Calcutta Notebook

Bharat Jhunjhunwala

The Modi government is caught between the devil and the deep blue sea in respect of imposition of lockdowns. According to a paper published by the Frankfurt School of Finance, not imposing a lockdown leads to higher numbers of deaths which, in turn, leads to lower economic growth. On the other hand, imposition of lockdown leads to a direct reduction of economic activity and lower economic growth even though some improvement takes place after a time. According to Financial Firm Jeffries, three states of the United States namely, Arizona, Texas and Utah, did not impose lockdowns. The result was greater spread of Covid -19 and the economy of these states was more impacted negatively than other states. In other words, economy is not better if lockdown is not imposed. This same study describes the different trajectories of two Scandinavian countries Sweden and Denmark. Lockdown was not imposed in Sweden and people were encouraged to follow social distancing and wearing of masks voluntarily. Lockdown was imposed in Denmark. It was found that the rate of death in Sweden was five times higher than in Denmark. This underscores the fact that lockdowns are necessary. Two papers published by the University of Oxford and Wiley Clinical Practice, both said that late imposition of lockdown in United Kingdom led to higher death rate and a negative impact on the economy. These studies indicate that lockdowns have necessarily to be imposed. Not imposing lockdown may seem to help economy by not prohibiting economic activity immediately but that does not save the economy because then the higher death rate soon impacts the economy.

It is clear that imposition and non-imposition of lockdown-both have a negative impact on the economy. The way out is to impose a lockdown but fine tune it to reduce the economic hardship. The Economist Today has suggested that construction workers could be required to stay within the boundaries to reduce possibility of infection. The same could be done for manufacturing industries and software parks.

It is also necessary to determine on which activities to impose-, and on which activities not to impose a lockdown. Economists calculate the costs and benefits of various projects. The costs and benefits of locking down various activities can be calculated separately. For example, the costs and benefits of lockdown in a school, bus travel, rail travel, international travel, restaurants, cinema halls, street corner markets and manufacturing activities can be calculated separately. Those activities that have high costs and low benefits can be locked down while others can be allowed.

A paper in the Wiley Clinical Practice journal has emphasised that lockdowns are more likely to succeed if the people are taken into confidence rather than mainly imposed from the top. Last year towards the beginning of the Pandemic, New York Governor Andrew Cuomo used to hold one hour long press briefing every day and informed people of the true state of the pandemic and the facilities that he was trying to arrange. It had a great impact on compliance by the public. On the other hand, even during the strict lockdown last April, the ministers in Uttarakhand were nowhere to be seen and officials were issuing passes to one and sundry. The holding of public meetings and family functions without social distancing in the presence of leaders sends and exactly opposite message. A daily press briefing by India's Minister of Health would help clear a lot of misinformation that may be circulating.

David Navarro of WHO has emphasised that the economic impact of lockdowns is severe and disproportionate on the poor. The poor find themselves locked down without food. The only way they can possibly survive is by breaking the lockdown and undertaking their petty income earning activities. Therefore, a study by Harvard University has said that direct cash transfers to poor must be made while imposing strict lockdowns.

[Formerly Professor of Economics at IIM Bengaluru]

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Frontier
Vol. 53, No. 47-52, & Vol 54, No. 1 - 4, May 23 - July 31, 2021