Brigadier (Dr) Vijay Sagar Dheman
Corona pandemic has engulfed the humanity in a manner never seen before in the recent times. The world recalls many economic downturns but there is no record of such a disaster where 90% of the race is directly affected. India reacted in time to contain the pandemic and forced the lockdown to minimise the loss of human life. Initially, slogan given by Prime Minister was “Jaan Hai Jahan Hai”. This war against the Corona virus was met with multiple challenges i.e shortage of medical facilities, social unacceptability of lockdowns, religious belief (God only can save me) and international conspiracies like Tablighi Jamaat and Rohingya etc. While India was gasping in the glory of international praise for timely measures to mitigate the effect of the virus, it soon realised its impending fallouts on the economic structure of India. Modi government acted in time, albeit now with a different slogan “Jaan Bhi Jahaan Bhi”, signalling minute to minute watch and dynamic decision making. The experts took a decision for selectively relaxing the provisions of lockdown to minimise damage to economy due to closure of the industry and services.
The world view of the economy, as forecasted by IMF, lends to a disaster leading to a steep slump never seen before. As per IMF estimates, all the economies in the world i.e GDP growth rates would be anything down to minus 7% except for India and China which is in positive figures i.e + 1.9 % and + 1.2% respectively. Similarly, GDP growth for 2021 has been predicted to be around 7% for India and China. The same is not true for the developing countries of the world. This IMF forecast reminds us of the robustness of Indian economy and its strong fundamentals. The downward plunging of Sensex and Nifty etc, at this moment, is attributable to sentimental factors rather than fundamental factors. The present lockdown has immense potential to destroy these fundamentals. However, technical fundamental factors still come to the rescue of Indian economy in a big way.
Present situation
The nuances of the lockdown have ensured a steep decline in lavish and unnecessary spending by the citizens. It has led to decline in consumption almost by 30%. Thus the imports, especially from China, have been reduced to mere 5%. The consumption of petroleum products has, drastically, been cut down worldwide leading to sharp decline in the prices of crude. This has resulted in saving of Foreign Exchange in India. Another factor, favouring Indian economy, is Services Sector which contributes max to our GDP i.e Banking sector, Information Technology sector, a plethora of services provided by Call Centres and other E-Commerce operations. These operations have not been affected much with ethos like ‘Work from Home’ etc. These fundamental aspects haves kept the prospects of Indian economy afloat.
As regards the Industry is concerned, the majority of workforce has been retained by the Industry, despite the pressures of migration back to home in case of migrant workers. There may be a problem with some micro Enterprises involving daily wage workers. However, most of these workers are still retained with the help of government measures of provisioning of free food and shelter. Some percentage may have migrated back home. Overall, once the lockdown is lifted and manufacturing is allowed to resume, the rehabilitation of industry may be painful but not impossible.
As regards Agricultural Sector is concerned, there are a lot of noises of migration back of workforce. However, as per reports, most of Agricultural workers have turned hawkers selling fruits and vegetables or have taken up allied jobs. It is the ‘Tendering Process Of Unorganised Labour’, which is causing distress to farmers having standing crops because of unusually hiked rates of labour due to this calamity.
Despite some strong fundamental reasons for Indian economy to remain in green, albeit at much lower levels i.e 1.9 % for Financial Year 2020, there are serious concerns as regards the Hospitality Sector, the Aviation Sector, and MSMEs etc that the nation has to address. It will be a while (more than two years or more) that the consumers start holidaying or national/international business reaches a level where the these sectors are revived.
Dynamic measures to monitor / course correct economy
Reserve Bank of India. Having seen the health of Indian economy, RBI needs to be in touch with reality to boost liquidity in the market to revive the stock market sentiments and maintain the viability of Banking Sector. The measures announced by RBI need to be reviewed every week to course correct dynamically. The TLTRO (Targeted Long Term Repo Rates Operations), CRR (Cash Reserve Ratio), LAF (Liquidity Adjustment Facility), WMA (Ways and Means) for state Govts need to be followed to ensure adequate liquidity in the market. The measures, to provide moratorium on EMIs/loans/dividends, sensible dilution of collaterals (to prevent NPAs rising), asset classification, infusing liquidity in NBFCs and Insurance sector, are needed as a lifeline. However, these doles should not be used to course correct the Pre Corona misdeeds of a Financial Institutions. Red Tapes need to be removed to blow life into Corona hit industry.
Ministry of Finance/Niti Ayog. Ministry of Finance / Niti Ayog need to come with short term/ medium term/ long term SOPs (standard operating procedures) to revive and revitalize sustained growth of Indian economy. UBI (Universal Basic Income) concept may be explored based on UID system. In order to ensure ‘U’ shaped economic recovery, the government also needs to announce monetary packages, tax concessions, loan waivers, enhanced allocations and cutting paper work for domestic as well as foreign investors. The domestic industry needs to be protected against hostile take overs. Labour Laws need to be streamlined for higher productivity.
Ministry of Agriculture. Immediate problem is to provide food to teaming millions of poor daily wager migrant workers. Government must distribute food grains available with FCI free rather lose maximum quantity of the grains to rodents and environmental damages due to poor storage conditions. Available stock of more than 18 million tons is more than sufficient for next three years.
Ministry of Corporate Affairs.
The Govt need to encourage enhanced budgets of CSR (Corporate Social Responsibility). CSR may also include food and shelter of employees. The corporates may be asked to look into the humongous market potential in India in domestic consumption on the lines of Patanjali FMCG products with “Make in India” campaign. The concept of RSR (Religious Social Responsibility) should be promoted amongst Temple Administrations/Trusts to utilise the static gold Reserves held with the temples’ vaults. These age old reserves need to be deployed in aid of poor for provisioning of free medical services, food, shelter and employment.
Industry. The business environment, post Corona episode, is undergoing world of changes. The industry has to reinvent itself to cater for changes in its products, production norms i.e social distancing at workplace, work from home, online operations, zoom meeting, provisioning of food/shelter for workforce, modified shift systems and changes in market dynamics. The industry must exploit opportunities in prevailing global environment to redirect the business models to earn foreign exchange as well.
Future Prospects. Winston Churchill once said “Every Calamity Throws Up Enough Positivity for Betterment of Society”. Before, I suggest what lessons this Corona Pandemic has given us, let’s review the actual strength of Indian economy. Globally today, India is largest producer of Two Wheelers and Tractors, world leader in cutting and polishing Diamond industry , second largest Casting producer, second largest Steel and Cement producer, second largest Mobile Phone Manufacturer, third largest producer of Heavy Trucks, third largest Real Estate producer, third largest producer of the Coal, fourth largest producer of the Iron Ore, fourth largest producer of Cars. Fundamentally, Indian economy is poised to take leap ahead of China. Finally, India must revamp its health care system , Supply Chain Management, revamp MSMEs and labour laws, “Make in India” campaign and formalise social security sector including UBI with robust identity system like UID etc. And the most important aspect is that, “we the people of India” must remain UNITED irrespective of our political, religious and diverse entities. Jai Hind.
(The author is Ex Additional Director
General and Vice Chancellor.)
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