We are witnessing unprecedented health pandemic created by COVID-19, and it will have maximum impact on low-income population. If, we draw an analogy, with the responses of health professional to reduce the impact on the economic condition of people, we will have three sets of people: 1) Low Impact (just got connected with high-impact people)- keep them in quarantine for 14 days—equivalence would be—giving some money and they will be able to recover, 2) Medium Impact- Got infected but have high immunity and will recover—protecting them from competition for some time, give them time and money-they will be able to recover, and 3) high impact – infected and need ventilation—need special package to come out of this situation.
Here, at the first level, we will have to find out the impacted individuals/organizations. Do we have a kit to diagnose the economic impact on the people to decide about severity of economic pandemic? At the second level, creating infrastructure for medium level impacted people and at the third level, making sure that economic pandemic does not take any life whether institution/organization or individual.
During this, we will need the support of multiple stakeholders like, banks, cooperatives, MFIs etc. in terms of responding to the new needs of society. In addition, getting data about the victims of economic pandemic is also going to be a daunting task as majority of them are part of unorganized sector. So, we need to reduce the information asymmetry and make sure that we do not fall victim to adverse selection. Probably we can create a database of patients (impacted people) who were hospitalized (assistance) which the financial institutions can access before disbursing credit support.
Ardhendu Shekhar Singh, Associate Professor, Symbiosis School of Banking and Finance, Symbiosis International (Deemed University), Pune