Downturn could last years, says Sanjeev Sanyal.

The process of “unwinding” the lockdown imposed to contain COVID-19 has already begun, and most sectors of the economy will be open by May 3, Principal Economic Adviser Sanjeev Sanyal told members of the PHD Chamber of Commerce and Industry via a video-conference call.

“Well before the rest of the world is out and about, the Indian economy will be open,” he said. International passenger travel, however, would be locked down for a long time. “I think it will be months, not weeks, as much of the world remains unsafe,” he said.

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With regard to an economic stimulus, Mr. Sanyal exhorted industry leaders to view the process as “a marathon, not a sprint.” He warned that the economic downturn was expected to last a long time. “Not weeks, but possibly years, and certainly months,” he said. So the government also expected to dole out support in incremental doses, rather than spend all its resources in one go.

Mr. Sanyal acknowledged that many other countries announced huge stimulus packages, running into trillions of dollars, even before announcing shutdown measures to prevent the spread of the infection. However, most of these countries “wasted” their money on a “big bang” and felt the Indian approach of first announcing the lockdown, and then taking “calibrated” measures to protect and revive the economy was more effective in the long run.

“International investors are impressed by what we are trying to do...We should not at all be apologetic about this approach,” he said.

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The steps announced by the Finance Ministry and the Reserve Bank of India so far were only meant to “cushion the blow” so that the economy stays alive to the other side of the lockdown, so that limited resources could be saved for the rebuilding phase. “Our first few efforts are to make sure you have enough working capital to keep yourself alive through this shock,” said Mr. Sanyal. A larger package was in the works and would be announced “sooner rather than later.”

“Of course, we are not going to solve poverty by giving ₹500... But we are just cushioning the hit, so that everyone has some money and some food,” he said, responding to widespread criticism that the Centre’s initial ₹1.7 lakh crore welfare package was insufficient to deal with large-scale distress.

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The Principal Economic Advisor also said India would use the opportunity to implement “large scale reforms” in the economy. “We must remember that the world on the other side of this crisis will be very different,” he said. Geopolitical realities, supply chain structures and the use of technology would all have changed.

“This is not the end of the world... India should see it as an opportunity not just to rebuild ourselves, but also participate in the rebuilding of this new world,” he said.