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India set to extend lockdown amid fears of crumbling economy  

States are demanding more cash relief as the country faces an 'unprecedented economic catastrophe'

India set to extend lockdown amid fears of crumbling economy   

Indian Prime Minister Narendra Modi (center) talks to the media on his arrival at parliament in New Delhi on June 17, 2019. His government faces tough choices over how to react to the coronavirus pandemic. (Photo: IANS)

Published: April 28, 2020 09:56 AM GMT

Updated: April 28, 2020 10:48 AM GMT

India's 40-day lockdown, seen as a viable tool to fight the coronavirus, is likely to be extended despite fears of a crashing economy that could push millions into poverty and hunger.

A 21-day nationwide lockdown that began on March 24 was extended to May 3, but several state chief ministers urged a further extension in a video conference with Prime Minister Narendra Modi on April 27.

Reports said Modi is likely to extend the lockdown beyond May 3, albeit with certain relaxations, especially to help stalled industrial units.

"From the economic angle, we have paid a high price," Modi said in a nationwide address last month. People's lives are more important, he added.

The extension of the lockdown will further damage an already devastated economy, experts say.

Last month British brokerage firm Barclays said a lockdown until May 3 may cause India an economic loss of US$234.4 billion.

India's unemployment rate had shot up to 26.2 percent by the third week of April, a sevenfold increase from last year. An extended lockdown could further damage the labor market.

Cash buffers have already dried up and India will be confronted with a sharp decline in government revenues and economic growth for at least the next six months, leaders say.

"In many offices, retrenchment policies are being explored, and some companies have already decided to cut salaries to employees," said opposition Congress party leader Adhir Chowdhury.

The tourism industry has crashed across India, as in other parts of the world. The industry engages millions of people in restaurants, travel and hospitality.

The tourism industry generated US$240 billion, more than 9 percent of India's national GDP, in 2018 and supported 42 million jobs, according to the World Travel and Tourism Council.

"The year is the worst for the tourism sector," said Vipin Saxena of the Indian Tour Operators Association.

The labor-intensive real estate sector has witnessed a plunge, industry experts say, and may need at least six years to return to normal.

"India is on the verge of an unprecedented economic catastrophe as the humanitarian disaster from the Covid-19 pandemic unfolds," wrote educationist Jayati Ghosh of Jawaharlal Nehru University in a column.

Mortality rate

BJP leaders are saying PM Modi is pragmatic as he does not want to risk people's lives for the economy. He especially wants to keep the mortality rate of Covid-19 under check, they say.

However, India Ratings and Research, a credit rating company, predicted that growth expectations for the economy would be around 1.9 percent down, from 3.6 percent in March.

This will be the lowest GDP growth in the last 29 years and is based on the assumption that the partial lockdown may be extended until mid-May.

Ajoy Kumar, spokesman for Janata Dal (United), which is part of the ruling coalition, said the prime minister has rightly emphasised protecting people's lives and health, "the central source of wealth" for the country.

He also stressed stricter compliance with lockdown rules as about 60 percent of positive coronavirus cases in India have come without showing any symptoms.

In dealing with economic challenges as a direct fallout of Covid-19, there are micro-level issues revolving around morality.

In India, liquor consumption is traditionally seen as a taboo. Alcohol sales were banned as part of the lockdown, and the federal government has rejected a plea to allow the sale of alcohol in Congress party-ruled Punjab state.

Similar requests from the states of Assam, Meghalaya  and Kerala also faced stiff resistance. States are seeking the green light to sell liquor to make up for the loss of revenues.

The government justifies restrictions on liquor by saying the priority is on health care and the supply of essential food for ordinary people, migrants and marginalized workers.

The revenue-starved government has announced a US$24 million relief package to take care of the poor and those who need immediate help. However, state administrations are asking for more financial support.

Rajasthan Chief Minister Ashok Gehlot has demanded a federal government grant of some US$14 billion to states as revenue has drastically nosedived.

The lack of cash is where the Modi government is feeling the pinch.

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