In his Tuesday speech, the Prime Minister strove to drive home the point that the 21-day lockdown had slowed the march of coronavirus (which indeed, it has), while arguing for another 19-day extension. The plan to gradually relax restrictions on economic activity, from April 20, in areas that show a sustained reduction in Covid cases can help relieve the economic distress caused by the breakdown of the supply and output chains. If rabi harvesting and procurement proceed smoothly, it could inject incomes into rural India. However, what remains a puzzle to this day is the Centre’s delay in coming up with a cogent economic plan that goes beyond the minimalist ₹1.7-lakh crore distress relief package announced last month. If the implementation of the lockdown as well as amelioration measures are to be left to the States, the Centre needs to transfer funds at the earliest. So far, a paltry ₹17,289 crore has been transferred to the States as part of its 2020-21 allocation of ₹28,983 crore for the State Disaster Response Fund, spelt out by the 15th Finance Commission. With tax revenues expected to fall drastically short this fiscal, it’s a back-to-the-drawing-board situation — both for fiscal and monetary policy. Yet, key policy actors have not grasped the nettle, as other crisis-hit economies have done.

Demand, investment and savings, including income from remittances, are poised for a free fall. The issue at hand is to revive production in sectors where inventories are low and employment potential is high. Industries which fit the bill are textiles, garments, leather, food processing, FMCG; besides, pharma and medical accessories, which are perhaps the sole drivers of the economy today, are expected to ramp up activities. It would be a mistake, as the government seems to suggest from time to time, to restrict the opening up of activities to ‘essentials’. If inventories in housing are high, public infrastructure programmes should be taken up. A roadmap along these lines would lift confidence in India’s economic prospects. To restore liquidity and velocity of money circulation, the RBI should further liberalise its lending norms, taking a leaf or two from the UK and the US, and provide cash-strapped industry with the funds to resume operations. It should further widen the ‘ways and means advances’ window, from which States can borrow at the repo rate, to beyond ₹42,000 crore for this year. The Centre, while exhorting industry to keep employees on its rolls, needs to loosen its purse strings as well.

It is hoped that a package for both small and large industries, as anticipated, will be unveiled soon. Farm distress should be averted in horticulture crops by implementing price stabilisation measures; that will lift demand as well. India needs to keep its economy going, even if it has to implement lockdowns in phases and pockets.