COVID Crisis: Could India impose Financial Emergency?

[Authored by: Mandar Garge, Apr 28, 2020]

The Indian Union government can, but in all probability, won't impose a Financial Emergency. Never in the history of India has a Financial Emergency (वित्तीय आपातकाल) been declared. 

What is a Financial Emergency? And what are its effects?

First a look at the different types of emergencies the Indian Constitution allows. There are basically three types of emergencies:

1. National Emergency (Article 352)
    - Imposed at: National level
    - By: The President of India
    - On recommendation of: The Union Government of India
    - Has been Imposed: 3 times (1962 China war | 1971 Pakistan war | 1975 Internal disturbance)

2. State Emergency (Article 354) (a.k.a: President's Rule)
    - Imposed at: State level
    - By: The President of India
    - On recommendation of: The Union Government of India
    - Has been Imposed: More than 120 times so far

3. Financial Emergency (Article 360)
    - Imposed at: National level
    - By: The President of India
    - On recommendation of: The Union Government of India
    - Has been Imposed: Never. But we had come very close to imposing it (1991 when India went bankrupt)

Article #360 of the Indian constitution allows the Central Govt. to recommend a Financial Emergency to the President to in case the country is facing an unprecedented financial crisis. The COVID-19 crisis indeed is a grave financial crisis. 

The Mechanics:

• The Central Govt. provides a recommendation to the President. The President issues an order to impose the emergency. 
• The Lok Sabha (LS) and Rajya Sabha (RS) have to pass this order within two months of its issuance (else it becomes void). 
• Once imposed, only the President can lift it. No approval is needed from LS or RS while lifting it. 
• There is no time limit on when President is supposed to lift it. He does so on the recommendation of the Central govt.

The Implications:

• Financial decisions of the entire country become unitary. This means the central government gets complete hold of the Financial budgeting, spending and approval of State level financial bills and decisions.
• The state financial decision making powers render ineffective for the duration of emergency.
• State governments can keep working on financial bills, but their approval can be done only by the President (upon recommendation from the central govt.)
• The President gets complete control over central and state government employees' salaries and allowances (including the Judiciary) during the period of emergency. The President can also reduce their salaries and allowance if deemed necessary.

Does current situation warrant a Financial Emergency?

Probably yes. The country's financial condition is extremely bad. Revenues have diminished significantly, almost stopped. Government is running out of money. The country needs continuous (monthly) revenue to run itself. 

• States revenues have completely halted because the industry is shut, transportation is shut, farming is ON, but the produce is going waste, consumer spending has come to a grinding halt. 
• E.g. Maharashtra's 2019 revenues were around 3.15 Lakh Crores. It has a deficit of 90,000 Cr already. 2020's estimates are yet to come in, but the impact is going to be severe. The state had allocated a 4% expenditure of its revenue for Health care for 2020. COVID has already consumed that spending.
• Lockdown: A report by HDFC bank stated that the lockdown is likely to shave off INR 10 L Cr in the first half of 2020 (That's a whopping 4% of India's GDP)
• Moreover the slump in economic activity is projected to affect India's "forecasted" GDP by another 3%.
• GST collection for March 2020 has dipped by 11% (Rs 97,597 Cr as against 1.07 L Cr in March 2019). April 2020 GST collection can dip further to Rs 80,000 Cr. May 2020 collections are likely to be Rs. 60,000 Cr.
• The COVID crisis has sucked significant and unexpectedly higher amount of Govt's money on medical treatment. Just the money spent by states on testing the their population is more than Rs 100 Cr. The Central government has released Rs 17,000 Cr to states for spending on PPE, Ventilators, kits etc.
• Additionally the Central government is releasing multiple relief packages (a recent one was Rs. 1.7 L Cr - to benefit the poor directly via Direct Cash Transfer to their Jan-dhan accounts).

In such a scenario, its absolutely necessary that the state governments completely stop unwanted and low-priority expenses immediately. There is a possibility that state governments that are politically misaligned with the central govt may not follow Center's directives and guidelines. 

In such a scenario the Central govt. may see wisdom in taking full charge of country's every single financial expenditure.

Can Current Central govt. impose a financial emergency?

Theoretically yes. In fact rather easily. The current, PM Modi-led NDA government has the numbers in LS. It can manage number in the RS. And it can make the President sign an order for rolling out the emergency. 

Would Central Govt. impose a financial emergency?

Very unlikely. Although current situation favors a financial emergency, the current Modi-led Union government will not impose it for the following reasons:

• It would not want to be seen as predatory and would prefer achieving fiscal prudence collaboratively.
• It seems that there is a good amount of coordination and harmony between the Central and State government's in prioritizing the spend on fighting COVID.
• The Central government's approach seems to be that of issuing formal guidelines, make the states tow the line. If they don't, the Home ministry seems to get into a a mode of persuasion. It has been seen that Union government has brought the most misaligned state of WB in line.
• In the video-conf meeting between the PM and the CMs held on 27th April, PM Modi stated that he would like states to decide how to handle extended lock-downs or its lifting up. Modi has expressed complete solidarity with states with high COVID numbers and extended Center's support. 
• Imposing an emergency would send a very negative signal to the already shaken foreign investors.

All in all, the Central government seems to be getting States to fall in line, and work cohesively to ensure that the spending is wise and only where necessary. It seems to be able to impose the same discipline as expected in a Financial Emergency, without actually imposing it. 

What we see currently is an excellent example of how unitedly and cohesively the Center and State governments are working to fight the virus, keeping politics aside at least for some time. Hopefully we never reach the stage of Financial Emergency.

[Authored by: Mandar Garge, Apr 28, 2020]

Why Dr. Harsh Vardhan's plan to handle COVID seems to be working

[Authored by: Mandar Garge, Apr 14, 2020]

This is an apolitical account of how Dr. Harsh Vardhan, the Union Health Minister is steadfastly steering India through the COVID19 crisis. 

I have quoted studies and articles from external (non-governmental) private health agencies to highlight the fact that India's strategy of handling COVID seems to be working under Harsh Vardhan's leadership.

While we all guess, contemplate, admire or criticize the government's handling of the crisis, it is important to bring to everyone's notice how this farsighted leader is working relentlessly to keep India two steps ahead of the COVID’s proliferation.


While PM Modi and his other ministers may be making economic, financial and administrative decisions during this crisis, they have left the medical and health related decisions to this one man who carries immense grasp of India's public health, its handling of mass immunization programs as well as the administrative challenges associated with such mass immunization activities.

National and State level health ministries work collectively, but the union health minister drives the overall plan and strategy to fight the virus.

I must mention that at this juncture the health ministers and departments of all state governments are working closely with the Union health minister and health officers. However Dr. Harsh Vardhan is in the driver's seat in the war against Corona. All key decisions at the national level, that you have been reading about India's rapid response to COVID, the passengers screening and quarantine in the very early stages followed by the lockdown are all his decisions, all coming out of his wisdom, farsightedness and vision combined with experience. His team then issues directives to state level health machinery to follow certain norms, be it about COVID reporting, medical preparations, testing the masses, identifying clusters and deciding the high level approach of weeding out the disease.

Evaluation the impact of the India lock-down:

Look at the following graph, published & updated daily by Shamika Ravi, a Sr. Fellow of the Governance Studies Program at the Brookings Institution Washington D.C:

Ref: Shamika Ravi’s tweet of April 14, 2020

This study measures the spread of Corona in terms of its rate of doubling rather than the absolute number of cases found. Going by this count, it seems that "the curve has started flattening".

• March 12, India's count of COVID-19 cases was doubling every 3 days.
• March 23, the count of COVID-19s was doubling every 5 days (flattening had started). This was before the lockdown.
• March 29 -- doubling every 4 days -- a setback that can be attributed to Tablighi conclave aftereffects.
• April 06 -- doubling every 6 days. The lockdown had started showing a positive impact.
• April 13, the numbers were doubling every 7 days -- flattening had picked up further.

The research estimates that without the lockdown the positives would have been more than 67,052, as against the real count of April 13th of 10,453 (a 541% higher rate). Institute of Mathematical Studies (IMS) in Chennai had also estimated that without the lockdown, by the COVID count by mid-April would be have been 35,000 at a minimum.

The lockdown has surely worked. Of course, the testing levels in India are around 190,000, but one can assume, based on the sampling, the trend (proportion) will be consistent across a larger population.

Ref: India Today

Yes, indeed 10,815 (India count as of 14^th April 2020, with 353 deaths) is a large number, but in an enormously populated country like India with enormous population density, this is really a small number, thanks to the strategy and approach taken by Dr. Harsh Vardhan. 10,000 as against 60,000 is a Great news. Compare this with 5.3 Lakh positives in the US with > 20,500 deaths.

The Basic Reproduction Number (R0)

The R0 (R-naught) number (Reproduction Number) is a mathematical term that indicates how contagious an infectious disease is. It’s a number that indicates how many people can an infected person infect. E.g., R0 number of 10 means one infected person can infect 10 other persons. An R0 of below 1, renders the spread of infection ineffective.

The R0 number of COVID-19 in India is improving.

• Mid-March: 1.7
• March 23: ICMR had estimated it to be 4. This is where the farsightedness of Harsh Vardhan must have prompted him to go into an immediate 21-day lockdown starting 25th March.
• 6th April: 1.83
• 11th April: 1.55
• 18th April -- awaited. 

The central Govt. will then decide whether to relax the lockdown beyond 20^th April or not (that's why PM Modi's staggered approach - which may ease the lockdown in low or zero impact areas but continue to keep the hotspot areas sealed. It would be mix of lockdown and limited economic activities.

The Health Ministry’s Approach:

The approach his ministry has taken is to stay two steps ahead of the coronavirus growth curve. The ministry feels that they have put in place a good amount of measures to be ready to tackle the rising cases of COVID.

The first goal of the Lockdown was not to contain and end COVID altogether, but to "Flatten the curve" by breaking the chain of transmission. The goal was to severely suppress the spread of the disease by as much as possible avoiding the outbreak of Community transmission (that is when Virus is all over, on surfaces in public places). Well such a suppression refrains the population from developing herd immunity to the virus, but the transmission rate is expected to be much lower after the lockdown is removed.

The second goal is to meticulously study daily growth, extrapolate the number of positives at the end of lockdown and aggressively prepare for handing the outbreak based on the estimates. Buy time to prepare and setup the medical facilities, spaces, beds, trained staff to handle that anticipated outbreak. The immunity of people will grow as well, but at its own pace.

An interesting report in New York Times by Dr. Faheem Younus, MD at University College Hospital of Maryland, USA outlined the “hospitalization rate” and “fatalities rate” in New York, the new epicentre of COVID-19 across different age groups. See a graphic from his tweet below:

So, the trend in the worst impacted place in the world shows that average hospitalization rate is less than 8 per 100,000 people up to age of 65, with the highest at 17 per 100,000 for ages above 80.

Today India has 10,815 positives. So, going by NYC estimates, very small number needs hospitalization. Even if India were to hospitalize all 10,000, the health ministry has announced that it is ready with 25,000 beds. And they are constantly increasing the following every day:

• Number of beds
• Quarantine facilities
• Trained medical staff
• Testing Kits & medical equipment
• Medical supplies

And this is what it means by staying two steps ahead of the coronavirus growth curve.

One important decision that Dr. Harsh Vardhan took is that he followed the ICMR when most world leaders were looking at WHO. His team is also constantly following important medical and health bodies countries with infections and observing what has worked and what hasn't in those countries.

A little bit about Dr. Harsh Vardhan:

Harsh Vardhan, born in Delhi, graduated with a Bachelor of Medicine, Bachelor of Surgery in 1979. He did his Master of Surgery in 1983. He won an election in Delhi in 1994 and became the State Minister of Health the Delhi government, during which he oversaw successful implementation of the pilot project of the Pulse Polio Program which mass immunized 1 million children in Delhi. Then In 1995 he led a similar program of similar nature immunizing 88 million children, but across the entire Nation. WHO declared India polio-free in 2014.

His understanding of Public Health in India is impeccable. He flawlessly planned the state-wide and then nationwide immunization programs very successfully and hence has a fantastic grasp of the meticulous administrative outlining and planning involved in such mass immunization programs.

There is no doubt that India will defeat Coronavirus soon, but the measures by Dr. Harsh Vardhan, his ministry officers will go a long way in improving the Healthcare and Medical treatment readiness of the nation in an irreversible manner.

[Authored by: Mandar Garge, Apr 14, 2020]

Credits:

• Shekhar Gupta, Chief Editor, The Print (Cut the Clutter Episode #443)
• Shamika Ravi, Economist, Brookings (Twitter)
• Dr. Faheem Younus, MD, Maryland UCH (Twitter)
• Wikipedia (Dr. Harsh Vardhan’s page)
• India Today