Four lockdowns and four stimulus packages – suppressing COVID-19, India turns to the economy

25 May 2020
Four lockdowns and four stimulus packages – suppressing COVID-19, India turns to the economy
Since the Perth USAsia Centre’s India Update in early April, India has remained in various stages of national lockdown. To suppress the spread of COVID-19, Prime Minister Narendra Modi first announced lockdown on 24th March - and has subsequently extended it three times. In consultation with State and Union Territory governments, an incremental loosening of restrictions has been announced at each new stage. “Lockdown 4.0” will be in effect until the 31st May.
 
Shutting down social and economic activity for two months has had two major impacts: firstly, the successful suppression of COVID-19 thus far in a densely populated nation of 1.3 billion people; secondly, a significant contraction in the economic activity that is so vital for Indian livelihoods, jobs and incomes.
 
India’s challenge, akin to Australia, is to regenerate economic activity without sacrificing the health consolidations of recent months. As India now turns to revitalising one of the largest economies in the world, the key developments of the last six weeks include:
 
Thus far suppressed - COVID-19 by the numbers:
 
COVID-19 Case Numbers: As at Monday 25th May, India’s Ministry of Health and Family Welfare is reporting 77,103 active cases of COVID-19, and 4,021 COVID-19-related deaths. India’s total case numbers now stand at 138,845 – 10th in the world for total cases, 5th for active cases and 15th for total deaths. Maharashtra is the worst-afflicted State, accounting for over 40% of India’s deaths.
 
Testing and Tracing: India has significantly ramped up testing, and is now testing over 100,000 people per day. Over 1.5 million tests have occurred in May out of a total 2.5 million, and India’s testing rate of 2,000 people per million is up from 100/m in late March. While this is significantly lower than other countries (the US is nearly 40,000/m), India’s 4% test-positivity rate is a third of the US rate. India’s contact tracing app, Aarogya Setu, has been compulsory in many settings.
 
Flattening the Curve: India’s doubling rate in mid-May was 13 days, improving from 8 days in mid-April, and 3 days before the lockdown commenced. Over the course of April, India’s new case growth rate fell from above 20% to below 10%. However, with daily new cases still increasing, India recorded its highest single-day figure of 7,097 on Sunday 24th May. Case numbers are expected to continue growing as India loosens restrictions.
 
Four stages of lockdown – an incremental unwinding:
 
Lockdown 1.0 to 4.0: India’s initial lockdown ruled all persons must stay in their homes, except for providing or accessing essential goods and services. After the resumption of some industrial and agricultural activity, lockdown 3.0 began on 3rd May and divided the country up into green, orange and red (containment) zones. Dependant on COVID-19 levels, construction sites, shops and other activities resumed in green zones. Lockdown 4.0 began last week, with passenger transport resuming and staff-in-office limits ending. Education institutions and hospitality service providers remain shut, and strict restrictions remain in containment zones.
 
Enforcement and public communication: State and Union territory Governments have extended tighter lockdown restrictions in harder-hit States, and all have greater autonomy over zone classifications under Lockdown 4.0. Police enforcement has been strict, and at times criticised for over-reaching. The Australian Government had advised expats to carry shopping bags outside, to reassure authorities that travel was necessary. A WhatsApp-based Chatbot, developed with authorities and Indian artificial intelligence company Haptik, has become the de facto official COVID-19 information provider.
 
Migrant worker challenges: In early May millions of India’s migrant workers, who had been rendered unemployed and displaced in the lockdown, were allowed to self-fund their repatriation via charter buses. India’s over 40 million migrant labourers, many of whom attempted to walk home following transport shutdowns, have become a visible symbol of India’s lockdown inequities.
 
An economic rebooting – survival, stimulus, self-reliance and reform:
 
Macroeconomic Indicators: While India has been tipped as one of the few major economies who can avoid recession in 2020, lockdown extensions into May have further revised down growth forecasts. Over the course of March to May, Moody reduced India’s growth forecast for 2020 from 2.5% to 0.2%. Both India’s import and export levels fell by 60% in April, the nation’s services sector output has plunged, and unemployment is above 20%.
 
May Stimulus Packages: Subsequent to tripling the Central Government’s borrowing limit, in his 12th May Lockdown 4.0 address Prime Minister Modi announced a “20 lakh crore” stimulus package ($US260bn). Four tranches of fiscal initiatives were announced over four consecutive days, including small business loans, free food for the poor, rural agricultural scheme boosts, and more healthcare infrastructure spending. The May packages bring Central Government stimulus, and Reserve Bank liquidity measures, to a combined 10% of GDP.
 
A Self-Reliant India: In his 12th May address, PM Modi focused heavily on the need for India to become more self-reliant, “Becoming self-reliant is the only way to make the 21st Century belong to India.” PM Modi stressed that self-reliance for India did not mean becoming detached from international markets, but having a greater role in global value chains. COVID-19 has highlighted certain supply chain vulnerabilities, such as the importation of 70% of India’s active pharmaceutical ingredients from China.
 
Reform Agenda: Accompanying the May stimulus tranches were a number of major economic reform announcements by India’s finance minister, including agricultural sector deregulation, the privatisation of state owned enterprises, increased FDI limits in Indian defence manufacturing, and the enabling of commercial coal and space industry activity.
 
Indian foreign policy and relations with Australia:
 
Relations with Neighbours: Despite India’s move in April to block all automatic approvals of FDI from neighbouring countries (including China), India and China have continued to trade medical equipment and PPE supplies. India has delivered medical supplies to most of its neighbours, including Australia, further to establishing the SAARC COVID-19 Emergency Fund.
 
WHO Chairmanship: PM Modi was an early voice for WHO reform, stating at the G20 in March that improving the WHO’s early warning, vaccine development and capacity building mechanisms was essential. India last week assumed the Chairmanship of the WHO, succeeding Japan, with health minister Harsh Varhan becoming the new head of WHO’s Executive Board.
 
India-Australia Virtual Summit: Prime Ministers Modi and Morrison will hold a “virtual summit” on 4 June, further to their April phone conversation. The two leaders are expected to sign a number of economic and defence agreements, including in critical minerals and defence force port access. Australia’s High Commissioner-Designate to India, Hon Barry O’Farrell AO, has praised India’s handling of COVID-19, and stated that the pandemic response will bring the two nations closer together.
 
The Perth USAsia Centre will continue to provide updates and analysis on crucial developments across the Indo-Pacific region, including developments in India.
 

Authors

Hugo Seymour
Hugo Seymour
Research Analyst
Hugo Seymour is the Research Analyst at the Perth USAsia Centre. He develops content and publishes on Western Australia and Australia's engagement in the Indo-Pacific region.
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