When written in the Chinese language, the word ‘crisis’ is composed of two characters: danger and opportunity. In a state of panic, we must not overlook the opportunity this crisis (coronavirus pandemic) may have presented before us.
In just a few months, the coronavirus or COVID-19 has claimed over a quarter of a million lives and disrupted economies worldwide. More than 3.9 billion people or half of the world’s population have now been asked or ordered to stay at home by their governments to prevent the spread of the deadly virus. The coronavirus is, therefore, a reality now and is not going to go away easily.
This is because no perfect solution has been found so far to end the pandemic. As long as the virus persists somewhere, there’s a chance that one infected traveler would reignite a fresh spark in countries that have already extinguished their fires. This is already happening in China, Singapore, and other Asian countries that briefly seemed to have the virus under control. Under these conditions, it appears that the world has to play a protracted game of whack-a-mole with the virus until an effective treatment regime or vaccine is developed.
Hence, we have to learn to live with COVID-19 and at the same time address the problems caused by this-virus-induced-lockdown, including a deteriorating economy. The International Monetary Fund described the current global economic decline as the worst since the Great Depression of 1930s.
India has been no exception to the pandemic. With a nationwide lockdown imposed since 25th March 2020, the fallout from the suspension of nearly all economic activities is expected to be massive, as experts are predicting a significant slump in India’s growth for the current fiscal. The World Bank and credit rating agencies have downgraded India’s growth for fiscal year 2021 with the lowest figure that India has seen since its economic liberalisation in 1990s.
India’s economy is expected to grow from 1.5-2.8% in the 2020-21 fiscal that started on 1st April, as noted in the South Asia Economic Focus Report of The World Bank. Within a month, unemployment rose from 6.7% in March to 15-26% as on 19th April 2020. During the lockdown, an estimated 14 crore (140 million) people lost employment. The Indian economy is expected to lose over Rs 32,000 crore ($4.5 billion) every day during the lockdown period.
In a developing country like India, MSMEs (Micro, Small and Medium Enterprises) are the backbone of the economy. The MSME sector contributes to 45% of India’s Total Industrial Employment, 50% of India’s Total Exports and 95% of all industrial units of the country under which more than 6,000 types of products are manufactured.
When these industries grow, the economy of the country grows as a whole and flourishes. The government has already issued an advisory asking companies not to lay off people during the lockdown period. Good companies are already following this. However, the MSME sector, the largest employment generator after agriculture, requires help. It means the informal segment of economy is the worst-hit in this scenario, since they lack the cushion to cope with the lockdown.
More than 90% of the people in India directly or indirectly depend on the informal sector for their survival. Currently, most of them are out of employment. How long will it take to recover the economy? Nobody knows. But one thing is for sure: the coming times have to be managed carefully.
How do we manage this grave crisis, which originated in Wuhan, the sprawling capital of central China’s Hubei province? It is an international commercial center divided by the Yangtze and Han rivers. The city contains many lakes and parks, including the expansive, picturesque East Lake, where PM Narendra Modi met Chinese President Xi Jinping for a two-day informal summit in April 2018. Like its origin, the solution of the disruptive impact of coronavirus crisis also lies in China. Going back to the two components of the Chinese word for ‘crisis’: does one look at this crisis as a danger or an opportunity?
Some countries are looking at this ‘crisis’ as an opportunity to punish China for its gross negligence in handling the corona outbreak. And US President Donald Trump represents this category of countries. On a naturalistic side, he might be right. So far, there have been more than 1.4 million cases with over 80,000 coronavirus-related deaths in the US, and the pandemic has shut down huge swathes of the economy. As a result, he is seeking recovery of these damages from Beijing.
In contrast, some leaders think that one should never let a ‘serious’ crisis go waste. Here, Modi’s vision needs attention. He believes that the pandemic has thrown up new challenges that the country had never faced before, but it has also offered fresh opportunities. “The biggest message COVID-19 has given, the biggest lesson it has taught, is to become self-reliant,” Modi said while interacting with gram panchayat heads and members to mark Panchayati Raj Day on 24th April 2020. But as usual, he or his office did not spell out the agenda to be initiated to achieve it.
Without entering into an ideological debate, we must think about ways to implement the concept of a ‘self-reliant economy’, since this is the only way to make India sustainable and inclusive. Unlike other economies, a self-reliant economy is one that lays down a strong economic foundation to fulfill the needs of people and the country’s economic development.
Before I discuss the selected action points to implement the vision in the field, let me talk about the need of a ‘self-reliant’ economy for India’s survival. Consider some facts: India is heavily dependent on imports from other countries, especially China. It is getting increasingly difficult to manufacture goods and machines at a competitive cost in India. “Things have come to such a pass that we now depend on China even for electric circuit boxes; not too long ago, we produced them in garages,” noted Dipankar Gupta, a renowned public intellectual.
As a result, India’s trade deficit with China has increased significantly in recent years. Bilateral trade between China and India touched $89.6 billion in 2017-18, with the trade deficit widening to $62.9 billion in China’s favour. In 2017, the volume of bilateral trade between India and China stands at $84.5 billion. India’s many manufacturing sectors have a critical dependence on Chinese imports, including drugs and auto industries. While the assembly of mobile phones in India has emerged as a bright spot for the economy, employing a sizable number of people over the past four years, India still relies on imported assembly parts from China because of the lack of an ecosystem of component manufacturers here.
In short, heavy dependence on Chinese imports has already weakened the Indian economic base; and it may now encroach upon India’s sovereignty. All these are having an impact on the level of employment. The Indian economy is facing a lot of problems, but the main problem is unemployment and under-employment.
India’s unemployment rate in October 2019 rose to 8.5%, the highest since August 2016, as per the Centre for Monitoring Indian Economy. The CMIE’s figures are in line with the findings of the Periodic Labour Force Survey conducted by GoI, which had estimated unemployment or jobless rate of 6.1% between July 2017 and June 2018, the worst in 45 years.
To initiate the process of a ‘self-reliant’ economy, India has to focus on two of its problems: agrarian unrest and job crisis. Any durable solution to agrarian unrest requires non-farm jobs. When a sector with less than 15% of GDP supports a population three times its size, we have a convergence of rural and urban hopes: jobs. One cannot lift rural incomes without absorbing at least two-thirds of those dependent on farms in non-farm jobs.
Furthermore, the nation needs to create 10-12 million jobs every year in the coming decades to provide quality of life for its growing population. Young Indians, particularly members of the emerging middle class — a billion strong by 2034 — have rising aspirations, as per the PricewaterhouseCoopers.
The recent electoral mandate clearly indicates that Indians want socio-economic development, and for this, they do see hope in PM Modi’s leadership. Generating jobs is, therefore, the biggest issue that will lay the foundation for a ‘self-reliant’ economy. This would require changes in labour and land laws, cutting corporate and general taxes to the level of East Asian countries.
In addition, India has to improve the basic infrastructure with special reference to uninterrupted cheap power supply. There is a positive relationship between job creation and availability of uninterrupted cheap power supply. A review of the good quality statistical studies indicates that energy use is either the cause or the facilitator of economic growth. The literature also suggests that the relationship between energy and economic growth varies by country and within countries. Insufficient, unreliable or costly access to power can be a binding constraint to business and job creation, as noted in an evaluation study titled: ‘What are the links between power, economic growth and job creation?’
Job creation is directly related to production of goods and services. Low productivity, however, makes Indian goods more expensive as compared to other exporting countries. Experts call it premature ‘de-industrialisation’, that is, it is becoming increasingly difficult for countries to export their way to prosperity because of a more competitive environment for manufacturing. Furthermore, we stand on the brink of a technological revolution that will fundamentally alter the way we live, work, and relate to one another. In its scale, scope, and complexity, the transformation will be unlike anything that humankind has experienced before. We do not yet know just how it will unfold, but one thing is clear, we must prepare ourselves.
Currently, there is a growing gap between job creation and needs of our machine-powered future known as the Fourth Industrial Revolution. India, therefore, has to embark upon a journey of continuous adjustments to develop, utilise, and maintain human capital. Also, it should be top priority for India because of its demographic bulge, as noted in my policy monograph — Nurturing Human Development: A Strategy for New India. It proposes a strategy to unlock human potential or formation of human capital based on the capability approach; and it is christened as ‘HDPlus’ (Human Development Plus).
In short, there are many reforms that are required to achieve the goal of a ‘self-reliant’ economy. However, two reforms, as discussed above, are the need of the hour. These are:
The vision of a ‘self-reliant’ economy could be ‘The Roaring Twenties’ for India. But this cannot be achieved without peace, stability and effective governance. India has to create an environment for the fundamentals of progress: infrastructure development, human capital formation, rule of law, and so on. Interestingly, it also frees up resources, both financial and human, which would otherwise be diverted to controlling violence or maintaining law and order.
Further, we have to recognise that solidarity of people is a prerequisite for development. Here, the issue of communal harmony is very important. Yet, India is increasingly divided. The country has fallen into a seemingly endless cycle of conflict and violence.
Furthermore, economic growth in India hinges on the mobility of labour, but there is little done in return for their security and well-being, as we have seen during the lockdown. An overwhelming 120 million people or more are estimated to migrate from rural areas to urban labour markets, industries and farms. There is an urgent need for a solution to transform migration into a more dignified and rewarding opportunity.
Lastly, any action agenda to achieve self-reliance must be based on a participatory dialogue between the centre and states.
No doubt, achieving the vision of a ‘self-reliant’ economy is an ultimate solution of India’s wide-ranging problems. But, in the face of COVID-19, our way out could be somewhat different since our first priority is to manage the spread of the virus.
India has been under a lockdown for the last seven weeks. It has served its purpose of initially limiting the transmission of the disease, sensitising people to the importance of social distancing, and providing time to upgrade health infrastructure. Such efforts must continue, but the time has come to lift the lockdown. The question of COVID-19 now is no longer life versus livelihood, but livelihood for lives.
Recently, PM Modi stated, while extending the lockdown by another two weeks (up to May 17), that the motto of the government earlier was “Jaan hai to jahaan hai (if there is life, there is world)”, but now, his mantra is “Jaan bhi jahaan bhi (life as well as the world)”. Hunger is the more desperate, deadly, and immediate of the two alternatives, and hence it has prevailed.
“Currently, India has been managing the virus through a lockdown. It is an extreme social distancing intervention available to break the chain of transmission and prevents spread of the disease. However, it does not destroy or kill the virus but is an important measure that flattens the peak of the epidemic, slows the growth of the epi-curve and provides time to the health and social systems to mount a response,” noted Union Health Minister Dr Harsh Vardhan. “Given the diversity of a country like us, it becomes essential to use this extreme strategy judiciously,” he added.
Now the question arises: What next? The total lockdown cannot be indefinite. The middle and upper class with savings can survive, but others are struggling. Many from the middle class are losing their jobs in the current scenario and struggling to survive. The government is aware and looking to get out of this situation. We can’t be locked down for such long periods. Time to get back to work with abundant precautions is the need of the hour. This could help millions amongst us from privations that the coronavirus has already brought about.
As testing goes up and economic activity opens up, India’s coronavirus numbers may somewhat rise — authorities must refrain from getting spooked by it. We can’t afford to neglect other health problems and economic issues that are currently hidden by the COVID-19 dashboard. I will say that the lockdown must be lifted and all economic activities and movement of people should be allowed with necessary precautions after 17th May, except in the hotspots.
In conclusion, the crisis has taught us a lot of things. Investment in public health and precautionary measures in personal hygiene are the obvious ones. However, there is one other big lesson. “That it sucks to be poor, particularly during a crisis. Don’t let our obsolete mindsets keep India poor. It is time we shift our national priorities from all the nonsense and focus on to one, and only one goal — making India rich,” as argued by the popular writer Chetan Bhagat. In the last 70 years, India has never tried seriously fixing its core problem: poverty. No doubt, it can be resolved through a ‘self-reliant’ economy. For this, India’s policy makers must start working on developing an agenda to implement this vision.
In sum, the vision of self-reliance and its proper implementation will not only help PM Modi politically, but will also help India emerge as a major gainer in the post-COVID world. There will be opportunities for the country, but we will end up missing them if we do things in a short-sighted or half-heartedly manner.