The Covid-19 Pandemic has sent the Indian government in a tizzy. Modi government has panicked like anything and without any kind of prior very careful thinking or planning Modi has announced a 21 day lock down of the whole country of 1.35 billion people. Almost all production processes in the country have either totally shutdown or working at much lower capacity now. This means, huge supply crunch is coming. Moody’s has already lowered Indian GDP forecast to just 2.5% for calendar year 2020. The actual growth very likely is in reverse gear now. No one knows how the millions of rural folks are surviving right now, in Modi’s own constituency Varanasi children are forced to eat cattle grass with salt and water, and within 3 days of lock down even urban areas are now running out of essential supply of food etc., items because whole supply chain is on a stand still.
Amidst this historic lock down, Modi has taken control of all economic activities in his hands and now the Coronavirus central planning exercise is well on its way. Basically, India is now experimenting with socialist central planning country wide like former USSR. As the country is on a 21 day long lock down, the government’s central planning is the only system that is now in place to allocate (essential) goods to 1.35 billion people.
Anyone who understands sound economics knows how dangerous this socialist central planning is. As Prof Ludwig von Mises showed us a century ago, socialist central planning is simply impossible. Without the market price and profit and loss system, government can’t allocate resources where they are most urgently needed. With the state now in charge of the whole economy, nothing but huge wastage of (essential) resources is going to take place, and that too at a time when already all production is either close or going down rapidly because of 21 day lock down. Modi government created huge scarcity is on its way. If Narendra Modi is not going to end this lock down early or, as many are fearing, if he extends this lock down then hunger, starvation and deaths are very likely coming. In the end, this Modi-made famine is very likely going to kill more people than this Covid-19 disease.