Confederation of Indian Industry (CII) poll of about 100 CEOs conducted on May 4 has revealed that most of them expect the economy to contract this year. As per an earlier poll, one-third of firms expect their revenues to contract more than 40% this year. Almost half of those surveyed felt that it would take more than a year to achieve economic normalcy post-lockdown.
GoI’s May 1 decision to extend lockdown from May 4 by two more weeks, with further relaxations in places, is welcome, as it provides for a safe and calibrated opening of the economy while also containing Covid-19’s spread. This also allows governments both at the Centre and states additional time to build necessary medical capacity required, in case there is a spike in the number of Covid-19 cases. Under the new guidelines, all industrial activities in rural areas are permitted, while it is restricted in urban areas to specified areas like industrial estates, special economic zones (SEZs), export oriented units (EOUs) and industrial townships with access to control.
GoI has also divided districts into red, orange and green zones. Economic activities in red, and especially containment, zones continue to be restricted.
The guidelines leave out large segments of economic activities not located in industrial sectors. As a result, this does not cover many business units, including MSMEs, belonging to unorganised sectors.
Providing financial stability to these business units is of critical importance. A focused strategy needed to minimise the adverse impacts of the lockdown without compromising the efforts to restrict the contagion.
The exit strategy should focus on districts with heavy presence of industrial and economic activities, or industrial clusters. The top 100-150 industrial districts could be identified and classified, based on their contribution to the national economy, presence of industrial clusters, and number of registered enterprises.
Second, the focus should be on restarting all economic activities in all parts of an economic district — including in containment zones — with all necessary safety measures in place. The classification of zones into containment zones, orange zones and green zones could be done on the basis of safety precautions required. These zones could be marked in terms of concentric circles around the hotspot.
Identified industrial districts would require a separate working protocol and monitoring mechanism for business operations under various zones. Guidelines pertaining to movement of people and vehicles, sanitisation procedures, door-to-door testing, health and social distancing protocols, etc, should be strictly followed in containment zones.
Given the economic significance of these industrial districts, more should be spent in taking measures to contain the spread of Covid-19 — e.g., free distribution of personal protective equipment (PPE), masks, close monitoring, etc. The benefits from the resumption of economic activities in such districts will hopefully outweigh the additional costs incurred on protective measures for containing the pandemic.
Third, all business activities — essential or non-essential, within specified industrial zones or outside of them — should be restarted in urban areas. Standalone facilities or industrial clusters that are not notified should be permitted to open up at the earliest. This would also enable supply chains to operate smoothly across the country.
Real-time availability of data on all types of zones within industrial districts can help businesses plan better. It is also important to permit public transport for workers and selfemployed people with requisite precautions, so that they can travel to work. Standard operating procedures for workplaces and establishments in case of Covid-positive cases are available to avert a start-and-stop situation.
Focusing on the reviving industrial districts may reduce potential loss of industrial activity by around 50%. This, in turn, could provide relief to the national economy, along with providing financial sustainability to business units, preserving livelihoods and bringing relief to all workers.
This article was first published in The Economic Times on May 04, 2020