Covid-19 pandemic is a once in a century type of global event. At a time when global cooperation is most needed, it is conspicuous by its absence. The big two, the US and China, are highly estranged. Their rivalries are spilling over to multilateral institutions which are becoming increasingly dysfunctional.
By Arvind Gupta
The government announced a further two weeks extension of the nationwide lockdown which was to end on 3 May 2020. The Ministry of Home Affairs has issued detailed guidelines on handling the red, orange and green zones in the country. The decision does not come as a surprise because right from the beginning the government has prioritised containment of the virus and save lives.
While India has done much better than other countries in containing the number of cases, the virus is still spreading with new hot zones coming up in different parts of the country. According to the Ministry of Health and Family Welfare figures released on 3 May, total number of Covid-19 positive cases in India rose to 39,980 including 28,046 active cases, 10,633 cured and 1301 deaths. There were some encouraging signs too. The doubling period has increased to 14 plus days while mortality rate is less than 3 percent. The situation could have been much worse had the stringent lockdown not been in force. The single day increase in corona positive cases has gone beyond 2600, which is quite large. The government does not want to lose the battle against the virus by premature relaxation of the lockdown.
Prime Minister Modi has displayed firm and resolute leadership in handling the crisis. He reached out directly to the people of the country, explaining the gravity of the situation and yet instilling confidence that the crisis can be handled if we work together. The government’s daily measured briefings went a long way in reassuring the people that the crisis was being handled well.
The regular video conferencing meetings between the Prime Minister and the Chief Ministers was something of a novelty. One would hope that such consultations will continue in future not only on Covid-19 but also other issues. It goes to the credit of the Chief Ministers who are handling the situation well in their respective states although the pandemic progressed differently in different states. Kerala, Tamil Nadu and Haryana have succeeded in flattening the curve. Others are on the way to achieve that.
Doctors, nurses and healthcare workers fighting at the front lines, risking their lives, are the true corona warriors. Facing the shortages of essential equipment, and often the slurs from misguided citizens, they have kept the country going. They deserve the greatest gratitude from every citizen. The government rightly came up with a stringent ordinance to protect them from attacks from mischievous elements. We can also not forget the role of the police, employees of the essential services and delivery boys, who worked tirelessly to provide the essential services. The oft-criticised bureaucracy rose to the occasion to efficiently implement the guidelines and maintain order and discipline in society.
Yet, there were some blemishes as well. Over 10 million migrant workers were stranded in different parts of the country. Faced with livelihood uncertainties, many of them decided to walk back home hundreds of kilometres on foot. There was a lot of confusion about how to handle such mass exodus. Belatedly, the government has decided to run special trains to take the stranded workers home. Hopefully, that will provide some relief to them. It is not clear why a logical step like running special trains was not taken earlier. Hopefully, the problem of migrant workers, which has deep roots in the way our economy functions receive some attention in future.
Covid-19 had an unexpected diplomatic fallout which raised the question about the future of 8 million Indian workers in the Gulf. The social media has been in overdrive discussing the Tablighi Jamaat incident. Regrettably, on 18th April, the Organisation of Islamic countries (OIC) issued a statement asking India to take urgent steps to “stop the growing tide of Islamophobia” in the country. Traditionally, the OIC has been anti-India and its statements are biased. There were reverberations of the statement in some Gulf countries. To make matters worse, the US Commission on Religious Freedom also came up with a mischievous report on how India was treating the minorities during the Covid Crisis. The MEA spokesperson rightly condemned the report in strong terms. The repercussions for Indians in the Gulf can be serious. To contain the fallout, the Prime Minister tweeted a ‘unity and brotherhood’ message on 20th April: “COVID-19 does not see race, religion, colour, caste, creed, language or borders before striking. Our response and conduct thereafter should attach primacy to unity and brotherhood. We are in this together”. Pakistan will do its best to interfere in India’s domestic matters by internationalising them. India will have to be wary and ensure that the safety, security and livelihoods of over 8 million Indians living in the Gulf are not jeopardised by carelessness of a few.
Economy and Livelihoods
The public health crisis has morphed into multiple crises. Apart from saving lives, the livelihood question is becoming increasingly important. The country is facing a steep decline in economic growth and a massive unemployment problem. Sector after sector of the Indian economy is demanding relief and stimulus packages. The government has announced some relief measures but substantial stimulus packages are still being awaited. With the sharp decline in economic activity, tax collections, the government has limited options. Whether it should monetise the fiscal deficit is a call it will have to take. Most economists and industry captains are advising the government and the Reserve Bank of India not to be conservative at this moment. Jobs, once lost, will be difficult to recreate. The small and medium enterprises need help. So far, the government has proceeded with caution. Only time will tell whether a gradual approach to bailout packages is better or should the government have announced a big bank package right in the beginning to minimise the losses.
The Fiscal Responsibility and Budget Management (FRBM) requires the government to
(a) limit the fiscal deficit up to three per cent of gross domestic product by the 31st March 2021; (b) ensure that the general Government debt does not exceed sixty per cent.; the Central Government debt does not exceed forty per cent., of gross domestic product by the end of the financial year 2024-2025.
The act also bars the government from borrowing from the Reserve Bank except by “way of advances to meet temporary excess of cash disbursement over cash receipts during any financial year in accordance with the agreements which may be entered into by that Government with the Reserve Bank, Such borrowings will be repayable. The act provides for the RBI to “buy and sell the Central Government securities in the secondary market”. 2
These limits and stipulations are inadequate in the times of crisis of the magnitude we are facing today. This fiscal deficit for 2019-20 was kept at 3.4% of GDP for 2019-20. The FRBM may have to be suspended at a time when the country is facing its greatest crisis in recent times. On balance, the government should be ambitious in its stimulus packages so that the jobs are saved and the economy is kickstarted. There is no doubt that India will have to live with large fiscal deficits in the foreseeable future. That is unavoidable. The need of the hour is to save the economy from being destroyed completely. If need be, the government may even have to print money to monetise its deficits.
Covid-19 pandemic is a once in a century type of global event. At a time when global cooperation is most needed, it is conspicuous by its absence. The big two, the US and China, are highly estranged. Their rivalries are spilling over to multilateral institutions which are becoming increasingly dysfunctional. The US has threatened to suspend the funding of the WHO, while Chinese are busy defending themselves against a cover-up, the charges of lack of transparency and in dealing with the pandemic. Several countries are demanding inquiries and even reparation from China for its responsibility in spreading the virus.
We cannot pretend that the world will return to the habit of cooperating overnight and everything will return to normal. We should be prepared for the world in which the US and China competition and rivalry will play out in all areas. Multilateralism needs to be revived but that is not going to be easy. The post-Corona world is likely to be fragmented, nationalistic and directionless. The new world order requires no principles. The new world order should be based on cooperation on issues that matter, namely, health, education, climate change, et cetera. Globalisation has received a setback but it requires a human face. In such a world, India will have to seriously think of building its strength and capacity rather than be hostage to global uncertainty.
Prime Minister Modi, in his discussion with the Sarpanches, has emphasised the importance of ‘self-reliance’. Self-reliance seems to be an anachronism in an age of globalisation. The Prime Minister’s idea needs to be elaborated more fully. In simple terms, India should be able to stand on its two feet to minimise its dependence on the outside world in critical areas. The economic growth should be inclusive, it should create jobs and not joblessness. More importantly, the most vulnerable sections of the society should also be stakeholders in the task of nation-building.
Self-reliance, based on sustainable development, could imply rejuvenating sectors which create employment. These could be in social sectors, handicrafts, rural industry, agriculture, clean technologies, food processing industry et cetera. Only in extreme cases, like that of energy or critical minerals, or highly specialised machinery, we should rely on imports. To the extent possible, we should build and manufacture in India and export depending upon the demand. We should try and achieve indigenisation in emerging technologies. There is an urgent need to build domestic capacities in electronics, active pharmaceutical ingredients, critical minerals, rare-earths, cybersecurity products, 5G/6G, Industry 4.0, artificial intelligence, data analytics et cetera. We should strongly back indigenisation of the aerospace and defence industry. We have been remiss in neglecting the R&D in India. India’s expenditure on research and development would need to be doubled if not tripled in the years to come. Start-ups which thrive on innovation need to be nurtured. We should therefore not waste the opportunity this crisis has provided in reshaping India in the post Covid phase.
This article was first published in VIF India. The article belongs to them.