When you have inadequate and unvalidated data points, don’t have a vaccine or a known cure, and you run a country with 15% of the world’s population, how do you take a decision that brings some very painful choices to the table. Let’s look at what PM Modi faced:
- The country’s woefully inadequate medical infrastructure cannot cope with a pandemic if we hit stage 3 of expansion.
- The country’s 200 million daily wage earners who have no carry forwards even for one day’s meals would be the worst hit in an economic shutdown.
- The virus has primarily killed the elderly (Italy lost 85% above the age of 75, similar data for China and Iran). Infection numbers globally reached 400,000, but 100,000 have also been cured by a combination of good care and educated guesses in medicine.
- The economy with a three-week shutdown would take a $100 Billion approximate hit, and some businesses would have very delayed recoveries or just shut down. The small/self-employed would be worst hit, and those who employ migrant labour would be very challenged. Coming on the back of demonetization and GST which destroyed huge chunks of the unorganized sector which provides the largest employment, can the country’s fragile economic and social fabric take the hit.
- India’s foreign exchange reserves shored up very largely on debt, made the INR very vulnerable to sharp declines, and some estimates look at a range of 78/89 to the USD over the next 4/8 quarters. Weak crude has been the only solace.
- A 40% global correction in equity markets, put paid to divestment plans of BPCL, Air India etc and widened the budgetary hole. Clearly GST collections and Corporate tax collections were going to be much lower than estimate, and hence before considering a stimulus, we are looking at a 7/7.5% budgetary deficit.
- Would imposition of a lockdown be perceived as a draconian action, and a split hostile media project it as a backdoor emergency? Would the baying hounds who project him as a power seeking megalomaniac get their needed ammunition? A strategy to communicate to people directly and credibly either way would be needed.
- Law and Order, Food Distribution being state subjects, would all Chief Ministers buy-in to whatever decision was taken by the PM, and not pull in their own directions, in order to prevent a constitutional crisis of dismissal of non-compliant state governments.
- China and Korea took the tough approach and in three months brought the crisis under control. Being a democracy should we dither like Europe, USA and debate before we are pushed to decide.
- Securing the borders to prevent an influx of infected people being pushed across by an irrational neighbour. Sounds cynical but theoretically possible and needs mitigation.
Damned if you do and damned more if you don’t. The PM had faced a weather crisis which devastated Gujarat when he was CM, and he succeeded in putting it back on a growth path, this is not a state but the whole country. He would need ideologically opposed leaders and bureaucrats to pull in the same direction.
The decision to choose the best path of life for the maximum number of Indians, and live to fight another day on the economic front was what led to the final call by the PM. Proverbially “heavy is the head that wears the crown”. That’s what true leaders do, in strict time frames based on the maximum information available, they take difficult decisions using criteria which reflect their core values and beliefs. The actions are decisive and clearly and coherently communicated. They don’t run or duck or prevaricate. History writes the outcome of their choices.
Sanjit Paul Singh
Managing Partner S&S Associates