March 2021 marks one year of the declaration of COVID-19 as a pandemic by the World Health Organisation (WHO). And, on March 25, India went into a severe lockdown after a one day janata curfew on March 22. Cases rose alarmingly till the middle of September 2020 and then quickly went down – only to once again rise steeply in some states over the last month.
On March 25, 2020, the number of new cases were 121 and deaths were two. Now there are more than 40,000 cases daily and 200 deaths. The contrast in the picture between March 2020 and March 2021 stands out.
A number of issues arise. In spite of a massive vaccination drive, why are the numbers rising steeply? Is our strategy of dealing with COVID-19 flawed? What have we learnt in this one year of severe social and economic stress?
Virus, mutations and disease
Coronavirus has been intensely researched globally in the last more than one year. Its genome was published quickly and that aided the developments of vaccines in less than one year, a record. Usually vaccines take many years to develop and test but in the present case emergency use of several vaccines has been allowed by multiple countries. The AstraZeneca vaccine developed by Oxford University and produced in large quantity by the Serum Institute, Pune is being rapidly administered all over the world.
The virus keeps mutating and the strain found in different countries is somewhat different. Some strains are more virulent than others and spread faster, such as the South African, Brazilian and the UK variants. These strains have spread rapidly to other countries in the last four months and led to surge in cases. In India also it is feared that the surge since mid-February could be due to new strains that may have evolved here. Reports suggest that in three districts of Maharashtra, a new mutant variant is spreading, but it’s unclear still if it is the cause behind the surge in cases in the state.
As the virus mutates it is feared that it can evade the available vaccines. So, new and/or modified vaccines may be needed soon to tackle the new strains. Intensive research will be required on viruses and vaccines.
Vaccination, herd immunity and vaccine diplomacy
The duration for which vaccines provide immunity is not known. So, if vaccination is required every couple of years not only for immunity boost but for new strains, massive vaccination drives will be required. If 60% or more of the population is vaccinated, ‘herd immunity’ is said to occur and that stops the spread of the virus. So, in India, at least 84 crore individuals would have to be vaccinated in one year.
Since most vaccines require two doses (Johnson vaccine is the only one requiring one dose), 168 crore doses would have to be administered in the season. Currently, India is vaccinating at the rate of two crore doses per month. At this rate, it will take seven years to get to herd immunity and it will never be achieved since after a year or two those vaccinated will have to be vaccinated again. So, vaccination needs to be stepped up to about 40 crore per month in India.
Since July 2020, it has been known that massive vaccination would be required soon. But the planning for logistics and production was not taken till much later leading to a slow start in vaccination. Scaling up to vaccinate the general population has been very slow and confused. Just as during lockdown rules were changed repeatedly, sequencing of vaccination has been changed, resulting in confusion.
Production of vaccines needs to be scaled up. Unfortunately, the rich nations have cornered the vaccines by paying and booking in advance and denying the poorer nations access to vaccines. The World Health Organisation (WHO) anticipating this had initiated the COVAX programme to supply two billion doses of the vaccines to the poorer nations. India is fortunate to be largest producer of vaccines but its needs are huge. The Chinese and the Russians are now supplying vaccines to poorer nations in what is referred to as `vaccine diplomacy’. Its ugly side is the restrictions on export of vaccines from Europe and India so that they can accelerate their own vaccination programmes.
WHO has been accused of delaying the announcement of the pandemic (March 11) which led to the spread of the disease across the world and to complacency in many countries. Both of these prevented a quick control of the disease. In this one year much has been learnt about the disease but we still do not fully understand the virus and its functioning and it keeps throwing surprises. But what is clear is that the pandemic has led to the worst ever worldwide economic and social crisis and is leading the world towards a new normal.
Rapid vaccination to achieve herd immunity is facing ‘vaccine hesitancy’. Social media has been used to spread all manner of fears about the vaccine and doubts about the disease itself. This has been called ‘infodemic’. Some are scared of the side-effects while others suspect an agenda behind vaccination or believe that there is nothing like COVID-19, so why get vaccinated.
Another cause for hesitancy has been the fear that full testing has not been done, the long term impact is not known and how long the effect of the vaccine will last is unclear. The latest news is that AstraZeneca cherry picked the positive news only. Reports of blood clots occurring among some of the vaccinated and the consequent stoppage of AstraZeneca vaccination in a few European countries have added to the fears.
Vaccines have not been tested for people below 18 years of age so they are not being vaccinated. Trials are now starting in phases and it will take perhaps another six months for the results to come. This means that children can be carriers of the disease for some time. This makes the reopening of schools somewhat difficult and risky. Some reports also suggest that the vaccine is less effective in the case of those above 65 years of age because of their lower immune response. So, some countries did not recommend certain vaccines for the elderly. All this has caused confusion and hesitancy.
Since the virus is highly virulent, people have to stop meeting others to slow the spread of the disease. So, a lockdown is recommended to prevent people from meeting each other. Further, physical distancing is prescribed along with use of face masks and better hygiene via hand washing. Lockdown meant that people have to isolate themselves and cannot travel. Families cannot meet each other and vacations become difficult because transportation requires people to be close to each other. Visits to restaurants expose people to infection since one has to remove the mask in closed spaces and people talk to each other. Similarly, other contact services have had to be stopped during lockdown.
Some could work from home (WFH) via net but most could not. Children had to have classes via the net. The use of telecom services shot up. But the efficiency of work and studies was not what it used to be since people were not used to the new requirements. At home there is distraction and the office or classroom environment cannot be created easily. Parents had to help children in various ways so had to take time out from work.
The digital divide impacted the poor. They did not have access to Wi-Fi and/or did not have the devices. Some children committed suicide. Reports suggest that many children simply dropped out of the schools since parents either migrated back to their villages or could not pay the fees. For children to sit in one place for hours and pore over a small screen is difficult – their attention span is limited. Teachers had to devise new ways of teaching online which is not easy. All this has set back learning for many children.
People need to meet each other for bonding and support. Children learn through socialisation with each other and that has weakened. Thus, isolation has led to huge psychological effects on people. While some used the forced togetherness within the confines of the family to spend quality time with each other. But, where there were pre-existing tensions in the family, things reached breaking point and violence increased.
During the year festivals have been low key both because of economic hardship and need to isolate. Sports events stopped or were postponed (like, Olympics and IPL) or held in an unnatural setting without spectators. Visits to religious places stopped for much of the year. Cinema halls and theaters were closed. All this aggravated the psychological impact on people.
The result has been that people are exhausted and itching to go back to the pre-pandemic days. As the number of infections declined, people stopped using masks or used them casually. But the virus was lurking in the population. At its lowest in India in February, there were more than 10,000 new cases a day and the disease has surged since then. Massive protests, elections rallies, and Kumbh since early 2021 have aggravated the situation. Globally also various protests, like Black Lives Matter, election rallies in the US and travel for Thanksgiving led to a spurt.
Disease control requires cooperation
China, where the disease originated from quickly, controlled the disease through lockdown. It is governed by an authoritarian regime that could implement a severe lockdown between January and March 2020. Since then, it has experienced minor local breakouts of the disease but they have not been quickly managed. This is in contrast to the experience in India, US, Brazil, UK, etc.
The lesson clearly is that lockdown has to be strict and after that also the population has to follow appropriate social behavior. The disease does not care for human emotions and will proliferate the moment it gets a chance. Even rapid vaccination may not offer complete protection from the disease.
Further, the virus highlights that we are a community and have to deal with the disease as a collective. Unless the virus is eliminated everywhere it will persist, mutate and spread. For it, there are no borders and no one is high or low. It has spread to all corners of the world including the Antarctica. It has not only infected the poor but also presidents and prime ministers.
In democratic societies, people have to voluntarily follow socially appropriate behaviour. If the credibility of the rulers is low, people will not voluntarily follow the laid down rules. For success, the rulers need to address the alienation of people who have lost faith in them. This would also address vaccine hesitancy. It might also moderate the adverse psychological impact on people as the duration of the lockdown gets reduced.
There is need for better public services, like health infrastructure. The digital divide needs to be addressed so that there can be better access to public services. The rising inequality and loss of employment and incomes needs to be tackled. Since India has been found wanting in these respects, it has fared worse than other countries.
Impact on the unorganised sector
India consists of a large unorganised sector with 94% of the employment and 45% of the output. This sector was the worst hit since it works with small amounts of capital, has low wages and little savings. Stoppage of incomes due to lockdown even for a few days is disastrous. Millions of people migrated from cities to the villages they had come from. This kind of movement was not seen in any other major economy.
Due to the sudden lockdown, no transport was available so people walked, cycled or used whatever transport they could get. They had children in tow and the little bit of their belongings. They depended on the charity of people on the way for food and water. They were cheated, beaten by the police and had to bribe their way.
The elite discovered that most workers in the country live in uncivilised conditions and could not practice isolation required by the lockdown. How can five or ten people live together in a room 24×7? They do not have access to clean drinking water or toilets and have to buy their essentials daily. So, they had to move and that defeated the purpose of lockdown. It became evident that they do not get a living wage, live at the edge of survival and cannot take care of themselves in a crisis like a pandemic.
No V-shaped recovery
During lockdown, economic activity, except for the production and distribution of essentials completely ceased. Only some well off in the services sector could continue to work from home. Hundreds of millions lost employment and incomes. Thus, supply got disrupted and demand declined in the economy. Such a difficult situation is neither faced in a war nor existed during the global financial crisis of 2007-09.
Policymakers had never faced such an emergency and did not know how to deal with it. They tried to portray a rosy picture and talked of a V-shaped recovery, that is, the economy would recover as fast as it had declined. In India, in April, the economy had declined by 75% and barely eased in May. So, in June when ‘Unlock’ started, a V shape would have required the economy to return to the pre-pandemic level by August 2020.
But an economy is not like a rubber ball which immediately bounces back. An economy has people, workplaces, etc., which do not recover immediately. So, in March 2021, the economy is still down by more than 10% over March 2020. If the economy had declined by 75% in last April and is still down by 10%, the rate of growth for the full 2020-21 would be -30%.
The official data suggests that the economy is now growing. In the third quarter, it’s supposed to have grown 0.4% and recession is over. For 2020-21, officially, the economy will decline by about 8%. All this is based on organised sector high frequency data. Even this data indicates that major sectors of the economy are yet to recover. Further, no data on the unorganised sector is taken into account. For agriculture, it was assumed that targets would be fulfilled (which was not the case) since actual output data was not available in the first quarter.
However, the Reserve Bank of India (RBI) data shows that in the organised sector, capacity utilisation which had dropped sharply in April and May was only at 63% compared to 70% last year. Thus, output of the organised sector is still down 10%. Further, consumer confidence survey is at 55 way below last year’s level of 105. So, demand has not yet revived and production cannot have revived without demand. Investment is also down compared to last year.
Thus, the official data which does not take into account the unorganised sector cannot be relied upon. Further, indications are that the organised sector has not recovered to the pre-pandemic level and there is no V-shaped recovery.
The government argues that international agencies like Asian Development Bank (ADB) and International Monetary Fund (IMF) are also talking of around 8% decline. But, their prediction cannot be very different from the official figure since they are not independent data gathering agencies and use the government data. So, their data also has all the infirmities of the official data.
There is a political reason for not admitting that the economy has declined drastically. First, the country’s standing in the world does not decline too much. Second, the business sentiment does not collapse. Finally, and most importantly, government does not have to take big steps to support the poor and the unorganized sectors – the real sufferers from the pandemic. If the economy has recovered on its own, no major policy initiatives favoring the poor are needed.
Government pushing supply-side policies
With low capacity utilisation, businesses cannot expand unless demand revives but that is unlikely with the low consumer sentiment in the organised sector itself. It is much worse in the unorganised sector. The largest component of the unorganised sector is agriculture and even farmers have been complaining of loss of incomes. The government needed to push purchasing power in the hands of the vast unorganised sectors. Instead, it has used the occasion to push supply-side policies to help businesses.
These policies, like changes in farm laws and labour laws and privatisation are proving to be counter-productive since protests have broken out. This is leading to a spread of the disease and disruption of work and supplies, thus, slowing the recovery. Even if the supply-side policies deliver, they will do so in the medium to long run whereas the need is for immediate succour to businesses and the poor. If demand does not pick up, investment will also not pick up and the supply-side responses will not occur. For instance, the cut in the corporate tax rates in 2019 did not lead to increased investment.
Globally, there has been unprecedented response to people’s hardship. Budget deficit has been allowed to rise to record levels across countries. Central banks have released liquidity in huge dollops. The economic theory underling the Washington Consensus since the 1980s has been turned on its head and Keynesian policies are being followed. The deficit in the budget in many countries is above 20% of their reduced gross domestic product (GDP).
A new $1.9 trillion stimulus package has been announced in the US. This is in addition to the almost $3 trillion package in 2020. These packages support the unemployed, small businesses, secure housing, etc.. These measures will push demand in the economy, prevent closure of small businesses and boost employment. China also had negative growth in one quarter and then a revival.
Life versus livelihood
The Indian government has used the pandemic to push through pro-business policies that it has wanted to implement since it came to power in 2014. It has taken advantage of the situation when protest is difficult and the opposition is weak.
The government’s pro-business stance is also clear from the way lockdown was handled. It was eased when India had a rising number of cases. In most countries the lockdown was eased when the new cases had dropped sharply. The government was pressurised to open up since businesses were suffering losses and they posed the issue as ‘life versus livelihood’. Their argument was that closure of businesses led to loss of employment and without income, workers could not sustain themselves and could die. Actually, they were not worried about workers but about themselves.
The dichotomy posed was false. If life can be preserved, work can always be created later on. India was in the happy position of having huge stocks of foodgrain so that life could be saved even without work. The government realising that the lockdown was not working well decided to unlock and keep businesses happy. The premature opening up gave many the sense that the disease is not a problem. So, the guard was let down and the disease has proliferated.
Out of line financial sector
Large number of businesses have suffered losses and many have closed down, especially, the small and micro sector units that have little capital. Or, those that were already stressed with high debt. Many have been unable to pay their EMIs. A moratorium was offered till the end of August but that may not help many stressed units. With failures, the already high NPAs of the banks will spurt and the financial sector is likely to face further problems.
Another cause of worry is that the financial sector has gone way out of line from the real sector. The stock markets have risen to record levels even when the economy is still way below its earlier level and there is huge uncertainty going forward. The P/E ratios are very high which is a sign of speculation and the possibility of a big fall. But, investors do not have much option with the banks reducing interest rates and the real estate market down.
Since production of essentials could continue and use of IT, telecom, etc. increased, these sectors are doing well. But many other sectors are not doing so well as yet – so that there is a divergence in the performance. Technology stocks are doing well the world over since they are likely to gain from the trends toward greater automation, use of e-commerce and work from home. Companies from the US have invested heavily in Indian technology and telecom companies to take advantage of the emerging possibilities and that has boosted the Indian stock markets. But a change in the US or EU could lead to an outflow of foreign funds leading to a market fall.
The world is headed towards a new normal with increasing automation, digitisation, e-commerce, etc. Travel, tourism, entertainment, education, remote working, etc. have undergone big changes. Unemployment will rise due to increasing automation.
Workers need to be paid a living wage so that they can face the challenge of a future pandemic. The possibility of new viruses attacking human kind has increased as environment has been greatly disturbed and animals have come closer to human populations. In the last 20 years, the coronavirus is the seventh virus to have infected humans. The poor need to have savings to be able to take care of their families. While the poor have greater immunity due to their unhygienic conditions of living they are also more vulnerable due to their living in crowded conditions. In the US, the poor have been impacted more severely by COVID-19 than the well-off.
Education standards need to be greatly improved so that people develop a basic understanding of life and not be led astray by dogmas, superstitions and misinformation. Research needs to be stepped up so that challenges facing human kind can be taken care of better. Other public services need to be enhanced like health, drinking water, toilets and sanitation. Wi-Fi should become a public service like roads.
Consumerism has to be checked so that the environment can be better protected. Public transport rather than personal transportation needs to be encouraged and living close to the place of work needs to be promoted. Growing inequality has to be addressed. Supply chains may have to be shortened so as to reduce disruptions. This will change trade in the world and exports will decline. Such big changes would require people to think of improvements in their welfare in non-material terms. All this cannot happen without changes in consciousness of people and focus on the collective.
The pandemic is continuing with second and third waves hitting nations in spite of the ongoing vaccinations. We understand the disease much better and that’s why recovery has improved and deaths have declined. But compared to March 2020, India is in a worse situation with infections rising rapidly. The virus has mutated into newer versions and some of them are not only more virulent but also able to evade the present vaccines. The current pace of vaccination needs to be scaled up by a factor of 15.
With outbreaks, lockdowns become imperative. While a lockdown is not a cure, it prevents the spread and gives the health system a chance to cope without getting overwhelmed. However, India did not implement the lockdown as it should have and people are now tired. A second and a third lockdown is more difficult to cope with since uncertainty continues and that results in deep social and economic impact. Economic recovery slows down in spite of vaccination and achieving the level of GDP in 2019 becomes more difficult.
The disease has shown that it has to be tackled globally, collectively and swiftly. Delays can be very costly. We cannot let our guard down as yet and socially responsible behavior is crucial. Testing and tracing is vital but we had relaxed it. Research has to be accelerated to track the virus and its mutations. We are not sure whether a new variant is attacking India currently.
The poor and unorganised sector have suffered grievously in India and need massive support through employment generation and income support (for the time being). They need better public services. The divide between the rich and the poor has grown and needs to be addressed. Supply-side policies will not only not deliver but lead to discontent and protests which can only slow down both the fight against the disease and economic recovery.
Once again the policymakers have shown that the unorganised sector is not in their consideration. Every crisis is an opportunity to reflect on deeper social issues and improve matters for the long run for the majority but it should not be misused to promote narrow vested interests in a new normal.
Arun Kumar is Malcolm Adiseshiah chair professor, Institute of Social Sciences and author of Indian Economy’s Greatest Crisis: Impact of the Coronavirus and the Road Ahead (Penguin Random House).