liquor shops. People lined up in hundreds, often without masks, jostling with each other, to buy cases of alcohol. The police authorities had to, in some cases, resort to lathi-charge or close shops. Liquor is an important source of revenue for state governments. Given the dire straits of public finances, as well as popular demand, opening stores made sense. But if citizens behave with such irresponsibility, then don’t rule out a revision of rules in the future. In times of the pandemic, it is not just about drinking responsibly — but also purchasing it responsibly. It is about maintaining social distancing and knowing that the right to step out comes with responsibilities.

Handwara: India must act stronglyDefeat Pakistan’s designs to inflict

Even the coronavirus disease (Covid-19) fails before Pakistan’s obsession with inflicting terror against India. The Handwara encounter, in which five Indian soldiers and a policeman were killed fighting a militant cell, is a reminder that through the pandemic, it has been business as usual along the Line of Control and in Kashmir. The past few months have seen a steady exchange of fire between Indian and Pakistani forces along the border, a parallel infiltration of militants, and concomitant terrorist activity in Kashmir. Rawalpindi’s recent rebranding of the existing militant groups in Kashmir as “The Resistance Front” does nothing to disguise the fact what is happening continues to be State-sponsored terrorism with Rawalpindi’s favourite Lashkar-e-Taiba at the forefront of the violence.

Pakistan has been ratcheting up violence in and along Kashmir since the abrogation of Article 370. This, despite failing to persuade the international community to force India to reverse its decision, and the looming threat of sanctions by the United Nations Financial Action Task Force. It is evident to everyone that India is not going to change what was passed without opposition in Parliament, and which is now engraved in the Constitution. Pakistan knows this too, but what it is seeking to do is make India pay a price for effectively cutting Islamabad out of the future of the Valley. Pakistan should know that incidents like Handwara, however tragic, will do nothing to bend India’s will.

India laid out a potential new path for Indo-Pakistani relations, one that focuses on trade and investment, tackling common development challenges and building personal bridges. It required, however, Pakistan to accept that the use of coercion to force territorial changes is no longer viable. The Covid-19 pandemic provided a perfect opportunity for Islamabad to at least explore this new path, using the excuse of a common viral enemy to put aside a legacy of animosity. Instead, PM Imran Khan chose to treat the pandemic as a non-event and the military, which still determines Kashmir policy, rejected the opportunity through violence on the ground. Pakistan must accept the new reality. But a nation born in bloodshed and sustained by violence will not surrender its delusions easily and peacefully. Which is why India should take into account these designs, anticipate challenges, and respond accordingly. Security forces will have to be at the forefront of this battle to seek a conclusion of the Kashmir conflict and force Islamabad to give up terror as an instrument of State policy.

jai Ganesh

DENIZENS TURN TO ORGANIC FARMING FOR IMMUNITY

Covid-19 pandemic is of greater concern to those having a weak immune system and in search of ways to strengthen it, more and more people are resorting to organic produce.

“People who consume organic vegetables develop better immunity in the long run, making them less susceptible to several diseases, including cancer,” says Tina Sapra, a Gurugram-based nutritionist.

Heeding to experts, many have adopted the practice of growing organic vegetables. “My mother has a weak immune system as she is a cancer patient, and the oncologist suggested an organic diet to build immunity,” says Manoj Kapoor, a Delhi resident.

The trend is also making inroads among citizens looking for healthier food choices. Entrepreneur Shikha Vatsa, who has moved from growing vegetables in her backyard to full-fledged farmlands, says, “What started as a hobby has now turned large scale. We’re now growing our own vegetables.”

The shift to organic farming comes as a saviour for people struggling with diseases. “Organic food reduces inflammation in the body which helps with autoimmunity problems,” says Rajeshwari Prakash, co-owner of a Gurugram-based organic company.

A blueprint to finance higher public spendingThe government should confront difficult choices using the key principles of public finance

It becomes clearer by the day that the lockdown to contain the spread of the coronavirus disease (Covid-19) is creating enormous stress on every part of the economy, including public finances. The need for public expenditure to address the crisis has increased, but revenues are down. Given this, how should we finance the additional spending? Broadly, there are four options before the government: Cut other expenditure, increase revenues, increase borrowing, or print money to monetise debt. All these options are painful and are costly in their own way. But as the government confronts these difficult choices, it would do well to consider four key principles of public finance.

The first is that the costs of each of the options may increase non-linearly, and so the optimal approach may be a judicious combination of all four options. The second is to minimise frictions across tiers of national, state, and local governments and take a consolidated view on the best policy actions. The third is to ensure that short-term actions do not jeopardise longer-term fundamentals and also enable structural reforms that will put the country on a stronger economic trajectory. The fourth is to not let financing concerns impede essential investments to support public health and the economy.

Based on these principles, there are a few implementable ideas that the government can use to help fund its response. On expenditure, one simple idea is to change the structure of public employee pay so that all allowances other than basic pay are linked to government tax revenues. In good times, public employee pay will be higher, and in difficult times, the reduced payroll provides an automatic macro-fiscal stabiliser. It may also create an important symbolic link between public employee pay and state and national economic performance, which is missing right now. Over time, once the principle of variable pay for public employees is in place, it may be possible to link it to measures of department and individual performance which has been shown to meaningfully increase effort and productivity of public employees.

On revenues, there is substantial scope to increase property tax rates and collections by local bodies. The central government can incentivise these payments by making property taxes deductible from taxable income. This has several advantages. First, property taxes are less likely to dampen economic activity since they are based on immovable investments.

Second, urban areas contribute the most to GDP and tax revenue, but have been hit hardest by the pandemic and lockdown. This then becomes a form of central government support that disproportionately benefits urban areas. Third, it does not cost the central government much (since property tax collections are very low), but makes the extent of benefits to states and local governments conditional on implementing overdue property tax reforms.

Third, the government should issue debt with a commitment that these funds will be used primarily to invest in strengthening health systems. Increasing debt per se is not a problem if used to finance a public investment that has a positive net present social rate of return. The problem is that bond markets do not trust that governments will finance productive investments. Consequently, breaching deficit targets and borrowing more is often penalised with higher interest rates. Ring-fencing any additional Covid-19-related debt to focus primarily on health systems investment will reduce the likelihood of a bond market interest penalty. According to one estimate, each week of the full lockdown has cost nearly ~2 lakh crore. Thus, the public returns to health investments that enable even a partial release of the lockdown are likely to be very high.

Fourth, it is best to avoid discussion of monetising the debt. Even talk of debt monetisation will raise inflationary expectations, divert domestic savings to unproductive assets like gold, raise bond yields, and jeopardise India’s hard-won inflation credibility in recent years. At this point, we do not know if the crisis will be deflationary (through demand contraction) or inflationary (through supply chain disruptions). So it is best to wait. Importantly, this does not preclude the Reserve Bank of India from directly purchasing government debt. As long as there is a commitment from the government to paying it back (and markets believe that the debt can be paid back), this approach allows fiscal stimulus without jeopardising inflation credibility. If inflation stays very low, then a modest amount of monetisation of debt may make sense over time.

Finally, it is critical to recognise that states are at the frontline of the battle against the virus, both for securing public health and for protecting the vulnerable. But they do not have the policy instruments needed to respond fully. Consistent with first principles of public finance, the central government should lead on financing this war, and state governments should lead on-field implementation (including designing locally appropriate mitigation measures).

Further, it is essential for the central government to communicate not just policies, but also the principles and broader thinking behind the pandemic response. Citizens, state governments, and market actors make decisions based on expectations. And in these uncertain times, greater clarity on policy will be critical to minimising the economic and health costs of this crisis.

Covid-19: Portraying India unfairlyDespite the doomsday scenarios painted by critics, India has been a stunning, positive outlier

It would not have come as a surprise to most people when a recent national survey showed a staggering 93% of Indians expressing confidence in Prime Minister Narendra Modi’s leadership in tackling the coronavirus pandemic. In fact, other surveys had shown the public’s confidence has steadily grown, from 77% at the beginning of the national lockdown over a month ago to 83% at the end of April.

This was evident to anyone with an ear to the ground, such as the millions of volunteers who have been reaching out to assist those in need, or those who are in touch with many of them to coordinate aid. That confidence was also echoed by the vast majority of domestic and international public health experts monitoring India. Their sentiments were backed by solid evidence of the nation having done remarkably well in managing the pandemic.

Nevertheless, for a group of the usual suspects among international media, and some of their fellow travellers in India, all this might have been happening in a different galaxy. So deeply do they seem vested in purveying bad news about India that they appeared oblivious to the overwhelming evidence that India was a stunningly positive outlier.

In the early stages, this school of reportage and commentary predicted catastrophe for India. They kept emphasising that since first world nations with superior health care systems were in big trouble, India was doomed. Some headlines include: “Callousness of India’s Covid response”; “A vulnerable population braces for a pandemic”; “The consequences (in India) will be especially grim”; and even “Mr Modi is in big trouble.”

Next, as days went by, they cast doubts on the relatively few infections by hyping the “low level of testing”. Never mind that their cynicism — which should have been corroborated by a severe shortage of hospital beds and ventilators, and a sharp rise in respiratory-related deaths — was contradicted by reality. As testing was ramped up dramatically to the hundreds of thousands, and it became clear that far fewer Indians were turning up positive than in Europe and the United States (US), that bogey has mostly been quietly tucked away.

Thereafter, their acknowledgement that India was doing relatively well has been fleeting, and the tone grudging. Some sounded wistful, almost as if hoping that the good news about India were untrue, or if it were, that it would soon be overcome by negative developments. To be sure, the road ahead for India’s fight against the virus will be long and arduous. But while it is not the global media’s job to exude undue optimism about India, neither should it be to downplay achievements and ooze negativism.

Finally, when the doom and gloom failed to materialise, these purveyors of a rigidly-blinkered narrative on India turned to their favourite charge: Islamophobia. They pounced on the developments surrounding the Tablighi Jamaat, and the public’s disapproval of its members’ behaviour, to accuse the Modi government and most Indian media of polarising the situation.

Of course, the reports that made this claim invariably omitted mentioning that the government’s rules — such as the closure of places of worship — were equally applicable to all religions. Or that the PM’s repeated appeals to unite people, including asserting that this virus “does not see race, religion, caste...we are in this together” was exactly the opposite of their allegation. And ironically, even those in the Indian media who went out of their way to be politically correct, more often preferring to use the euphemism “single source” rather than name the Tablighi Jamaat, were nevertheless accused just the same.

Such jaundiced views about India have gradually become commonplace among far-Left, modern liberals within and outside the country. Another aspect that stands out among this group is an excessive empathy for China that defies reason and that has eroded their credibility.

That was visible in the hotly-contested debate about the name of this virus. Although originally termed the “Wuhan virus” and later whitewashed into “SARS-CoV-2,” the moment US President Donald Trump called it a “Chinese virus,” all hell broke loose. Calling it that has, somewhat oddly, been termed racist by these commentators. More to the point, as the American talk show host and classical liberal — and no fan of Trump — Bill Maher pointed out, all past epidemics have been named after the place of their origin. These include German measles, Japanese encephalitis, Spanish flu, Middle Eastern Respiratory Syndrome and others.

The reason this should be of interest in India is that none of this cohort objected a few years ago when an antibiotic-resistant bacterial strain was named the “New Delhi metallo beta-lactamase 1 (NDM-1)”, because it was possibly first acquired here. This sort of hypocrisy only reinforces the perception of an entrenched bias against India among these circles.

As India grapples with the next phase of this pandemic, both in containing it as well as reviving the economy, it will also have to contend with more such determinedly pessimistic portrayals. It would be more appropriate for us to strive for a more balanced global narrative on India.

An agenda for economic reform

Please read it carefully

Over the past week, Prime Minister (PM) Narendra Modi has held a series of meetings reviewing the state of various economic sectors, the ways in which the current slump can be reversed, and most significantly, the fundamental reforms that can be undertaken in these respective sectors to overcome structural issues. This is important, for once the coronavirus pandemic subsides, there will have to be a singular focus on the economy.

There is no doubt that the pandemic will force the economy to press the reset button. India will, in the worst case, witness a recession this year, or in the best case, grow by 1-2%, a projection offered by the chief economic adviser. These figures translate into businesses shutting down; a sharp dip in the profitability of companies which do manage to survive; shrinking incomes for citizens; the collapse of a high number of micro, small and medium enterprises; a spike in unemployment across sectors; a hit to trading arrangements; depleted taxes for the government at a time when expenditure commitments will increase; and an inability to pursue much-needed development goals. The ambition of becoming a $5 trillion economy will recede further.

This newspaper has consistently argued that to overcome the distress, the government must come up with a substantial fiscal stimulus package immediately. There is no alternative to enhanced public spending. This has already been delayed inexplicably. But beyond the size and the composition of the stimulus, the PM’s meetings offer hope that this moment can be used as an opportunity to undertake structural reforms. Two areas, in particular, stand out. The first is manufacturing. As countries turn inwards, and many global production hubs seek to relocate from China, India must cut red tape, reform its fundamental factors of production, and encourage businesses which can provide mass employment. To be sure, new ways of doing businesses — including mass manufacturing — will have to be found in keeping with social distancing norms. The second is agriculture. The PM indicated in a meeting on Saturday the need for integrated markets and a new legislative framework for the sector. Fragmented agricultural markets and the Agricultural Produce Market Committee’s framework have long been held farmers hostage, given inordinate power to intermediaries, and undermined India’s potential. If, after the stimulus, the government can use the pandemic to herald long-awaited reforms, it will be the best use of this crisis