Coronavirus pandemic: A systems approach to mitigate the social and economic fallout of COVID-19
We are living in the time of a pandemic that although unique to our generation, mimics the one exactly a century ago. Not only is the pandemic triggered by a respiratory virus, its effect on both human health and livelihoods is similarly astronomical — bringing the wheels of the economy to a halt
We are living in the time of a pandemic that although unique to our generation, mimics the one exactly a century ago. Not only is the pandemic triggered by a respiratory virus, its effect on both human health and livelihoods is similarly astronomical — bringing the wheels of the economy to a halt.
The 1918 flu pandemic — colloquially known as the Spanish flu —took close to 50 million lives, of which around 18 million casualties were in India. Data around its economic impact is harder to trace due to restrictions on flow of information during the First World War and the fact that record-keeping on national income accounting was not as sophisticated as today. However data from the United States showed that both industrial production and business activity dipped at the height of the pandemic in 1918.
Our own 21st Century pandemic — COVID 19 — has till date affected more than 2.5 million individuals worldwide with a toll of over 180,000 people and counting. The world GDP growth rate is projected to fall by three percent, while the cumulative loss to global GDP over 2020 and 2021 from the crisis could be around $9 trillion — greater than the economies of Japan and Germany combined.
This predicted economic contraction — especially in developing countries such as India, where a huge share of the population works in the informal sector — will lead to mass layoffs that can further lead to starvation, malnutrition and law and order challenges. The lack of consumption demand and private investments might put the economy into a spiral of recession, while the disruptions in the supply chain can have long-term impact on the availability of essential products and create inflationary pressure for governments in the future.
Over the course of this article, we will take a systems view to map out the social, economic and health implications of the pandemic and highlight the pathways policymakers should take to minimise losses:
As with any high-transmission disease; eliminating COVID-19 will require three levels of action: Detection, treatment and prevention. Detection and treatment are purely dependent on the strength of a country's healthcare infrastructure. To mitigate the inordinate burden on its healthcare infrastructures in treatment and detection, most countries therefore focus on prevention. Prevention in COVID-19 is practiced by social distancing and maintaining high hygiene standards. This is mostly achieved by citizen education but— and especially in densely populated regions — this is only possible through a complete lockdown.
A lockdown or a state of isolation or restricted access instituted as a security measure, brings with it many economic ripple effects. A systems approach — an approach that helps break down the web of interrelations between various elements that create complex problems — to planning the lockdown therefore becomes even more crucial.
A lockdown is only as successful as the strength of citizen cooperation which is possible when there is an implicit trust between the state and its citizens. Trust in a pandemic is built by the knowledge of efficacy of the healthcare system, economic security for those unable to earn livelihoods during isolation.
This is where the inter-connections of the system come into play. We have tried to capture this in the system map above.
We see that in a pandemic the effectiveness of government systems is the central node of the system that drives all other forces necessary to eliminate COVID-19. In systems language, the force is the interaction between different elements of the system. For example, the element social distancing to be effective its relationship with other elements such as maintenance of law and order, psychological security of population etc. is important. The strength of this force is further defined by linkages to other elements such as safeguards for vulnerable communities, relief plan for industry, role of the media and action plan for keeping essential activities alive in a lockdown. These are further linked to other elements that eventually lead up to the elimination of COVID-19.
Through the study of this complex web of interconnections and acknowledging that the state will be in the steering wheel during the pandemic of different elements; we propose the following recommendations for each key element in the system for the complete elimination of COVID-19 in India.
Central and state Governments
Government institutions — both Central and state are the central node of the system that control all steps to COVID-19 elimination — prevention detection, treatment. Below are the key steps the government should take in addressing the pandemic:
- G1: India spends only 3.5 percent of its GDP on health which is much lesser compared to other emerging economies such as Brazil (nine percent) or Russia (6.5 percent). This crisis has provided the country with a great opportunity to improve healthcare systems and make it equitable. Provisions should be made to reallocate spending from sectors such as defence and channel them towards healthcare. The reallocation should be utilised across investments in research and development of a vaccine; research on low-cost testing; subsidising testing for private testing laboratories; ramping up hospital beds — permanent and temporary, creating temporary structures, performing widespread testing and providing incentives to healthcare workers
- G2: The Finance Minister of India has announced a stimulus package of Rs 1.7 lakh crore which is about 0.8 percent of GDP. While a developing country like India can't afford to have a stimulus package of the scale of the US (10 percent of GDP), there is still scope to increase it to similar levels as China (2.5 percent of GDP). This stimulus allocates an additional Rs 45,000 crore under the key public distribution scheme — the Pradhan Mantri Garib Kalyan Yojana. The additional food supply currently as per the stimulus is five kilograms of rice or wheat and one kilogram of pulses per household. This should be further increased to cover other essentials such as oil, soap and sugar. A letter from the Indian Society of Labour Economics (ISLE) has proposed a figure of 10 kilograms of free ration per month along with other essential items. It is to be noted that about 56 million metric tonnes of food grain are currently available with the Food Corporation of India. The government should increase the per household allocation. The buffer allocation norm currently calls for stocking about 21 million tonnes of food grain.
- G3: The Central government announced direct benefit transfer to farmers — Rs 2,000 in the first week of April under Kisan Samman Nidhi. This is estimated to be about Rs 17,380 crore for 8.69 crore farmer families, however this is an advance payment and it is already part of the planned expenditure for this fiscal year. The government should look at increasing this amount for this year to compensate for the loss during the rabi season and probable increase in cost of cultivation in the kharif season due to disruption in the input supply chain.
- G4: The Central government announced cash transfers for senior citizens — one-time additional amount of Rs 1,000 — and women with Jan Dhan accounts — Rs 500 per month for three months. This should be further increased considering these amounts do not even meet the government's own poverty line estimates. The ISLE has recommended a minimum transfer of Rs 6,000 per month for three months to households who do not have a taxpayer or a formal worker. This is a good way of creating an artificial wealth line for transferring direct cash to the needy.
- G5: In the near-term; a corpus for all informal workers should be created that recreates the Provident Fund structure that formal workers have access to. This corpus — or a universal social protection fund — should be initially built from government budget expenditure. The International Labour Organisation has also provided detailed recommendations on Social Protection Floors that can be the basis for establishing this universal social protection fund
- G6: The construction sector that contributes eight percent of GDP is currently suffering and will need months to recover. The Central government has asked states to use funds worth Rs 31,000 crore to provide relief. This fund is likely to augment medical testing, screening and provide better healthcare facilities. However, this relief is only for workers who have a Building and Other Construction Worker (BOCW) identity card. There are around 55 million daily wage workers. A recent study by Kamgar highlighted that 94 percent of the workers do not have a BOCW card. Under these circumstances, it is important that this relief is universally provided.
- G7: Linked to the recommendation above, similar universal relief measures should be extended on all public distribution services. Migrant workers who do not have their ration cards should be extended food support via the public distribution network.
- G8: Many inter-state migrant workers are returning to rural areas. Wage work should be created for them through the Mahatma Gandhi National Rural Employment (MGNREGA) Scheme to ensure that they have a source of livelihood. The focus should be on creating productive assets in rural areas through MGNREGA.
- G9: The Second World War gave the world organisations such as the International Monetary Fund (IMF), World Bank and the United Nations which have been instrumental in addressing issues of economic and social inequality. This crisis is the biggest challenge mankind has faced since then and it calls for similar collaboration at global level, especially when infections in one country can counter the good work done by the other countries in today's globalised world. India — being one of the biggest economies in the world with around 16 percent of the population and being projected by IMF as one of the few economies to have a positive GDP growth rate — can play a leadership role in these discussions. Where possible it should display solidarity especially with lower income countries by personal protective equipment (PPE) and medicine exports, technology transfer etc.
- G10: The World Health Organisation currently has a budget of around $4.4 billion. In the coming months, a larger budget will be needed — especially in the least-developed countries — for awareness programmes such as behaviour change communication, research on vaccines, distribution of essential medical supplies like testing kits and building health infrastructure. India should continue to extend its support at the current rate.
- G11: Both the Central and state government will have to coordinate towards maintaining law and order as loss of employment and pending starvation may drive increase in criminal activities. There is already news of theft in shut factories, sporadic incidences of violence and attempts to communalise which can have long-term implications by driving fault lines amongst citizens. This will need a carrot-and-stick policy. It will be important that law enforcement officials are sensitised on taking a humane approach while ensuring that people do not use this situation for their own benefit.
- G12: It will be critical to take special steps to revive the agriculture sector and food supply chain hampered by the lockdown. The kharif season is about to start soon while harvesting was delayed for the rabi. The government has done the right thing by relaxing the lockdown norms for agricultural activities. But more needs to be done for the sector to recover from the sudden shock. Most of the agriculture labourers — mostly migrants — have gone back to their homes. Processing, value-addition and marketing activities were shut, though relaxations have been announced, it will take for things to get back to normal. The government’s procurement system will have to increase its procurement levels to ensure that farmers do not suffer because of this. It is also a great opportunity to strengthen and use community based institutions such as Farmer Producer Companies (FPCs), self-help groups to further complement the procurement efforts of the government. To address the issue of labour shortage, the government should look at providing rental support to FPCs for agricultural equipment.
Central Banks and Financial Institutions
As a subsidiary of the government, the Central bank and the financial system under it provides the much needed oil to the wheels of the economy. Monetary planning — especially to trigger the private sector — thus becomes the second most important element in the system after the direct intervention of the state.
- FI1: The Reserve Bank of India has reduced the repo and reverse repo rates by 75 and 90 basis points to 4.4 and 4.0 percent respectively and announced liquidity measures to the tune of Rs 3.7 lakh crore. The reverse repo rate was further cut by 25 basis points on 17 April. In addition, the Credit Reserve Ratio has been cut by 100 basis points. This is all done to pump liquidity into the economy and should be further passed on to the customers by banks. The banks can look at developing short-term personal loan products with lower than usual interest rates. Working capital loans should be provided to SMEs to meet the immediate requirement. Proper due-diligence should be done to ensure that benefit goes to only those SMEs which had a better financial status pre-COVID-19.
- FI2: The RBI has provided a three-month moratorium on loan repayment. It can look at extending the moratorium on monthly loan repayments for another quarter at least as the economic impacts of the pandemic will be fully felt only towards the latter half of the year.
- FI3: The RBI should look at quantitative easing options by buying assets from financial institutions such as insurance companies, mutual funds and other lenders that do not take deposits. As recommended by former RBI governor Raghuram Rajan, these institutions should be further encouraged and provided incentives to buy investment-grade bonds
- FI4: The role of Non-Banking Financial Companies (NBFC) and Microfinance Institutions (MFI) are critical in the context of rural economy. The disruptions caused by COVID-19 have impacted these institutions severely. RBI is looking at targeted long-term repo operations to pump in Rs 50,000 crore, with at least 50 percent of the total amount going to small and mid-size NBFCs and MFIs. However, certain other measures such as a moratorium for these institutions, similar to the one announced for banks would help both the customers and these institutions.
The private sector is the second critical element of the system that is a companion to the government both on the healthcare and economic front. Government and private sector action combined is needed to maintain social equity in the pandemic.
- P1: Large companies should take advantage of the reduced banking interest rates (already outlined in FI1) to increase private investments in the economy. They should look at further raising money for the market and passing it on to small suppliers in their supply chain.
- P2: High net worth companies should look at channelising investments towards strengthening the health system, wherever possible and in consultation and collaboration with the government as outlined in G1.
- P3: Private Equity and Venture Capital firms can also play an important role by scouting for good entrepreneurial initiatives — both on the healthcare infrastructure and employment creation — to fight this challenge as many new entrepreneurs will come out with solutions in this time of crisis.
- P4: Large companies should take additional steps to address the supply-chain disruption caused by the lockdown. This should involve providing additional assistance in terms of advance payment to the suppliers.
- P5: Both large companies and SMEs should ensure proper safety measures for the employees and workers at the place of work. This should include investment in PPE, testing and also negotiating on group insurance terms.
- P6: Both large companies and SMEs should have flexible work policies, till a permanent cure for the disease is found.
- P7: Make the best effort to retain the workforce and honour supplier commitment — displaying willingness to work with low profit or bear loss in the short-term.
In the systems map, the element of philanthropic investments is a support for both much-needed healthcare infrastructure and workforce. But it is also a catalyst for protecting vulnerable communities. Domestic philanthropic funding (including funds spent as per the corporate social responsibility norm under the Companies Act, 2013) in India in 2018 is estimated at $7 billion. International philanthropic funding is estimated at another $1.5 billion. To eliminate COVID-19, this corpus should be dedicated equally between strengthening healthcare and protections for vulnerable communities suffering economic loss in the lockdown period. Specific ideas to channelise the corpus are listed below:
Contribution to dedicated government funds such as Prime Minister's Citizens Assistance and Relief in Emergency Situation Fund (PM-CARES), Prime Minister's National Relief Fund (PMNRF), Chief Minister's Relief Funds set up across different states etc.
- PO1: Direct investment towards COVID-19 related work-awareness, relief, rehabilitation, R&D and subsequently vaccine and essential medicine distribution. This should be in tandem with G1 and P2.
- PO2: Build innovative outcome linked financial products such as social bonds that can speed up research, treatment and prevention.
- PO3: Support grassroots civil society organisations that are doubling up their efforts in reaching out to vulnerable communities and in many cases acting in tandem with government relief efforts. The many roles that civil society organisations can play and by association, philanthropic organisations can support are outlined in the next section.
In addition to utilising existing efforts, this pool of funds must be further expanded.
- PO4: Where possible, unplanned expenditure/savings can be channelled to philanthropy.
- PO5: Private foundations should explore the possibility of tapping into the endowment fund corpus.
There is no explicit element of the civil society in the systems map. However as mentioned earlier; no crisis can be addressed without civil society support and action. From hyperlocal citizen action groups to well-established grassroots organisations, they act as implementers, advisors, thought partners and overseers of public and private sector action in the country. Civil society therefore shadows all of the activities of the State and governments should embrace civil society, and collaborate in many areas:
- CS1: Building trust in the community on social distancing and other lockdown measures taken by the government through positive communication and reinforcing importance of social distancing and personal hygiene.
- CS2: Addressing misinformation in communities — especially around how the disease is spread and need for quarantining of high-risk community members. Role of civil society here will further strengthen the management of law of order as outlined in recommendation G11.
- CS3: Supplementing the government relief and rehabilitation work through volunteer networks. Ideally, civil society should work in collaboration with government channels when it comes to relief distribution to avoid duplication of efforts. This links to the recommendations G2 through G7.
- CS4: Setting-up community based small enterprises for manufacturing PPE. This will provide meaningful employment at the community level and increase the supply of much-needed PPEs.
- CS5: In rural communities where the lockdown has hampered access to services, civil society networks should facilitate input distribution for agriculture (seeds, fertilisers etc.), support sales of agricultural produce through community-based collectives. Additionally grassroots civil society organisations should also identify solutions to creating employment in rural areas through investment in productive assets in the village. This recommendation connects civil society with the government in delivering recommendation G12.
- CS6: As a thought partner to the government, civil society actors should provide direct policy inputs as well as evidence to support innovative policy formulation during the crisis. They should share evidence and experience from the field with various government stakeholders and support in crafting of solutions that are most meaningful in redressing the pain of the pandemic
- CS7: The evidence and experience from the ground should be used to shed light on policy implementation and/or private sector action on the ground — especially if it adversely affects vulnerable populations. Civil society should play a key role in driving accountability in governance processes.
The fourth estate is critical to success of the element — psychological security for the population. The key roles the media can and should play in the times of crisis are:
- M1: Playing a positive role in spread awareness on the disease and prevention; affirmative communication on social distancing, lockdown. Ideally this should work in tandem with recommendation CS1.
- M2: Countering fake news and spread of misinformation with facts and data-backed news reports and information from experts. This in combination with recommendations G11 and CS2 is critical in maintaining social harmony through the pandemic.
- M3: Acting as the government's support system in reporting implementation gaps from the ground. When needed, it should also hold stakeholders to account for lapses. This will be especially powerful when combined with inputs from CS7.
We began this article with the premise that a lockdown is only as successful the strength of citizen cooperation which is possible when there is an implicit trust between the State and its citizens.
Transparency is that fundamental element that builds this trust. Transparency in planning and execution will strengthen this trust and drive accountability within all elements of the system. In closing, if there is one ground truth that will differentiate this pandemic from the one last century, it is that it will be built on transparent policymaking that took a historic and systemic view.
Ipshita Sinha is a programme manager at an independent foundation where her work focuses on the intersection of business and human rights.
Litul Baruah is an economist who presently works as a programme manager at an independent foundation. The paper is written in the individual capacity of the authors and does not represent the views of any institution with which they may be affiliated.
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