Coronavirus

India’s response to the COVID-19-induced economic crisis is proving to be ineffective. The neo-liberal embrace of monetary measures that infuse cheap liquidity as a substitute for fiscal activism has not resulted in faster credit growth. The reliance on banks and credit to mediate the stimulus, rather than directly injecting demand through government spending, is not working. Agents overwhelmed by a demand recession are not seen by banks as creditworthy borrowers, and the former in turn are reticent to borrow, fearing that they will not be able to service the debt.

During the early phase of the coronavirus pandemic, Italy had a high infection burden and death rate while India appeared much less affected. By 22 May, Italy and India had 3,770 and 86 infections/million population with mortality rates of 14.24% and 3.03%, respectively. There was speculation about hidden advantages to India leading to a false sense of security. These differences are readily explained by the time and frequency of virus importations and the differences of the age profile of Italy and India.

Only bold interventions by the government can ensure a quick recovery of the economy.

The article explores various methodologies of estimating the relation between population density and COVID-19 cases to suggest that deaths per million may not be a sound indicator as a guide to public policy. It also infers that population density alone may not suffice to explain the spread of the virus. Social and living conditions could play a more dominant role in explaining the spread.

The COVID-19 pandemic is stretching the contradictions of the present economic arrangements to the limits. The system survived inflating financial assets and feeding on inequalities. The divide between the real economy and the sphere of finance cannot be left unchecked without risking an economic catastrophe. Wealth and income inequalities cannot be pushed anymore without irretrievably damaging the underlying social contract. The virus is making change inevitable.