CAG calls India’s 68-day lockdown a prudent policy decision

The Comptroller and Auditor General (CAG) of India GC Murmu has called India’s 68-day COVID-19 lockdown a prudent policy decision. He said that as the virus spreads, the economic impact of the crisis will test the resilience of India’s economic and financial structures.

Murmu observed that there are divergent views among economists, experts and policy makers on the pace of economic recovery. “While some predict a V-shaped recovery, others are not so optimistic. We may need to wait and watch how various measures taken by the government to ensure economic recovery pan out in the near future,” he said at the fourth annual day of the Insolvency and Bankruptcy Board of India (IBBI) on Thursday. The CAG noted that no country has been untouched by the pandemic. “It is not the first time that humanity has seen health crisis. What is different this time is that the coronavirus pandemic is truly global and its trajectory and impact are highly uncertain,” Murmu explained. “India has very successfully contained initial spike in COVID-19 cases with strict implementation of lockdown. This time was also effectively utilized to upgrade health infrastructure and for augmentation of supplies etc.”

But the intensity of the pandemic, the CAG said has caused disruptions in the global economy of proportions and dimensions almost comparable to 1929’s Great Depression and sub-prime crisis of 2008. “Cumulative loss to global GDP over 2020-21 is estimated at around US$9 trillion. The United Nations Conference on Trade and Development (UNCTD) estimates that the pandemic will likely cost the global economy between $1 trillion and $2 trillion in 2020,” Murmu said.

The CAG highlighted that the Insolvency and Bankruptcy Code (IBC) has prepared a route of exit for honest entrepreneurs whose business ventures have failed and, in doing so, saved their future. Murmu said India needed a codified and structured market mechanism to put the under-utilized resources to more efficient uses continuously and free entrepreneurs from failure. The insolvency reforms through the Code provide a market mechanism for rescuing a failing, but viable firm, and liquidating an unviable one and releasing its resources, including entrepreneurs for competing uses, and thereby provides the freedom to exit, the ultimate freedom. He also explained that the Code had led to a significant shift in credit behavior.