Devendra Kothari, Ph.D
Population and Development Analyst
Forum for Population Action
When written in the Chinese
language, the word ‘crisis’ is composed of two characters: danger and opportunity.
In the state of panic, we must not overlook the opportunity this crisis may
have presented before us.
In just a few months the Coronavirus or the COVID-19 has
claimed more than 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 it is not going to
go away easily.
This is because there
is no perfect solution so far to end the pandemic. As long as the virus
persists somewhere, there’s a chance that one infected traveler will reignite
fresh sparks 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 could be developed.
Hence, we have to learn to live with COVID-19 and at the
same time have to address problems caused by the virus induced lockdown including deterioating
economy. The International Monetary Fund
described the global economic decline as the worst since the Great Depression
of the 1930s.
India
is no exception. With the nationwide lockdown imposed on March 25, 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 figures India
has seen in three decades since India's economic liberalization in the
1990s. India's economy is expected to grow 1.5 per cent to 2.8 per cent in the
2020-21 fiscal which started on April 1, as noted in the South Asia Economic
Focus Report of The World Bank.
Within a month, unemployment rose from 6.7 per cent on March 15
to 26 per cent on April 19, 2020. During
the lockdown, an estimated 14 crore (140 million) people lost employment.
The Indian economy is expected to lose over ₹32,000
crore (US$4.5 billion) every day during the lockdown
period.
In a
developing country like India, MSME industries (MSME stands for Micro, Small and Medium
Enterprises)
are the backbone of the economy. The MSME sector contributes to 45 per cent of
India’s Total Industrial Employment, 50 per cent of India’s Total Exports and
95 per cent of all industrial units of the country and where more than 6000
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 company not to lay off people during the lockdown period. Good
companies are already following this. The MSME sector, which is 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 a lockdown. Around 800
million people of India are directly or indirectly depend upon the informal
sector for their survival. Currently, most of them are out of employment. How long it will take to recover the
economy, nobody knows. But one thing is sure that the coming times have to be
managed carefully.
Now the question arises as to how to 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 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 to the disruptive impact of
coronavirus crisis also lies in China. Here, the Chinese word for “crisis” as
being composed of two Chinese characters signifying "danger" and
"opportunity", respectively. Whether one is looking this crisis as a danger or an opportunity?
Some countries are looking in this ‘crisis’ to punish China
for its gross negligence in handling the Corona outbreak. And, here U.S.
President Donald Trump represents such a segment of countries. On a
naturalistic side, he may be right. There have been more than a million and
half infections with more than 75,000 coronavirus-related deaths in the U.S. so
far and the pandemic has shut down huge swathes of the economy. As a result, he
is seeking damages from Beijing.
In contrast, some leaders think that never a ‘serious’
crisis go waste. Here, PM Modi’s vision
needs an attention. He believes that the pandemic has thrown up new challenges
which the country never faced before, but it 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 April 24, 2020. But, as usual he or his
office did not spell out the agenda to be initiated to achieve it.
Without entering into the ideological debate, we must think
as to how to implement the concept of ‘self-relent economy’, since this is the
only way to make a sustainable and inclusive India. Unlike other economies, a
self-reliant economy is the one which lay down a strong economic foundation to
satisfy most of the needs of the nation's economic development and the people's
living.
Before I discuss the selected action points to implement the
vision in the field, let me talk about why the goal of “self-reliant” economy
is needed for
India’s survival. Consider some facts: India is heavily dependent on imports
from other countries especially from China. It is increasingly difficult to
manufacture goods, including 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 by 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 US$89.6 billion in
2017–18, with the trade deficit widening to US$62.9 billion in China's favour.
In 2017, the volume of bilateral trade between India & China stands at
US$84.5 billion. India's many
manufacturing sectors have a critical dependence on Chinese imports like drug
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 parts from China for the
assembly because of the lack of an ecosystem of component manufacturers here.
The heavy dependence on the Chinese imports has
already weakened the Indian economic
base; and it may now encroach upon India’s sovereignty. All these are having
impact on the level of employment.
The Indian economy is facing lots of problems, but main
problem is unemployment and under-employment. India’s unemployment rate in
October 2019 rose to 8.5 per cent, the highest level 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 per cent between July 2017 and June
2018, the worst in 45 years.
To initiate the process “self-reliant” economy, India has to
focus on two problems: agrarian unrest and job crisis. Any durable solution to
agrarian unrest requires non-farm jobs. When a sector with less than 15 per
cent 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 the farm in non-farm jobs. Further,
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 PWC.
The recent electoral mandate clearly indicates that Indians want socio-economic
development, and for this they do see hope in the PM Modi’s leadership. Generating jobs is, therefore, the biggest
issue that will lay foundation for “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 the uninterrupted cheap power supply. There is a
positive relationship between job creation and availability of uninterrupted
cheap power supply. The review of the good quality statistical studies indicates
that 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?
The job creation is directly related with the production of
goods and services. Low productivity, however, makes Indian goods relatively
more expensive as compared to other exporting countries. Experts call it
premature ‘de-industrialization’, that is it is increasingly difficult for
countries to export their way to prosperity, because of a more competitive
environment for manufacturing globally. Further,
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 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 the 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 a 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 the 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 India are required to
achieve the goal of “self-reliant” economy, however, two reforms,
as discussed above, are the need of
hour. These are:
1.
Improving basic infrastructure with special
reference to uninterrupted cheap power supply, and
2. Unlocking
human potential to propel the formation of human capital.
The
vision of “self-reliant” economy could be “The Roaring Twenties” for
India. But that 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, that would otherwise be diverted to
controlling violence or maintaining law and order. Further, we have to recognise
that the solidarity of people is prerequisite for development. Here the issue
of communal harmony is very important.
Yet India is increasingly divided. The country has fallen into seemingly
endless cycles of conflict and violence. Further, economic growth in India
hinges on mobility of labour but there is little done in return for their
security and well-being, as we have seen during the lockdowns. 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 solutions 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 Centre and
States.
No doubt, achieving the vision of “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 virus.
India has been under the lockdown for the last seven weeks.
It has served its purpose, to initially limit the transmission of the disease,
sensitise people to the importance of social distancing, and provide 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 said while extending the lockdown (No. 3) by
another two weeks (that is up to May 17) and stated the motto of the government
earlier was 'jaan hai to jahaan hai'
(lives are important than livelihoods) but now his mantra is ‘jaan bhi jahaan bhi' (lives as well as
livelihoods). Hunger is the more desperate, deadly, and immediate of the two
alternatives, and hence it prevailed.
Currently, India has been
managing the virus through 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 times to the health and social systems to mount a
response”, as noted by the 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 staggering. Even the middle class may lose
jobs at the current rate and struggle to survive. The government is well 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 a need of the
hour. This could help millions among us
from privations that Corona has already brought about.
As testing goes up, and economic activity opens, India’s
coronavirus numbers may rise somewhat – authorities must refrain from getting
spooked by it. We can’t afford to neglect other health problems and economic
issues currently hidden by the Covid-19 dashboard. I will say that lockdown must be lifted and
all economic activities and movement of the people should be allowed with
necessary precautions after 17th May except in the hotspots.
In conclusion, the crisis of Coronavirus has taught us a lot
of things. Investment in public health, personal hygiene is 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 we focus on to one, and
only one goal – making India rich", as argued by the popular writer Chetan
Bhagat. During the last seventy years, India never tried seriously to
fix 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 agenda as how to
implement the vision of “Self-reliant” economy.
In sum, the vision of “self-reliant” economy and its proper
implementation will not only help PM Modi politically but India can also emerge
as a major gainer in the Post-COVID world. There would be opportunities for the
country, but we will miss them, if we do things in a short-sighted or half-
heartedly manner.
In the context of a self-reliant economy, the factors of production utilize the country’s
natural resources and labor to produce goods and services that can satisfy
consumer needs, and improve the living standards of the people. Furthermore, a
self-sufficient national economy guarantees equality in economic affairs, and
sovereignty. For details, refer: Inzamul Sepoy. 2019. Indian Economic Development, Delhi: Sepoy Publications.
CDC. 2016. What are the links between power, economic
growth and job creation? Development Impact Evaluation, London: CDC Group
For details, see:
Kothari,
Devendra. 2019. Nurturing Human Development: A Strategy for New India, New
Delhi: Paragoan International Publishers. A copy of the publication could be
obtained by contacting author.
