Noida: India has taken small steps to open up the economy. The strategy of opening up is entirely based on geography – location of infections. This may not be enough. Yet, complete and uncontrolled opening up can also lead to a disaster. Can we balance lives and livelihood of people? Economics Professors at Shiv Nadar University, a leading multi-disciplinary and research-focused university, have released a report which suggests a strategic process for opening up the Indian economy and exiting the COVID-19 lockdown. As per the report, by taking into account three different factors i.e. infection rate in the districts, share of people who can work from home in an industry, and centrality of the industry, economic activities can be resumed in the country. The report is authored by Prof Partha Chatterjee, Head of Department of Economics; Shweta Jain, his PhD scholar, at Shiv Nadar University along with Soma Dey from FMS, Delhi University.
Findings of the report suggest that:
The infection rates in the districts can be categorized into low, intermediate and high-risk, decided based on inputs from health experts and health infrastructure in the districts. Given the high correlation between economic activity in a district and the extent of COVID – 19 infections, limiting economic activities only to Low-risk districts will not be sufficient to kick start the economy. This is corroborated by a report from RBI which states that 170 districts designated as COVID-19 hotspots account for 80% of the credit outstanding. Therefore, certain firms and industries in intermediate-risk and high-risk districts should be allowed to operate keeping in mind the following two criteria:
15% of workers could return to work if industries based on their work-from-home (WFH) capability are allowed to operate in all districts. Industries categorized as MAX-WFH (1% full time workers in this category) and MID-WFH (15% of workers in this category) can operate with no or little on-site support and can start operating. They can use passes, which can be audited, to ensure that no more than the minimum staff are working from on-site locations and all necessary precautions, including maintaining social distancing are followed by these firms.
Industries central in the network should start operations by taking steps like staggered shifts, pool testing, hygiene, rearranging workspaces to maintain social distancing etc. so that the spread of COVID – 19 can be limited. A central industry (eg: Chemical Industry) is the one which has many other industries dependent on it for inputs and its resumption can fuel a lot more economic activity than one which is lower in centrality ranking.
The impact on India’s manufacturing sector has been particularly significant with plants across sectors kept idle for close to 45 days (by the time the lockdown ends) affecting not just industrial output but also millions of livelihoods.
Following the mechanisms as recommended in this exit strategy report can help India arrest the number of job losses and limit the adverse effects on the economy caused by the spread of COVID-19. This will also help India attract multinational firms look to diversify out of China and move their manufacturing activities to other geographies.