Why blame the virus?

"Traffic congestion, power generation, port activity, vehicle registration and other high-frequency data point to the economy perking up as India reopens, recovering from a devastating slump as factories went idle and people were ordered to stay at home amid the coronavirus pandemic." "It is, however, unclear whether the current pent-up demand after a two-month lockdown will sustain as joblessness and pay cuts have been widespread." India's fuel demand is also recovering, according to Oil Minister Dharmendra Pradhan. "Sales of petrol, diesel and jet fuel have reduced by 70% in April from a year ago," Pradhan said in Hindi. This maybe good news for the government, which is extracting 69% in taxes on ever liter of fuel, but bad news for consumers, commuters and transport companies. Apart from the enormous inconvenience of the new rules of catching a flight, passengers may have to pay very high prices for tickets as the price of aviation turbine fuel (ATF) has been increased by Rs 11,000, or 48%, per kilo liter. High taxes reduce demand, especially as 122 million Indians are estimated to have lost their jobs. However, "At least 21 million people became employed after the nationwide lockdown was partially lifted," but "The salaried class did not see any increase in jobs," said the Center for Monitoring Indian Economy (CMIE). Sales of alcohol have fallen sharply because of an excess tax of 70%, according to Confederation Indian Alcoholic Beverage Companies (CIABC). "Consumer confidence has collapsed amid the coronavirus pandemic and it may result in contraction of the economy by 1.5 percent during 2020-21, surveys released by the Reserve Bank (RBI) showed on Sunday. As per the RBI, "85.3% households expect inflation to accelerate in the next three months". The RBI predicted that it may take years for economic growth to return from the recession. "The high-frequency indicators for March-April 2020 also suggested a collapse in demand." So if the economy is contracting and there is no demand, but prices keep on rising, then we can claim to be in stagflation. Of course, high taxes raise prices and depress demand when income is dropping. It is not just that the tax rates are high but companies have to pay goods and services tax (GST) on bills which have not been paid. As services companies "struggle with cash flows, they have to pay GST out of their own pocket even when the customer has defaulted".  Manufacturing is no different. Factory owners in Coimbatore were borrowing to pay GST for fear that their bank accounts will get frozen. "By all accounts, reversing the disruption caused by India's lockdown will be a long haul -- and the price businesses, especially small firms, have paid is just starting to become clear," wrote Nikhil Inamdar. It is not the virus which is causing so much economic pain in India, but government policies. Or lack thereof.