Covid 19 and India linkfest I

1. Good article by Harish Damodaran with suggestions for responding to the coming agriculture harvest season. They include - permit transportation of produce to the mandis, and from mandis to the  markets; managing the flow of farmers to mandis; decentralised mandi transactions; blanket assurance of government procurement.

Similarly good articles by Parvesh Sharma and Shoumitro Chatterjee (both on agriculture marketing). The calibration of the lockdown over the coming couple of months to accommodate agriculture harvest and procurement is critical to prevent large scale social unrest. 

2. Good interview of the Kerala CM which pretty much captures the essence of what the state is doing right.

This and this are good descriptions of Kerala's focused contact tracing and isolation work.

This, this and this about the Bhilwara model. As with the Kerala model, the essence is simplicity and doing the basic stuff, and getting execution right. There are also several other districts doing much the same, which have because of these efforts managed to avoid too many cases. Unfortunately, what gets avoided never gets noticed or praised. Of course, one needs to discount the excess hype that is associated with such praises. 

This has examples of the good work done by various state governments.

3. The problems facing migrants and implementation of the lockdown.

4. Good article by Neelkanth Mishra about the need to intervene with measures so as to prevent permanent economic damage.

Given that income generation has stalled, economic activity can only be sustained by digging into past savings or borrowing from the future. These can happen at the levels of individuals, firms or governments. Salaried folks are able to maintain their consumption because the firms that they work for either have cash reserves, or are able to borrow money to keep paying salaries. The self-employed are dipping into their rainy-day funds... Poor individuals do not have any buffers to dig into, and also cannot borrow easily. This is particularly true of migrant workers in urban areas: Many do not have the social networks that can help them survive the lockdown using informal credit. In rural areas they have that cushion – that India has a weak state but a strong society plays a role there; migrant workers lack this support.

5. The pandemic has brought to the fore many dilemmas facing governments. The biggest has been the decision to lockdown itself. Then there is the trade-off between protecting privacy and ensuring public safety - should governments make public the names and addresses of the positive cases and those under surveillance? Another concern has been about whether liquor shops should be shut down or not?

6. Stories of poverty and suffering induced by the pandemic here.

7. HT has an oped on how Covid 19 could impact India's politics - strengthen the role of the State, bring the focus back on public issues, strengthen federalism as States lead the pandemic fighting efforts, and define the legacy of the PM.

8. Business Standard writes about the knock-on effect of the pandemic on state government revenues.

The states depend on central government for nearly a fourth of their revenues. It remains to be seen as to how much haircut happens on this.

Taxes on fuel now accounted for bulk of the sales tax and VAT as most of other goods are under GST... a sharp drop in the offtake of diesel fuel, the largest fuel source in the country... diesel accounted for 39 per cent of the entire consumption of petroleum products in India... State excise duty — mostly taxes on alcohol — was budgeted to net Rs 1.75 trillion, accounting for 13 per cent of their own tax revenues in FY20. Alcohol shops have been closed across the country, adversely affecting this revenue source as well. It’s the same with real estate transactions as well, as they have come to a halt. Stamp duty and registration was expected to net around Rs 1.4 trillion worth of revenues to states in FY20, accounting for 10 per cent of their own-tax revenues. Taxes on vehicles and electricity were also a big source of revenues for states, expected to garner around Rs 1.22 trillion. According to data from vehicle manufacturers, vehicle sales more than halved in March, while electricity consumption was down 40 per cent after the lockdown came into force.

9. Business Standard has another article which highlights how stressed corporate India's balance sheets are, especially when compared to the pre-2008 crisis.

India’s top listed companies now have higher debt, while profitability, accumulated earnings, and cash reserves are much lower than what they were on the eve of the Lehman crisis. To put it simply, India Inc’s liabilities have grown at a faster pace than earnings and revenues in recent years, eroding their ability to absorb a demand shock from the Covid-19 lockdown. In contrast, the 2008 crisis was preceded by years of strong double-digit growth in revenues and profits, and that gave a reasonable amount of accumulated earnings to tide over the post-crisis slump in demand and profit... companies now have much lower levels of cash reserves and accumulated profits to take care of contingencies than in 2008. Cash and equivalents accounted for nearly 40 per cent of companies’ net worth in FY08 and they reduced to 29 per cent in FY19. They declined further to 14 per cent, but this calculation is based on unaudited half-yearly numbers, which may not include all the cash equivalents. To put it differently, companies’ combined cash and equivalents were sufficient to cover 23 months of their employee salary bill and interest payment in 2008 against just 13 months’ worth of cover in FY19.

10. Exacerbating problems is the external balance suddenly  on the corporate front.

The total external commercial borrowings (ECBs) rose to $50.15 bn for 2019, up from 61.45% over the previous year and 117% since 2017. The collapse of the IL&FS group in September 2018 spooked Indian creditors and had made corporates turn towards foreign lenders. It has also been facilitated by continuous easing of the ECB regulations to cover more corporates and their end-use of funds, as well as tightening of single group exposure norms of domestic banks.

The RBI had also allowed NBFCs to raise capital through the ECB route. Accordingly, in H1 2019-20, NBFCs HFCs, and NBFC-MFIs formed 47% of the total borrowings.

11. Some good Covid 19 economic response plan articles - Vijay Mahajan, Jahangir Aziz (here and here), Neelkanth Mishra (here and here).

12. Jean Dreze argues in favour of utilising the large stock of foodgrains with FCI to feed the poor.  He writes,

Take Jharkhand. The state has a major problem of exclusion from the PDS — there are pending ration-card applications from seven lakh households, including many poor ones. The central government does not provide any food assistance to them under its relief package. If the Jharkhand government wants to distribute some food to these excluded households, it will have to pay the FCI for it at the so-called economic cost — well above the market price. Providing seven lakh Jharkhandi households with emergency ration cards for, say, six months at the standard NFSA rate of 5 kg per person per month would require just one lakh tonne of foodgrain, or barely one-tenth of one per cent of the FCI’s food stocks. This would make a tiny dent in the stocks, yet go a long way in averting hunger in one of India’s poorest states. Thus, there is a strong case for the central government to release more food stocks to the states for free (or at a nominal price), over and above existing allocations. These special food quotas could be used not only to enhance monthly rations and reduce exclusion errors in the PDS, but also for emergency relief measures such as community kitchens.

He also posits the practical challenges with a cash transfers based food security approach in such times,

Releasing food is all the more crucial as the emergency cash transfers proposed by the finance minister are likely to have severe limitations. First, the amounts are small — for example, Rs 500 per month for three months to Pradhan Mantri Jan Dhan Yojana accounts held by women, the flagship provision. Second, exclusion errors are likely to be substantial — many poor households have no operational PMJDY account (there is, alas, little data on this). Third, there is the challenging issue of mass disbursement of cash in this crisis. In the poorer states, the density of rural banks is very low. Business correspondents (extension counters of the banks) are not safe at this time because they use fingerprint authentication. If their work is suspended, rural banks are likely to be massively overcrowded. Resolving this issue may take time. Meanwhile, even finding out whether and where relief money has been sent is going to be an ordeal for many poor people. Some of them will have to make expensive trips to distant banks and queue there for hours just to make enquiries. Some will be told that the computer is down, others that their account has been frozen for lack of biometric verification, others still may not reach the head of the queue... All this has been observed recently in Nagri Block (near Ranchi), where the Jharkhand government tried and failed to replace the PDS with so-called direct benefit transfers.

This again underlines the importance of a system like the PDS and the need for caution with the arguments made for dismantling PDS and moving over to cash transfers.

Update 1 (17.04.2020)

Yamini Aiyar writes,

Universalise the public distribution system (PDS), expand cash transfers and remove all hurdles to accessing entitlements for the next three months. If any further proof is needed of how acute the crisis of hunger is, especially (although not exclusively) for our migrant workers, here are some frightening statistics. Data collected from 11,000 distressed workers across the country by the Stranded Workers Action Network (SWAN), a group of volunteers working to provide relief, reports that by the third week of the lockdown, 50% of workers had less than one day’s worth of rations. More worrying, 96% had not received rations from the government while 70% had not received any cooked food. There is no time to be lost. Grains need to move immediately from the Food Corporation of India godowns, and, anyone who approaches the PDS stores should be given their entitlement, regardless of ration cards.

Update 2 (18.04.2020)

On migrants here, here.

Update 3 (20.04.2020)

Nidheesh MK has this nice summary of the reasons for Kerala's success,

For now, however, Kerala’s template offers three important pointers for the rest of India: the value of diverting significant state resources every year towards building public health infrastructure, trusting village-level bodies with autonomy and funds, and promoting shared values that encourage social cooperation.

Unfortunately, none of these are replicable elsewhere in the short run.

See also this article in Indian Express.

Update 4 (22.04.2020)

Mahesh Vyas points to 79% of the population, consisting of the non-salaried category, being the ones  most vulnerable to the crisis - small traders and daily wage workers (one-third, 130 million); farmers (113 million); self-employed entrepreneurs (14%). Even among the 21%, there is a large share of contractual labour, who too would have got laid-off with the lockdown.