A thought which has emerged over the past few months on different discussion platforms is that, since the beginning of the COVID-19 pandemic we are facing not one, but two major crisis. One of them is the crisis of the disease outbreak of course, and the second one is the economic crisis looming up against different countries as a result of this pandemic. In this situation, wherein we run the risk of being torn down by this novel disease on one side and confronted by a whirlpool of economic recession followed by a collapse of the world economy on the other side, it is difficult to navigate through this extremely narrow path to a stage of normalcy.

One of the biggest worries from an epidemiological perspective is the lack of sufficient number intensive care facilities and testing facilities in most countries. That being said, it is important to acknowledge that some of the problems arising from the health perspective will have a bearing on the economic side of this crisis. Countries went under lockdowns not only to mitigate these effects but also to buy us more time to ramp up our health facilities and prepare ourselves for this growing health crisis.

From an economic perspective, a major concern seems to be that of contraction in GDP and growth rates at national and global levels. Economists, scholars and policy makers all over the world concurred that a return to our pre-pandemic routines may not be feasible for a very long. There was an immediate need to protect the vulnerable from social and economic disruptions that arose every day. The decline in GDP, according to various sources, has been the greatest since the Great Depression.

But the question here is, what can be done to mitigate the effects of these economic problems?

An article by Dr. Lawrence Katz suggests that the mortality rate is being highly overestimated as asymptomatic people seldom avoid getting tested, causing the denominator value to be smaller than the actual value. While some economists are of the view that the younger population of the society and those with antibodies should be allowed to return to work, some others are of the view that countries should alternate between lockdowns and open economy till the situation is stabilised. An important thing to be noted here is that, unlike how it is during a war or depression, the productive capacity of people is preserved throughout the pandemic period. Although the impact of war and the flu is roughly the same size but the effect of the fall in GDP due to the flu will be less persistent and is likely to see a faster transition.

Another important concern is that of unequal income distribution arising from the pandemic shock in the short run. An important observation made by Amartya Sen regarding the aftermath of the Bengal famine of 1934 is that people became poorer, but not in a uniform way. The COVID – 19 pandemic shows a similar pattern. Several companies, especially the ones in online retail like Amazon and Walmart have been doing better than the market. The Dow Jones index shows that while companies in the hospitality industry are facing a state of tumult and uncertainty, stocks of several big giants like Microsoft and Apple have gone up by a significant amount. The huge disparities in the financial conditions among households and firms can be evened out through implementation of a carefully planned fiscal policy. The ones making fortune out of this situation can be charged with a pandemic tax or cess to provide economic assistance to the less fortunate. Since taxes are calculated annually, to facilitate an immediate redistribution of resources Dr. Parikshit Ghosh proposes the concept of Universal Basic Advance, an idea which is already in motion in the richer countries. The UPA allows issuing of cheques to the affected households, followed by a comprehensive assessment their losses by taking their average income during the pre-pandemic times with the passage of time.

The same framework cannot be adopted in India as the tax system here is not as extensive as in the case of most developed countries. The poorer sections in India are likely to be the worst hit as most of them are either self-employed or employed in the informal sector or the micro, small and medium enterprises (MSME). Dr. Ghosh suggests that financial assistance to the less privileged need not be funded solely by the government, and therefore may be supported by public debt as well. As people are not likely to invest in the near future, we may see a huge savings flood in the household sector, an event that apparently took place during the 1918 plague. This indicates a possible room for public debt and special taxes.

India has so far been behind other countries in terms of protecting the vulnerable sections. The 1.7 lakh crore economic assistance package announced by the government accounts for merely 1 per cent of the total GDP when other countries have created packages accounting for 10-15 per cent of their total GDP. Given how catastrophic this pandemic has been for the poor in India, aiding the migrant workers and the displaced by providing rental assistance should also be a priority. But India being a country with several overlapping welfare programmes, it is important to identify a single welfare system to facilitate the redistribution. According to Dr. Ghosh, the Public Distribution System seems to be the most effective out of them all, as it avoids the problem of duplication thus ensuring a more efficient way of transferring resources in cash as well as in kind. To fund this mode of transfer, hike in corporate tax and income tax along with a pandemic cess, not bracketed with long term taxes have to be given serious consideration.

Therefore, carefully planned surgical and targeted policies, is the need of the hour for the Indian economy. The government has to also take up the responsibility of maintaining its credibility in the global markets by assuring investors that the taxation system is only a temporary measure to mitigate the economic impact of the pandemic.

Thus, together with taxation on wealth and capital and support from government and non- governmental funds in the form of voluntary and involuntary funding, it is possible for the Indian economy to achieve a speedy recovery from this economic downturn caused by the COVID-19 pandemic.