CEA points at Spanish Flu lesson in Covid fight

A paper recently published by the US-based National Bureau of Economic Research (NBER) is bringing considerable comfort to policy makers here. Chief Economic Advisor KV Subramanian was the first to draw attention to the research and others like it on the Spanish flu pandemic (1918-1920) because he finds several lessons that the management of that pandemic holds for the Indian government. And if history were to repeat itself, he suggested, maybe India’s economic recovery after the crisis could be V-shaped.

Subramanian presented his findings at the Finance Commission advisory council meeting on Friday where he said because India’s economy resembled the US economy at the time of the Spanish Flu, “its study can provide a reasonable guesstimate about what will happen in the Indian scenario”. He was also present at the Prime Minister’s meeting with economists on Wednesday.

The Spanish flu emerged in 1918 and claimed 39 million lives till 1920. “The Spanish flu infected 1/3rd of the population in the US and had a mortality rate of 6%. So, by itself, the percentage of people that are infected by Covid-19 is much less as here the mortality rate is just 3%,’’ Subramanian told Hindustan Times, adding that important lessons can be derived by looking at the economic impact of the flu in 1920.

“There are several similarities that the US economy at the time and the Indian economy now have. For example,the proportion of urban population in the US was 45% while India’s, some say, could be closer to 45% (now),’’ he said.

Subramanian also points out that the proportion of various sectors like manufacturing, agriculture and services at that time in the US are similiar to the Indian economy’s numbers now. “There are some differences like India’s services sector is 5% greater than what the US’s was and the agri sector -- India’s is at a much lower share now than US was at the time. But at the macro level, there are similarities.’’

And there are learnings, he added.

The first and most important one, is the beneficial impact of the lockdown. Back then, “some counties (like our districts) enforced lockdown-like restrictions called Non Pharmaceutical Interventions (NPIs),’’ he said. This involved shutting churches and schools. “It turns out that the counties that had stricter NPIs had lower mortality. They also were able to bounce back economically soon. That means that jaan hai, aur jahaan bhi hai (lives and livelihoods were both saved),’’ he said riffing off the PM’s phrase during his second address to the nation.

The second lesson for Subramanian is the one on GDP. While many research firms expect India’s growth this year to fall to near-zero, the CEA is taking heart from US numbers post-Spanish flu -- they dropped to 3.5% but went to 7.5% soon after. “It’s the V-shaped recovery,’’ he said.

“However this analysis has to come with the caveat that we are dealing with enormous uncertainties,” Subramanian added.