Second Covid wave could delay economic recovery

Lakshmana Venkat Kuchi *

The second wave of Coronavirus attack is very much upon us, and we as a Nation must be serious in our attempts to tackle it head-on with the necessary resolve to fight back. The silver lining in an otherwise apprehensive health outlook–the virus is expected to spread faster, and wider but the good news is that its intensity in terms of fatalities is expected to decline.

Why we must fear the second wave, other than from the public health perspective, is because of its impact on our economy, which is slowly recovering from the adverse impact of the pandemic that put the economy on a negative growth path.

Figures from the ground are a cause for cheer, whether it is auto sales or GST realizations that have shown an upswing. There is reason to tend to believe the Government theme that the worst is over and behind us when it comes to the slow recovery in the economy that was driven down by the pandemic is concerned.

Our economy, according to recent estimates is projected to grow after a dismal year that saw it plummet into the negative growth arena. The Economic Survey projected the India growth at 11 percent, RBI 10.5 percent, International Monetary Fund 11.5 percent, and the World Bank in a wide range of 7.5-12.5 percent. Rating agencies too were bullish on Indian recovery, and let’s hope that they come true.

But what we must realize is that these predictions were made before the second Covid-19 wave erupted, which threatens this recovery and we need to guard against this adverse impact of the pandemic. Already, there are partial lockdowns mulled in parts of Maharashtra that is becoming the epicenter of the new wave, but other States too are showing worrisome signs.

Madhya Pradesh, Maharashtra have begun partial lockdowns in few cities. In Karnataka, some cities are already witnessing a rush in hospitals and the Government has asked the private hospitals to reserve 10 percent of beds for the patients referred by the Government hospitals. Similar requests are likely in other cities too, given the rate at which the Coronavirus is affecting the people.

Mumbai Municipal Corporation too is mulling serious steps and action against people violating Covid-19 norms. Maharashtra reported 43,183 Covid cases and 249 deaths on Thursday. In Pune, the administration has imposed partial lockdown and night time curfew besides shutting down malls, restaurants, and bars for a week.

Experts expected the second wave to peak by mid-April and the infections could see a decline from May end. So, this is a very crucial period that the Nation needs to be doubly cautious and people, in general, must take all precautions, in their own interest and the interests of their loved ones.

Slowly but surely, everyone is veering around to the seriousness of the situation but unfortunately, the behavior of the people is something that leaves a lot to be desired. This, cutting across regions and States.

On top of this, the election season is witnessing huge congregations for election rallies and meetings in the five poll-bound States, where Covid-19 protocols--masking up, social distancing is less in evidence. Health experts shudder to think what it could lead to if the virus breaks out in those areas. Already, in Tamil Nadu couple of candidates have tested positive for Coronavirus.

Why we should be really worried is the damage potential the second wave poses to our economy that is slowly recovering from the pandemic blow. Strict restrictions, if not shutdowns, do also have the potential to disrupt the economic recovery process, depending on the extent and intensity of the restrictions.

Localized restrictions could re-introduce uncertainty, as rumors about another lockdown fly around. The Government has so far ruled it out, but Mumbai could also witness the strengthening of curbs to check the rapid spread of the virus and infections.

Even Punjab, Kerala, Karnataka, Gujarat, and Chhattisgarh, too are experiencing a surge in cases. In few places, restrictions like night curfews and a cap on the number of people attending weddings, functions are put in place.

Vaccination drive is something that is giving confidence to the masses. But as of now, only those aged over 45 are eligible for the vaccine, and the confidence of the people will increase once the vaccine is available for all young people and adults.

Now let’s take a look at the recent numbers. Collections of Goods and Services Tax (GST) for February, collected in March 2021 has set a new record at Rs 1.24 lakh crore that is nearly 30 percent higher than the previous year. What is significant is that this GST figure crossing Rs 1 lakh crore mark continued for six months.

Of the total revenue collected, Central GST was at Rs 22,973 crore, State GST came in at Rs 29,329 crore, Integrated GST at Rs 62,842 crore (including Rs 31,097 crore collected on import of goods) and Cess was Rs 8,757 crore (including Rs 935 crore collected on import of goods).

Among States, the maximum year-on-year growth in revenue collection, during the month under review, was recorded by Manipur (40 percent), followed by Arunachal Pradesh (38 percent), Tripura (31 percent) and Jammu & Kashmir (27 percent).

Odisha recorded a growth of 25 percent. GST collection of more than a lakh crore for six straight months helped the Government to mop up Rs 11.37 lakh crore in the year 2020-21, which is a contraction of seven percent when compared to Rs 12.22 lakh crore collected during 2019-20. But given the strict lockdown, this figure is considerably higher than anticipated.

While this is a positive sign for the economy, the threat of partial or full lockdown could create more uncertainties and could affect recovery. Now what is needed is to fine tune policy initiatives to put the economy on the fast track, with a proactive review of policies to regenerate the economic process.