Shut-start-shut lockdown regime is taking a heavy toll
The shut-start-shut mode of administration is having a disastrous impact on the country’s economy. As a second wave of pandemic is hitting the southern and eastern states, panicky state governments have been imposing local lockdowns in Covid-hit regions. This is not only becoming a speed breaker as companies struggle to crank up production, it is actually killing whatever green shoots of revival we saw in recent weeks.
Data released by IHS Markit, a respected analytics firm, shows that manufacturing output in July contracted faster than in June. In particular, the Purchasing Managers’ Index (PMI) for manufacturing declined in July marginally to 46 compared to June’s 47.2. The below-50 figure indicates a contraction, while a score above 50 is a signal of expansion of the sector.
After the nationwide lockdown imposed from March 25 began to be eased from May onwards, regions and cities that had been relatively free of the novel coronavirus or had battled it well saw a sudden spurt in Covid-19 cases. Instead of testing and isolating hotspots, many state governments, in knee-jerk reactions, imposed severe lockdowns, once again stopping movement of men and material and paralysing industries that had begun to open up.
As an example of the nine-pin effect, the Indian Oil Corporation, which had increased its capacity utilisation to 93% of its pre-pandemic level by the first week of July, said utilisation again fell to 75% after many state governments reimposed curbs. Even Finance Minister Nirmala Sitharaman is now resigned to what she calls “a situation full of uncertainty”. But governments must end this ‘start-shut’ regime as repeated shutdowns are a huge blow for both mobilisation and confidence.
For manufacturing units, recovering from a second shutdown is very difficult, and in some cases it is ringing the death knell of vulnerable industries struggling to generate orders. A more viable approach will be to ring-fence only the hotspots rather than close entire states or cities. After all, the virus is not going to disappear soon, and we need to devise the best strategy to live with it without too much damage.