Preparing India for a role in the post-COVID-19 world

The Big Lens

Prime Minister Narendra Modi’s announcement of constituting a ‘Covid-19 Economic Task Force’ under Finance Minister Nirmala Sitharaman comes in the nick of time. Mumbai, the commercial capital of India, has ground to a complete halt; the stock market is in a downward spiral. Shops and other commercial establishments in cities and towns across the country have downed shutters and their usually busy market streets and bylanes are deserted. This is unprecedented.

Amidst this gloom, in India, there is humour among traders and consumers alike. They hope that like all cheap China-made goods, the coronavirus, too, won’t last long. Elsewhere, it’s a much more serious matter. American President Donald Trump has called the coronavirus the ‘China Virus’, clearly laying the blame for the world’s misery at China’s door. Indeed, there are even suggestions from some in the strategic community that the Covid-19 pandemic may not have innocent origins but is perhaps the result, deliberate or inadvertent, of a biological war effort or of deliberate non-conventional warfare aimed at paralysing the enemy (in this case, the US).

It is premature, perhaps even silly, to make such conjectures. After all, the Chinese economy is intertwined with the American economy and can thrive only if the latter thrives. But again, in the competitive dynamics of power between the Superpower and the Challenger, one can’t say what tools of war may be employed. If the ‘war by other means’ theory is true, then we may be heading for the next phase of the US-China trade war, which will be devastating for the world.

But this much, we more or less know now: The first cases of Covid-19 emerged in China at least as early as September last year, with more than 200 patients reporting symptoms. A doctor in Wuhan who shared this information with his colleagues was reprimanded by local authorities and later went ‘missing’ for a while. The next that the world heard of him was weeks later -- that he had died of Covid-19 himself, probably having contracted the virus from his patients. China made an official announcement to the World Health Organisation confirming the first case of coronavirus only in December; and human-to-human transmission was reported only in the third week of January, by which time thousands, if not millions, of people possibly infected with the virus had travelled in and out of Wuhan, the epicentre of the epidemic, and out of China. The gravity of the situation is being felt across the world.

As the virus has brought nations and economies across the world to their knees, governments, especially in the rich countries, are announcing bailout and stimulus packages for citizens and large sectors of their economies – from aviation and tourism to small-scale industries -- as they prepare for what was already a global economic slowdown turning into a recession at least in some major economies, if not all. In America, lawmakers are sitting through the weekend to finalise a $1 trillion ‘economic stabilisation plan’, which could include tax breaks, a $1,000-2,000 cheque to citizens, a $50 billion bailout for the airline industry and a $250 billion fund for small-scale industries. There is also more money being pumped into the healthcare system and to take care of unemployment doles as millions of jobs are expected to be lost over the next few months.

If the world’s largest economy is so worried about the impending economic gloom, it is obvious that India’s emerging economy will need much more than knee-jerk reactions and band-aid solutions. The Union Minister of State for Finance has put up a brave face, saying that Covid-19 will not have an adverse impact on the economy. One can only hope that either his words become prophetic or that he wakes up and smells the coffee. The ‘great recession’ is only weeks away. The year 2020 began on a dull note for the economy, and Budget 2020 failed to boost the morale of the industry and markets. Though not many in the industry complained initially, slowly, one doyen of the business world after another have expressed apprehension about the economy and business prospects.

Now, with city after city shutting down, the business environment will further deteriorate, forcing entrepreneurs to shrink operations and recover losses by cutting costs and staff. As it is, the manufacturing sector was already facing huge problems. From tax holidays to easy credit and zero restrictions on small and medium-scale industries through sincere and transparent ease of business provisions, the government should help unleash the entrepreneurial potential of the people. Extraordinary situations call for extraordinary solutions, using tools that will rebuild the economy, not just tinker with it or repair.

Every crisis has two sides – a challenge and an opportunity. In all likelihood, a vaccine will be found in the next several months. But the world that emerges on the other side of this will be a different one. The economic damage caused by the pandemic will take a much longer time to repair. Time tested tools of economic revival and reconstruction may not be sufficient. And, most importantly, the world will be looking for new centres of production that are transparent, respect international covenants, deliver quality and scale. New Delhi needs to shift gears and prepare India for the role. Hopefully, the ‘Covid-19 Economic Task Force’ will rise to the occasion.