We all need to accept the fact that COVID-19 is going to stay here for long and therefore we should all at the same point of time learn the art to living with it. But this crisis also demonstrates that governments and individuals are capable of strong and rapid action in the face of an overarching challenge. As India looks to boost up its economy, it is worth reflecting on the other systemic actions that are needed to shift towards a more sustainable and resilient economy. We need to overcome this crisis and take the situation in our hands to get best out of worst.
Economic crisis due to pandemic:
The world is facing probably humanity’s biggest crisis after World War II. Last month in New York Times Thomas Friedman wrote that the world history should henceforth be divided in B.C (before corona) and A.C (after corona). It’s too early to say on how the world will change after the covid-19 passes but one area to look at is global co-operation. Undoubtedly this pandemic has put the world economy at major risk.Covid-19 had already ravaged the economic foundation of global trade. Some specialists have identified this outbreak as an outcome of hyper globalization or starting of de-globalization.
The world is already facing recession and it is estimated that the global losses may exceed the losses which occurred in World War I and World War II in combined. At the same time falling of crude oil prices have added to additional anxieties. There are several estimates from the economist and the world economic forums which are already reflecting that world is facing a severe economic crisis.
Use of fiscal mechanisms for recovery and resilience:
If we try to be optimistic all crisis are a gateway towards the radical reforms. For realigning the priorities for the greater common good we need to take inspiration from US President Roosevelt book “New Deal” which is talking about three “R’s” , Relict for the vulnerable, Recovery for the economy and Reform for the financial system. These constructive principles by President Roosevelt should be kept in mind as the world has to stimulate the economy post COVID-19.
In the pursuit of relining the economy like other countries India is also trying to maneuver a judicious path between the need to safeguard the population (against unemployment and inflation) and revive the economy at the same point of time. The rigorous lockdown implemented has succeeded in slowing down the spread of the virus and now government is trying to start the economic activities in phases as per the situation of the area. Government is also trying to focus on the agriculture, manufacturing and service sector, while isolating the geographically identified hotspots of the virus contaminated areas. Ensuring that supply chain are re-opened as well as manufacturing and service sectors are free to operate by ensuring the social distancing and basic health hygiene guidelines.
From the very beginning our Honorable Prime Minister Mr. Narendra Modi seemed to be convinced that, the domestic economic situations will be a priority with some tough measures in the offering. India will have to make ease for global engagement and co-ordination. And therefore by calling a virtual SAARC summit and by pushing similar meet for the G-20 leaders, Indian government managed to bag various regional and multi-cultural engagements.
India’s external engagement has been suite substantially and its medical diplomacy in particular has highlighted the critical role India plays in global health matrix. By keeping in mind the media sources around mid-April India took the decision to export critical drugs like hydroxychloroquine and paracetamol to dozens of countries, these exports can be measured as humanitarian act for under-developed countries whereas for the developed nation it can be on the profit basis. It can be opined that this pandemic has brought various opportunities to solve the global crisis as well. And it goes without saying that the circumstances have potentials for proving India to be a leader in the global forefront of the nations.
The response to COVID-19 pandemic is simply the application of the dynamic that drives other social and ecological crisis. The intention here is not to minimizing the human cost of the tragedy that has unfolded although if we considered china as a worst affected nation initially USA, Italy, Spain, Germany have surpassed china in the death toll crisis. On the economic front, according to the most of the experts, global recession seems inevitable and which is giving rise to the vicious cycle of downward economy. Where companies are closing down, leading to further layoffs from the jobs and thus resulting in lower consumption level. A decline in GDP would follow and therefore to overcome this crisis a massive inflow of funds from the government side would be required with some changes in the industrial policies.
Global investors will be looking for the world for locations where strong states have shown themselves capable of managing black swan events effectively. And in the process stronger states will supply other important public goods that other international investors find valuable for instance infra-structure, macro-economic, social stability, skilled-labor and relatively open trade policies. Ideally India and Indonesia should top the list with all these criteria. Above and beyond India has proven itself extraordinarily effective in dealing with COVID-19 policies India seems to share values and interest that align closely with those of western democracies. Apart from that India has large international market and thriving private enterprises.
Clearly India needs a fundamental shift in is attitude towards trade and foreign investment, if it has to establish itself in the emerging post COVID-19 calculus of foreign investors. If the opportunity is attractive enough it will relocate various investors to India as well as to Asian countries moving away from china, and for this trend can already be seen.
Encouraging long-term Behavioral change:
If India compliments its state capabilities with moving towards more open trade and investment policies, it will prove to be a boon to the supply chain along with realignment with the foreign investors, no wonder. Indian government have launched the much-needed relief to the micro, small and medium enterprises (MSME) sector, which is worried about the future in view of the Covid-19 outbreak. Greater intervention by the public sector will be justified by the emergency for as long as exceptional circumstances persist, but must be provided in a transparent manner and with clear sunset clauses. Transfers or subsidized loans which are given to a large corporation, they should be conditional on preserving jobs and limiting CEO compensation, dividends, and stock repurchases. Liquidity crisis can be solved by credit from the central banks through asset purchase programs or other government controlled financial intermediaries through loans and guarantees which has proven effective in previous crises. These domestic policies need to be supported by maintaining international trade and cooperation, which are essential to defeating the pandemic and maximizing the chances of a quick recovery. Limiting the movement of people is necessary for containment. But countries must resist the instinct of shutting down trade, especially for health-care items and the free exchange of scientific information.
Need for sustainable infrastructure investment:
Infrastructure investments are an effective way to boost economic activity and create jobs. And if we take up examples from the past we can very well relate to the fact that South Korea to overcome the 2008-09 financial crisis has directed almost 70% of it GDP towards green measures has rebounded faster than other economies in the Organization for Economic Co-operation and Development (OECD). Not only this USA had launched Great Recession recovery package in 2009, in which investments in sustainable energy and public infrastructure has created more jobs than traditional investments.
India too should take this opportunity to increase support for renewable energy, particularly rooftop solar, through appropriate policies and business models. Decentralized solar power can help spread various basic facilities (banking, hospitals, schools, electricity, cottage industry) in remote regions if the sincere capital constraints is addressed.
Similarly, increase in electrification and adoption of public transport will be very vital for reducing traffic congestion and air pollution. This should involve closer coordination with the electricity sector and a greater focus on vehicle charging infrastructure. Sustained investment in electrification in remote areas will lead to increase in cold storage facilities and supply chains will ensure the preservation and timely delivery of agricultural produce and reduce losses to farmers. Thus letting the rural India grow and positively contribute in countries economy.
