A vaccine will be found. Plan for its delivery

18 months away from an approved coronavirus disease (Covid-19) vaccine, and even longer from having one available at scale. Despite vaccine development being at this uncertain early stage, India must immediately start planning how to deliver a Covid-19 vaccine.

When a vaccine becomes available, every onwill have to run the fastest and largest mass vaccination campaign in history. India will have to vaccinate about a billion people to reach the level believed to confer herd immunity for Covid-19. Each day of the virus-driven uncertainty cripples the economy and imposes immense human costs. India should do everything we can to save a few critical days, weeks or months.

A task force on coronavirus vaccine development, drug discovery, diagnosis, and testing exists. This group’s focus is diffuse. Even in the area of vaccines, the group’s focus is primarily vaccine development, not the delivery. Immunising a billion people in a country as diverse as India will be a staggering operational challenge. To be successful, we need a powerful group to plan for vaccine delivery now.

To pull this off, India can draw lessons from two large, successful campaign-style exercises. Every five years, India holds the world’s largest general election, involving up to 900 million voters. Electoral rules state there must be a polling place within two kilometres of every habitation. India employs 11 million election workers to make sure every eligible Indian can vote. Every vote is cast electronically via more than 1.7 million machines. Despite these formidable challenges, India successfully conducts elections, widely considered free and fair.

The polio campaign is the second example. As recently as 2009, India had over 60% of all global polio cases. With an annual birth cohort of 27 million children, high population density, poor sanitation, inaccessible regions, high population mobility and a high disease burden, the obstacles to achieving zero-polio status seemed insurmountable. Nevertheless, India has not had a single case of the wild poliovirus since 2011, and it was officially declared polio-free in 2014. The victory was achieved through government ownership, partnerships with private and social sectors, innovations in programme delivery, technical advances, and massive social mobilisation.

There are over 90 vaccine candidates in trials, six in human clinical trials, with more being added every week. The vaccine candidates range across virus, viral vector, nucleic acid, and protein-based approaches — which means that they will require different technologies and processes to manufacture them. We don’t yet know if an eventual vaccine will require temperature control, ultra-cold temperature control, or not require any cooling to maintain its potency. We don’t know if it will be packaged and administered via conventional syringes or an innovative new delivery mechanism such as a micro-needle patch. We don’t know the duration for which an eventual vaccine will confer immunity. We don’t know its efficacy; of the people who get vaccinated, what fraction will be protected from getting sick? We don’t know how that efficacy will vary across different populations — will it be as effective for older people as for younger people, for populations in north India as in south India?

Despite these uncertainties, there is a lot for a Vaccination Task Force (VTF) to productively focus its efforts on right now.

First, for each of the key uncertainty drivers, VTF can determine plausible ranges and identify the most likely options. These can be used to draw up a set of scenarios for detailed planning. The VTF can then monitor how vaccine development is progressing. As more information becomes available, the ranges on the key uncertain variables can be narrowed and the priority order and details of plans can be revised.

Second, practise through “war games” will allow decision-makers to rapidly and correctly react to changing circumstances. An example: How to react to the possible tragedy of a small cluster of deaths in one state, most likely due to vaccine-related side-effects? Such “war games” are standard practice for militaries, and are increasingly used by corporates to allow decision-makers to improve their responses.

Third, no matter how fast production can be ramped up, there will be initial periods when only a limited supply of vaccine will be available, and demand will exceed supply. The VTF can draw up allocation and prioritisation rules. For example, first high-risk populations such as health workers; then, vulnerable populations such as the elderly; thereafter, individuals likely to be potential “super-spreaders”; and finally, the general public.

The VTF can also represent India in global agreements for an equitable allocation of vaccines and agree to rules for the timing and allocations of supply within India versus for export to other countries.

Fourth, India excels in one critical dimension — vaccine manufacturing. India alone supplies 60% of the vaccine doses purchased by the United Nations Children’s Fund (Unicef) each year. The Serum Institute of India is the world’s largest vaccine manufacturer, producing and selling over 1.5 billion doses annually.

Even if Indian manufacturers are part of global agreements to ensure equitable access to Covid-19 vaccines for every country, India can be assured of a strong negotiating position, as it brings critical production capacity to the table.

The VTF can work collaboratively with local manufacturers to understand how many doses can be manufactured in what time-frames, provide the necessary support to increase the number, and establish agreements to purchase a minimum number of doses at an agreed price.

Last, coherent, clear, and resonant communication will be a critical pillar for building trust and ensuring public receptivity and cooperation for a vaccination campaign.

If planning for vaccine delivery starts now, India will have a well-thought-through playbook to execute from when a vaccine is ready.

There is a humanitarian crisis in India. Lift the lockdown, now

There is no nuanced way to say this. India is in the grip of a humanitarian crisis. And continuing the coronavirus disease (Covid-19)-sparked national lockdown will be an unmitigated disaster.

I have moved from being a reluctant votary of the initial lockdown — my understanding at the time was that it was a short-term inevitability — to an absolute opponent. I say this with the understanding that I have gained from a 60-day (and counting) road trip, reporting through nine different states in the north, west and south of the country. There is panic, paranoia, economic devastation and, above all, acute uncertainty on the ground.

We have hit a psychological tipping point. This has become apparent to me every time I have walked the highways with migrant workers. In the initial 72 hours after the first lockdown, the mass exodus of workers from cities was because they had been forgotten by policymakers, politicians and the media. Orphaned by the system and left without wages or work, labourer after labourer, in state after state, told me that if confronted with death, they would rather die at home, with the people they loved.

But even after we went through a zillion flip flops on migrant workers — first they were ignored, then they were blamed, then they were asked to stay put, then they were asked to take trains for which they were charged fares — India’s workforce is in the throes of rage and anxiety.

It’s ironic that as some lockdown restrictions finally ease, and we are talking of reopening factories, the workers I meet are more determined than ever before to leave. In some ways, it is the comeuppance that some of the country’s businesses deserve.

But, even now, there is an assumption that, with the passage of time, these workers will return. My sense is different. In Bhiwandi, Maharashtra, it was past 1 am, when our car screeched to a halt at the sound of a child crying in the distance. In the deathly still of the night, we saw men, women and dozens of small children walking their way to Gorakhpur in Uttar Pradesh. They were going to cover a distance of 1,500 kilometres on foot. I ventured to suggest that they might try the trains and buses that have finally been deployed. They’d have none of it. They were just desperate to get home at any cost.

In Mumbai, a truck had been stopped at a police checkpoint. It was unclear whether the police was going to give it permission to move ahead and they did not appear keen for us to open the back flap of the vehicle. So, we clambered on to the back to discover scores of migrant workers crammed into a tiny space. They were looking to escape to Uttar Pradesh. One of them shouted at me when I tried to say crowding together might be dangerous at such a time. “I am a BSc. I am also aware of the coronavirus dangers. But I would rather die from the virus at home, than from starvation here,” he said.

These responses are a sliver of what I have been able to document from worker after worker over two months. I have met the family of Ranveer Singh who died 80 kilometres short of home from a heart attack in Agra, Uttar Pradesh. Or the family of Mukesh Mandal who sold his phone for ~2,500 to buy a fan and some rations, and then killed himself.

India’s poorest are suffering the most. But entire swathes of the salaried middle class are also in danger of being wiped out. Sectors such as aviation and hospitality are in existential trouble. Neighbourhoods are treating patients and health workers as untouchables. And society presidents are becoming bigoted tinpot dictators against domestic help, drivers and cooks.

We could have still suffered all of this had it brought us any closer to a cohesive policy against Covid-19. The lockdown’s aim was to prepare hospitals better, not eliminate the virus. But as I learnt in Mumbai’s Sion Hospital, where doctors speak searingly about why bodies are placed next to patients in wards, India’s public hospitals are still carrying a disproportionate burden.

Luckily for us, India has been an outlier in fatalities. In a country where thousands die from tuberculosis, cancer and kidney disease every day, the coronavirus death rates are not just distinctly lower than the rest of the world, but also way lower than deaths from non-coronavirus disease illnesses.

But if we do not lift the lockdown with immediate effect, we shall be confronted with mass ruin and a breakdown of all our structures — social, economic and emotional

The judiciary and migrant workers

Besides handling the rising number of coronavirus disease (Covid-19) cases, and taking steps to mitigate the economic distress caused by the pandemic and the lockdown, the single-most pressing issue for India at the moment is the fate of its migrant workers. For over 50 days now, millions of stranded workers, facing an acute shortage of food and cash, have desperately tried to return home. Five weeks after the lockdown was imposed, the government finally introduced measures to enable stranded migrants to return home — a process which is ongoing, but which has not stopped thousands of others from continuing to walk back home.

While the political executive has been correctly held accountable for its failure in addressing the plight of migrant workers in a timely and sensitive manner, it is also important to look at the role of another institution which should have done more in this period to address this crisis — the judiciary. On Friday, dismissing a petition which asked that the Centre be directed to identify and provide food and shelter to migrant workers returning home, the Supreme Court said it was a matter for the states to decide. The Court, it added, could not monitor who was walking or not walking, neither could it stop them. Referring to the Aurangabad incident, where 16 migrant workers sleeping on railway tracks were mowed down by a train, the court observed that there was little that could do done if people were sleeping on the tracks.

Irrespective of the merits of the petition, the observations fit into a larger pattern of the court’s attitude towards the issue. It has accepted the claims of the executive too willingly; it could have done more to order relief and protective measures; and it should have ensured strict monitoring of the process of identification of migrant workers, provision of food and shelter, and their transport. To its credit, in the backdrop of workers having to wait for as long as 19 hours to board trains, the Gujarat High Court (HC) observed that there was lack of coordination among departments and asked the government to be more sensitive to the plight of the most “downtrodden, underprivileged and weaker sections of society”, and instil confidence in them. The Karnataka HC has also done well in observing that workers can’t be deprived of the opportunity of travelling home because of their inability to pay fares. India’s poorest need help. The government has to do its bit. But the courts can help, with more sensitivity and direction.

Big boost to small biz in first trancheDOSE FOR MSMES : 4.5 million entities will get credit of ₹3 lakh-cr in collateral-free loans, among other measuresLIQUIDITY SUPPORT : NBFCs get extra funds to improve credit flow; lower tax deduction to raise disposable incomes

Finance minister Nirmala Sitharaman on Wednesday unveiled a ₹5.9 lakh crore stimulus package which includes ₹3 lakh crore collateral-free loans to small businesses, ₹75,000 crore liquidity infusion in non-banking finance companies (NBFCs), ₹90,000 crore financial support to power discoms and ₹50,000 crore cash in the hands of taxpayers.

The allocation is part of the ₹20 lakh crore ‘Atmanirbhar Bharat Abhiyan’ (Self-Reliant India Movement) announced by Prime Minister Narendra Modi on Tuesday that combines policy reforms with fiscal and monetary measures.

While a finance ministry presentation noted financial implications of the schemes announced on Wednesday at ₹5,94,250 crore, Sitharaman declined to comment on the numbers immediately. She, however, said the government recently raised its borrowing limits to part fund the measures. The government on Friday raised its market borrowing estimate by a staggering ₹4.2 lakh crore to ₹12 lakh crore in 2020-21 to make up for an expected shortfall in revenues because of prolonged lockdown since March 25 that has crippled the economy.

“Beginning today, for the next few days, I shall be coming here with the entire team of the ministry of finance to detail the Prime Minister’s vision for Atmanirbhar Bharat laid out by the Prime Minister yesterday,” Sitharaman said.

The first package of ₹1.7 lakh crore was announced by the finance minister on March 26, followed by monetary measures taken by the Reserve Bank of India (RBI) to revive the economy, which has been battered by a prolonged lockdown since March 25 to check the spread of Covid-19 pandemic. The lockdown will continue till May 17, and may be extended in some parts of the country.

Sitharaman said the focus of the measures announced on Wednesday is “getting back to work”. The fiscal and policy support will enable employees and employers, businesses, especially micro, small and medium enterprises (MSMEs), to get back to production and workers back to gainful employment, she said.

She said a ₹3 lakh crore emergency working capital facility is provided to businesses in the form of term loans at a concessional rate of interest. “This will be available to units with up to ₹25 crore outstanding and turnover of up to ₹100 crore whose accounts are standard. The units will not have to provide any guarantee or collateral of their own,” she said. The amount will be 100% guaranteed by the federal government benefiting more than 4.5 million MSMEs, she added.

Besides, the government announced five other measures to support MSMEs – ₹20,000 crore subordinate debt-based scheme for stressed MSMEs, setting up a ₹50,000 crore ‘fund of funds’ with a corpus of ₹10,000 crore, redefining MSMEs to allow growth of units, disallowing global tenders up to ₹200 crore in all government purchases and providing e-market linkage to boost sales.

In order to infuse liquidity in the system, particularly for small businesses and rural sector enterprises, the government announced a ₹30,000 crore special liquidity scheme for NBFCs, housing finance companies (HFC) and micro-finance institutions (MFIs). The scheme will allow investment in primary and secondary market transactions in investment grade debt paper of NBFCs, HFCs and MFIs, which will be 100% guaranteed by the Union government. Another, ₹45,000 crore partial credit guarantee scheme is also planned to cover the borrowings of lower rated NBFCs, HFCs and MFIs. The government will provide a 20% first loss sovereign guarantee to public sector banks.

The MSME sector is, however, not enthused, said Vinod Kumar, the honorary president at the India SME Forum. “There’s nothing for unbanked MSMEs... Only 7% of MSMEs are using banking today. Those with no limits will close down. All the guys who have limits have already given collateral, so there’s no need for physical collateral guarantee of the additional amount only. It’s a no starter. The fund of funds has already been around, the only hope is from the NPA [non-performing asset] and stressed fund... that too, lets see, how many banks roll that out.”

Sitharaman also announced some reliefs to businesses and individual taxpayers. Measures included expeditious refunds to charitable trusts, non-corporate businesses, proprietorship, partnership, limited liability partnership (LLP) and cooperatives.

She said the rates of tax deduction at source (TDS) and tax collected at source (TCS) has now been reduced for all non-salaried payment by 25% of the specified rates for the remaining period of FY 2021, which will provide liquidity to the tune of ₹50,000 crore. However, the tax liability remains the same.

In order to reduce tax compliance burdens, the due date of all returns for assessment year 2020-21 will be extended to November 30, 2020, she said. The date for making payment without additional amount under the ‘Vivad se Vishwas’ scheme will be extended to December 31, 2020.

Sitharaman extended the three-month employees provident fund (EPF) support to small businesses and organised workers by another three months up to August 2020. The scheme provides for government’s contribution in 12% of salary each on behalf of both employer and employee to EPF in enterprises employing fewer than 100, with 90% earning less than ₹15,000 a month. This involves 7.2 million employees and will benefit them to the tune of about ₹2,500 crore.

Besides, she announced reduction in statutory provident fund contributions of both employers and employees (in companies other than those benefiting from the other EPF incentive) to 10% each from 12% for all establishments covered by Employees Providend Fund Organisation (EPFO) for the next three months. “This will provide liquidity of about ₹6,750 crore.”

In order to provide relief to real estate projects, state governments and real estate regulators are being advised to invoke the force majeure clause, she said. “The registration and completion date for all registered projects will be extended up to six months and may be further extended by another 3 months based on the state’s situation,” she said.

Similarly, contractors involved in public sector projects have been given additional time. “All central agencies like Railways, Ministry of Road Transport and Highways and CPWD will give extension of up to 6 months for completion of contractual obligations,” she said.

DK Srivastava, chief policy adviser at consultancy firm EY India, said, “Nearly 30% of the ₹20 lakh crore stimulus package envisaged in Prime Minister’s speech, that is about ₹6 lakh crores, has been covered in today’s Finance Minister’s briefing. The focus is largely on the MSMEs who may be facing different sets of issues.”

“This package is based largely on credit guarantee provisions implying minimal direct cost for the central exchequer which may be just a small fraction of today’s package. Any additional cost would only be on account of defaults, the burden of which may arise only in future years. In the case of the power sector, the burden of bearing the default is in fact, on the state governments.”

TDS rate cut to leave professionals, equity investors with cash

The government’s move to reduce the rates of tax deduction at source (TDS) and tax collection at source (TCS) by 25% will benefit investors and professionals by putting more cash in their hands. While this doesn’t bring down the tax liability of taxpayers, it leaves more money with them during the course of the financial year. Indivduals will still have to pay their tax liability -- every quarter, or annually.

The reduction in TDS/TCS is expected to boost cash flows by ~50,000 crore, the finance minister said on Wednesday while announcing the move as part of an economic package aimed at reviving an economy roiled by the Covid-19 pandemic and the lockdown enforced to combat it.

Usually, the payee deducts TDS or TCS on behalf of the receiver and deposits it with the government. TDS and TCS are methods that help the government to bring more people into the tax net and prevent tax avoidance.

For instance, in the case of an individual who has a fixed deposit with a bank, the bank deducts 10% TDS every year on the income that the depositor earns by way of interest. If the depositor earns ₹15,000 by way of interest every year, the bank will deduct ₹1,500, and deposit it with the government. Now, banks will deduct ₹1,125. “This way, the lower TDS and TCS will leave more money in the hands of the individuals,” said Naveen Wadhwa, a chartered accountant with taxmann.com.

The lower rates of TDS and TCS will also help those who usually get tax refunds, because if the TDS or TCS deducted is higher than the tax liability of the assessee, they will have to wait until their tax returns are filed and processed. However, Wadhwa cautioned that taxpayers will need to ensure they pay their tax liability, if any, on time.

Depositors are just one example. The biggest beneficiary of this provision are professionals such as chartered accountants, architects, doctors, lawyers, engineers and freelancers, who have their own practice or consultancy. When they receive payment for their service, the payee deducts 10% from the remuneration. Now, the payees will deduct 7.5%. Similarly, tenants who pay a monthly rent of over ₹50,000 need to deduct TDS from the payment. There’s 10% TDS on dividends or when a salaried person makes a withdrawal from employees’ provident fund (EPF) without completing five years of continuous service.

The government also extended the last date for individual tax payers to file income tax returns (ITRs) for assessment year 2020-21, which will now need to be done by November 30 instead of the usual July 31 deadline, finance minister Nirmala Sitharaman said. Besides, the due date for filing ITR for accounts required to be audited has been extended to October 31 instead of the usual September 30. The date for assessment of returns expiring on September 30 has been extended to December 31 and, those expiring on March 31, 2021, to September 30, 2021.

“Due dates for annual filings and compliances have been extended to account for loss of working days due to (the) lockdown,” said Amit Maheshwari, tax partner, AKM Global.

Assessees who must get their accounts audited by CAs are governed under Section 44AB of the Income tax Act, 1961. Taxpayers with sales or turnover exceeding ₹1 crore (₹2 crore under Section 44AD) or receipts from a profession exceed ₹50 lakh during a financial year are required to file the ITR along with an audit report. Besides, assessees covered under Section 44AD, 44AE, 44AF, 44BB or 44BBB (persons claiming that profits and gains from business are lower than the profits and gains computed under these sections) are also required to get their books audited.

Financing the Covid-19 economic packageThe government has been bold. Now don’t worry about inflation or capital flight, use the money financing route

The wait is over. It came in Prime Minister Narendra Modi’s fifth address to the nation in two months. The ending of his speech, which incorporated everything from Bharatiya sanskriti (culture) to solar energy, went off like a bomb. Just when most observers of the government’s actions since the coronavirus pandemic had more or less given up on its announcing an economic package, one far greater than expected was announced.

During the silence from the central government, some well-designed packages had been proposed from the outside. One by the Opposition had proposed a package of over ₹5 lakh crore. This concentrated on relief. While relief is vital and something expected from a government that implemented a lockdown without debate, it cannot address the subsequent revival of the economy. A package representing wider concerns and greater heft, amounting to ₹15 lakh crore, came from an industry body. At ₹20 lakh crore, the package announced by the prime minister exceeds even the latter.

Coincidentally, it exactly matches the quantum recommended in a proposal made in an article in these pages on April 15. A difference is that while the latter had proposed a pure fiscal stimulus of ₹20 lakh crore, the prime minister’s package includes the financial implications of measures taken by the Reserve Bank of India (RBI) so far and some relief offered in March. It is, therefore, a measure of the combined monetary and fiscal policy response to the exigencies of the moment. However, even if the monetary measures are taken to a sum of over ₹4 lakh crore, the package is large indeed.

At close to 10% of GDP, the stimulus is only slightly lower than what has been announced in the United States. The political element in the magnitude of the response cannot be overlooked. The announcement has come at a time when cases of infection in India are not just rising, but rising fast even though the world’s most stringent lockdown, with associated hardship, has been in place for seven weeks. The economy could no longer be ignored.

While the content of the package will slowly emerge, the prime minister’s speech suggests that it is comprehensive, covering most sectors of the economy. However, apart from the possibility that political considerations may end up spreading the outlay thinly, a technical issue remains.

Of the four areas of focus mentioned, liquidity is one; land, labour and laws are the others. Now, while liquidity enhancement by RBI is important, global experience points to its weakness as a method of reviving an economy that is in crisis. A central bank may enhance the capacity of banks through repo operations, but it cannot force them to lend. Judging by the volume of funds the latter have parked with RBI, it may be concluded that they are reluctant to do so, making it the right moment to contemplate negative interest rests on these holdings. The point is that the greater the share of liquidity-enhancing measures in this economic package, the less potent it will be.

After we have acknowledged the boldness of the announcement, we would be interested in knowing how the additional outlay is to be financed. For the moment, the government should seriously consider the money financing route as funding the deficit will raise interest rates. An objection encountered is that the former is inevitably inflationary. Actually, it is not more so than monetary easing implemented by the central bank.

For close to six decades, after the founding of RBI, money financing was routine. In the mid-1950s, there was much hand- wringing that the second five year plan was being deficit-financed. There was some inflation all right, but in seven years after launching the plan, the economy had sloughed-off the colonial rate of growth prevailing for half a century. By the time money financing of the central government’s deficit was discontinued in the 1990s, growth had accelerated two more times. Actually, a period of high inflation came after 2008, well after money financing was discontinued.

But recognising the possibility of inflation, the increased outlay now planned may be spent in tranches, holding expenditure back if there is a spurt in inflation. In addition to inflation, some Indian economists residing overseas have warned of capital flight if the fiscal deficit were to rise. India’s foreign exchange reserves currently exceed the volume of portfolio investment. Anyway, why would foreign institutional investors want to flee India exactly when, with the economic package just announced, it stands a chance of becoming the world’s fastest-growing large economy?

With the technicalities over, the irony of a government that has distanced itself from almost every aspect of the economic policy of early independent India now adopting its very premise is apparent.

Self-reliance was the motif of policies pursued in India in the 1950s, and the country industrialised quickly. In the next decade came the Green Revolution, which set the nation free from food imports. By contrast the “Make in India” initiative of 2014 has been less disruptive. May the freshly minted “Atma Nirbhar Abhiyaan” succeed.

Allocate resources, rationally and efficientlyGive money to state governments, protect the vulnerable sections, and don’t be hostile to businesses

Prime Minister Narendra Modi’s speech on May 12 had two central messages: India will have to learn to live with the coronavirus disease (Covid-19), and India must pivot towards economic recovery.

The recovery strategy will be pursued through a package of fiscal and monetary measures and a reforms package. In some ways, this is an intensification of existing efforts. Since 2017, consumption expenditure financed by the government has grown rapidly — at an average real rate of 10.6%. Big reforms — the Goods and Services Tax (GST), insolvency reform, inflation targeting — have been implemented. India’s rank in the Ease of Doing Business index has improved from 130 in 2016 to 63 in 2019.

But economic growth has slowed down from 8.3% in 2016-17 to 5% in 2019-20. As a percentage of GDP, new project announcements by the private sector were the lowest in 2019-20 since the Centre for Monitoring Indian Economy began the data series in 1995-96.

This central paradox of recent years needs to be considered while assessing the recovery strategy. We need to worry about how the policies work, and not just admire the list of announcements.

On fiscal support, three facts are important to consider.

First, no matter which nuclear option is used to expand resource availability, fiscal resources will be scarce. Tax, dividends, spectrum auction and other receipts will fall sharply. A significant part of the expenditure is committed, including ₹7.1 lakh crore of interest expenditure in 2020-21. Expenditure on schemes such as the employment guarantee scheme and food subsidy will increase.

Second, since the crisis is destroying considerable value in the economy, there will be many competing demands on fiscal resources. To avoid a fiscal crisis later, the government must spend its limited resources efficiently.

Third, our expenditure system is plagued with a number of allocative and operational inefficiencies. This crisis necessitates comprehensive expenditure management reforms.

Considering the above will give the government a sense of the budget constraint in which it can support the economy. Given that we may need to live with Covid-19 for another year, there seem to be three good uses of money at this time.

First, the government can help restart economic activity while Covid-19 is still a threat. Many who are rightly worried about attracting the wrath of the virus may stay away from economic activities. We need to lower the subjective probability that people place on getting the virus, and dying from it. This requires intensifying public health measures (screening, testing, quarantine and treatment efforts); expanding public transport deficits to ensure social distancing; and increasing resources for public order. These efforts can reduce the economic costs of the crisis, and preserve economic value. While firms, communities and families can contribute, these efforts will cost fiscal resources. Most of these activities are in the realm of state and local governments, which are resource-starved at the moment. So, a large part of the fiscal package should be given to the states to spend.

Second, while the government has announced relief measures, it is becoming obvious that many vulnerable sections, especially informal and migrant workers, are falling through the cracks.

As the unemployment rate is around 25%, and many households are struggling to make ends meet, there is a duty to ensure relief reaches them in a timely manner. One of the systems that must be reformed urgently is the integrated management of the public distribution system, so that food subsidy can be availed anywhere across the country. More cash transfers may also be required.

Third, since uncertainty is limiting the effectiveness of liquidity measures, they need to be supplemented with fiscal measures. Solutions such as creating a bad bank or doing anticipatory recapitalisation cannot reduce this uncertainty. The government has announced a scheme to give complete guarantees for loans given to micro, small and medium enterprises (MSMEs). This leaves little incentive for banks and Non-Banking Financial Companies to identify the firms that are likely to survive the crisis with loan support.

It would be better to give partial guarantees. Similarly, the government needs to be hardnosed about spending money. It is perhaps not a good idea to infuse resources into weaker MSMEs (₹20,000 crore subordinate debt) during such a crisis.

On the reforms package, two points are worth keeping in mind. First, the government should send a message to its enforcement authorities that this is a moment to be pragmatic about their approach to businesses, as they struggle to cope with this crisis. The de jure policy changes are not enough, unless the overall political stance towards businesses and market changes.

In the last few years, there has been a rise in the government’s hostility towards the private sector, as evidenced by the rise in tax disputes and actions of enforcement authorities. Second, the implementation and de facto integrity of reforms matter, as the example of GST shows. Reforms do not automatically lead to good outcomes.

Unless we are careful, we may do more harm than good in our response to this crisis. This is about achieving rational action when fear is all around us. The question for us, as a country, is to paraphrase Rudyard Kipling: Can you keep your head when all about you are losing theirs?