Indian economy: Surviving after Covid-19
September 23, 2020
Aatmnirbhar Bharat is possible only when swadeshi is adopted by Indian population and made their lifestyle swadeshi oriented. The propagation of Swadeshi with the help of a large-scale mass movement is therefore a necessity. — Anil Javalekar
The current crisis faced by humanity in the form of pandemic Covid-19 is unique and first of its kind. Its impact on economy is severest of all. It is not that humanity has not seen financial or otherwise crisis earlier, but world survived and could use all crises to transform socio-economic life for better. Indian societies have seen its looting and socio-economic destruction for long time in its history, first by outsiders and then by foreign rulers- Muslim and British. Even after freedom in 1947, the loot continued by Indian rulers in this or that form. Indian tax regimes and financial systems were never friendly to Indian commons nor were the socio-economic policies beneficial to rural Indian sectors. Still, however, Indian society survived. And after a longtime, with stable socio-economic policies and stable government, Indian socio-economic systems can be said as well equipped to face all types of crisis, financial or otherwise. India will survive this covid-19 crisis as well and Indian economy will transform itself positively for better India. Time is to wait and have patience.
The pandemic covid-19 and its impact
The covid-19 crisis is different from all other crises faced by humanity so far. It has not remained a disease alone that has resulted in many deaths. It has created a fear psychosis among the major population and has restricted their socio-economic life. It has kept a major portion of population locked in the home. In the process, it has almost stopped society functioning in real sense. Large numbers of people were confined to their homes and most practically were not doing any activity-social or economic. The progress achieved so far seems nullified by inactive society. Entire society is seeing the activities of only health workers and police and to some extend the supply chain of essentials. The passenger trains were and are still not running, the buses meant to transport people were not moving, autos taxis were not plying, factories were not running, offices were not functioning, markets were not operating, shopping centers and stores were closed. In short entire economy was at standstill. What was functioning was only digital India. After four months, slowly things have started to become normal. Lockdown lifted and economy started functioning. Still, after five-six months, everything in the economy is not opened. The hotel industry and tourism are still not operative nor people are coming out of homes and doing their activities in normal ways.
Economic crisis is certain and severe
The impact of this closer on the Indian economy was expected and GDP was bound to decline as also the increase in unemployment was certain. When every sector and every factory and every store and every office is closed, economy cannot grow even if government pour money and liberalize every of its tax policy. Economy will not grow, and its growth rate will come down instead because of pandemic covide-19 and its persistent fear among the people. There is no need to collect huge data or do a great analysis to prove that. However, this does not help government to escape. The fundamentals of Indian society are strong and will help economy to boost with the normalization of socio-economic life. Government has now to act fast and positively rescue the vulnerable sectors of economy with all its possible resources so to bring normalcy everywhere.
Indian economy is coming to normalcy
Indian economy is opening and now coming to normalcy. Factories are opening and supply chain is improving. Indian government has also acted fast and helped economy with financial packages to all sectors of the economy as also supporting every poor family with the cash transfer and supply of essentials in kind. Measures that have been taken are mainly to continue agricultural activities, start manufacturing/production units, help protect interest of workers and maintain supply chain intact in its all forms apart from providing survival kit to poor. True, the sectors affected are almost all and population dependent on hand to mouth have suffered most.
Government seems with the people
It is appreciable to note that the government has acted fast and immediately decided to reach to poor vulnerable groups. The poor were covered under the Pradhan Mantri Garib Kalyan Anna Yojana (Food scheme) where everyone was provided with 5 kg of wheat and rice for free as also 1 kg of preferred pulse (based on regional preference) for free to each household; the farmers were covered under the PM-KISAN scheme (minimum income support scheme); woman who are Jan Dhan account holders were given ex-gratia amount of INR 500 per month apart from providing households under Ujwala scheme with free LPG cylinders. Medical insurance cover of Rs 5 million per healthcare worker is also provided to all health services and ancillary workers; another vulnerable group, street vendors, was given working capital loans of up to ¹ 10,000 to be paid back in one year. For employed workers also, government decided to share their PF contribution. Government understood the needs of entrepreneurs, Industrialists, and traders etc, who lost the business, and tried to help them to survive in their financial crisis. The total package announced was of more than Rs 20 lakh cr.
Financial support alone will not help
True, in any crisis, finance is an important aspect and financial support help people survive. Allowing delayed repayment of loans, reducing interest rates on loans or subvention or even total waiver of loans and interest, allowing fresh loans on concessional terms and moratorium for repayment, guaranteeing the loan and interest repayment by government, providing subsidy in loan component, providing seed capital and giving concessions in taxes in various tax liabilities are important policy initiatives and do help economic activities to revive. However, financial support alone will not help economy to recover from the impact of pandemic covid-19 crisis. The response of industrial set ups, the labor market, banks/NBFCs, local administration and political parties is important. Lending institutions need to adopt easier norms on credit worthiness and repaying capacity and not tight its norms.
Need attention on demand and changed lifestyles
The crisis has impacted more on demand side and unless consumption reaches to normal level, improving only supply side may not help. The covide-19 has impacted the lifestyle of Indians and changed their demand pattern. This required attention and change in the attitude of supply chain holders. The concept of work from home and preferred attitude of automation of household work will have impact on employment. The fear psychosis may not allow many domestic help workers like maids, drivers, laundry and newspaper suppliers to resume their work for long time to come and this makes poor vulnerable. Similarly, online education will change the schooling system and its employment structure. Work from home, social distancing norms etc will make industries to reduce its employment. Online shopping has changed the shopping style and has reduced the need to go to stores for shopping and this will continue for some time more. This will reduce the earnings of large number of small petty shop keepers and vendors. However, this will create new opportunities also and government need to change its supportive policies for new start-ups and emerging sectors.
‘Aatm Nirbhar’ Bharat is the alternative
It is appreciable that government acted timely and announced to make India self-reliant and help domestic sectors to dominate the economy. It is good that government understood the need of using Indian rural potentials and thought of using the network of SHGs and NGOs to maintain supply chains during the crisis. India is geographically large country with varied skill and production capacities. When the idea of globalization has collapsed and international supply chains disrupted, the idea of Aatm Nirbharata is gaining importance. However, Aatmnirbhar Bharat is possible only when swadeshi is adopted by Indian population and made their lifestyle swadeshi oriented. The propagation of Swadeshi with the help of a large-scale mass movement is therefore a necessity. Government system should adopt more and more policies to support rural sectors and rural supply chains to serve India better. That alone will help India rebuild its future.