Thursday, April 09, 2020

How to decide which choice is less bad?

"To the best of my knowledge, virtually no country has imposed such a sweeping lockdown as India has; I continue to believe this makes India weak rather than strong," wrote industrialist Rajiv Bajaj. "I Don't buy the condescending argument that all Indians are a bunch of illiterate, ignorant, undisciplined morons who need cattle like shepherding." Trouble is, it takes one ignorant moron to infect multiple people. And there are millions of such people in India. "The Indian Council of Medical Research (ICMR) has estimated that one sick person could infect up to 406 others in 30 days if there was no lockdown, health ministry officials said on Tuesday..." Last month, "Indian authorities in the northern state of Punjab have quarantined around 40,000 residents from 20 villages following a Covid-19 linked to just one man." "Being a profitable, debt-free company that exports almost half of what it makes, Bajaj Auto is, fortunately, in a relatively resilient position as of now." But, "Until we see signs of normalisatiion, we are reviewing our capex budget to be put on hold, marketing budget to be reduced to virtually zero, interest waiver on dealer credit to be tempered, and wages to be cut across the organisation," wrote Bajaj. This is ominous because lower investment will decrease growth of the economy, lesser spending will reduce earnings of suppliers and dealers and lower wages will reduce spending power and tax collections. "Alarmist numbers base on questionable assumptions should not be used to prolong the lockdown, at least not in its present form. Even if there are 25,000 deaths, the economic costs of the present lockdown are disproportionately high," wrote Bibek Debroy & Vijay P Ojha. Normally, no one would have the guts to openly contradict Prime Minister Narendra Modi in public for fear of being arrested for sedition. So, why are they doing so now? Because, growth of GDP had already fallen to 4.7% in the third quarter of 2019-20 financial year and the economy will lose Rs 350-400 billion every day of the lockdown, bringing growth rate of the GDP down to 1.5-2.5% in the fourth quarter ending 31 March 2020, said Care Ratings Even worse, Goldman Sachs predicted a growth rate of 1.6% for the financial year 2020-21 for India. "Locked units, dead stocks, no sales, demanding vendors, uncollected payments and mounting expenses -- Covid-19 has been the last nail in the coffin for a host of MSMEs (micro, small and medium enterprises), post demonetisation and GST (goods and services tax)." The are 69 million MSMEs in India which means that 400 million informal sector workers could be pushed into poverty by the lockdown said the International Labor Organization (ILO). Lift lockdown and risk an epidemic, or continue and risk starvation. Stark choice facing the nation.

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