Indian businesses call on government to restrict ‘economic activity’

The Confederation of Indian Industry is pushing for a de facto lockdown in the country, calling on the government to implement the “strongest national steps” including curtailing economic activity to combat a calamitous second wave of Covid-19 infections.

India reported 370,000 Covid-19 infections on Monday, after reaching a global record of more than 400,000 on Saturday. It recorded 3,500 daily deaths, though experts believe the true toll is far higher, as the surge of cases has overwhelmed health systems and exposed critical shortages of vital infrastructure such as oxygen supply, hospital beds and testing capacity.

Large parts of the country have already gone into lockdown, including India’s three largest cities New Delhi, Mumbai and Bangalore. The government of Prime Minister Narendra Modi, however, has stopped short of the blanket nationwide lockdown it implemented last year, weary of the ruinous consequences for an economy still reeling from that shock.

But the second coronavirus wave has been so severe that even businesses that might otherwise be able to continue running have had to shut down or scale back operations owing to shortages of industrial oxygen, or because so many of their staff or their families are ill.

Uday Kotak, president of the CII and chief executive of private lender Kotak Mahindra Bank, said the government should turn to the “nationwide maximal response measure at the highest level”.

“At this critical juncture when [the] toll of lives is rising, CII urges the strongest national steps including curtailing economic activity to reduce suffering,” Kotak said.

Kotak, India’s richest banker, said the government should use the time bought with a lockdown to build up the country’s medical capacity by constructing field hospitals, expanding testing and distributing more vaccines.

Modi’s government has been accused of failing to prepare for the second wave, leaving health systems badly exposed when cases surged in March. Critics said his Bharatiya Janata party chose to focus instead on an aggressive — and ultimately unsuccessful — state election campaign in West Bengal.

Some experts believed the sharp rise in cases had been exacerbated by virus variants, including the B.1.1.7 strain first detected in the UK and another variant identified in India.

The country is also facing a shortage of vaccines. Adar Poonawalla, chief executive of the Serum Institute of India, told the Financial Times that the country’s severe vaccine shortage would continue until the end of July, when he would be able to increase production.

The second wave, and a potential renewed lockdown, risks derailing what was expected to be a robust recovery for India’s economy, which according to the IMF shrank 8 per cent in 2020.

Economists had predicted a double-digit rebound this year before the latest wave, which led to sharp drops in consumer activity.

Although this year’s more nuanced local restrictions allowed manufacturers and logistics companies to operate, companies said that was of little help when large sections of their workforces were sick or caring for relatives.

“There are parts of the country, including Delhi, where people are doing nothing except keeping people safe or trying to get them medical attention,” said Naushad Forbes, co-chair of engineering company Forbes Marshall and past president of the CII. “There is not any economically productive work.”

While India’s consumer demand bounced back quickly last year after restrictions were eased, businesses warned that overcoming the latest shock would probably take far longer.

“This crisis is deeper, far more vivid and people will respond to it differently,” said Gaurav Dalmia, chair of Dalmia Group Holdings, which has interests in financial services, real estate and manufacturing.

“The fear in the mind of corporate executives, citizens, consumers — whatever hat I am wearing — will be far greater,” Dalmia added. “It’s no longer just a statistic. We actually know people who had Covid. The rebound will be far slower.”

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