In most nations, massive economic changes take place every 70-100 years, changing the nations totally. Sometimes these changes destroy the nations, or they take them to the top. The US had earlier phases of growth when they grew 7-10 times post-civil war and American reforms including the ‘New Deal’ designed by President Franklin Delano Roosevelt. This was a series of reforms enacted between 1933 and 1939 that lifted the US out of the Great Depression and restored hope to the American people. It focused on the ‘three Rs’ of relief for the vulnerable, recovery of the economy, and reform of the financial system (familiar words during Covid crisis). The US again and the UK, the western world restructured themselves also during IR 1.0 and IR 2.0 and grew 5-6 times.
With the help of the US, China did a total restructuring during IR 3.0 and grew eight times. India could only grow 2.5 times. The growth rate depended on the efficiency of restructuring. All countries have now entered very disruptive periods of IR 4.0 and 5.0 requiring huge changes, and also hit by Covid, they require major changes in the administrative, financial and market systems, just to survive. And these changes could later be used for enormous growth. In normal times, our democracy may not have allowed these changes, hence the opportunity. (I have described the earlier changes in my book, Containing the China Onslaught).
We could not join the American market bloc in 1972, though we were shortlisted by US experts, due to Nixon’s strong prejudice against Indira Gandhi, she having convincingly won the Bangladesh war despite Nixon’s support to Pakistan. Perhaps, even if offered, we may not have joined due to our philosophical non-aligned stand, which was compromising our growth. All nations, including India, have to change now to survive Covid and this gives us an opportunity to collaborate with the best nations, practices and consultants particularly in the democratic world, keen to partner us against the tributary communist nation China, threatening everyone. The US supported China under the mistaken impression that it was helping itself against its Cold War enemy, Russia, but China emerged as its enemy/competitor. It might be in the interest of the US and other democracies to prop up India, to regain the ‘balance of power'(Kissinger’s term to define/justify the illogical China policy), particularly in the East.
In the words of David McCullough, a Pulitzer Prize winner: “All crises are also opportunities for radical reform, for re-aligning priorities, and for tweaking policies in pursuit of the greater common good.” History has shown that those who navigated in these perilous times better, gained at the expense of others. Mao failed in his new deal post-1950, but then took the unbelievable decision to go to the US for help, and this changed China. India also at the time of foreign exchange crisis in 1991, turned the crisis into an opportunity and launched reforms, but at a low speed and commitment, and lost out hugely to China.
No one expected that Covid, a six-month phenomenon would change the world and India irreversibly. Post-Covid India will be very different and if it is planned well, both by the central government and state governments, it can be a huge opportunity. Covid has ensured that we make these changes for our survival, and give up business as usual. Let me look at the compulsions of some changes, and start with the changes forced by the biggest impact of the huge migration of labour and employment crisis first.
Labour exporting states like Uttar Pradesh, Odisha, Bihar, Jharkhand, Chhattisgarh, Rajasthan etc have compulsively received large-scale semi to no skilled human capital in their states during the huge labour migration. This is also the time that digitization has hit the world and India. This is a great time to have a large scale reform and reorganizing the government departments, and reorganizing industry and other institutions, for long time results.
A large-scale migrant population earns less that Rs 500 daily in urban areas. Securing 80 per cent of this income in 100 km radius from their native place should be the primary effort, e.g. Uttar Pradesh should focus on large-scale infrastructure connectivity projects and building up new cities for better absorption of talent pool.
The pandemic has exposed fault lines in the global trade and financial architecture, disrupting our travel patterns, global manufacturing value-chains, and governance systems. The crisis brings home some potent lessons: individual health outcomes cannot be divorced from the health and hygiene systems of the community and that national borders are no defence against threats from nature, and that collective global action is increasingly a sine-qua-non for our own individual protection from such events. The hope remains that the Covid-19 crisis brings about a global epiphany regarding the need for saner responses to the other formidable(and less immediately visible) threat: the effects of climate change. Once this episode is behind us, if its only legacy is to bequeath us a wiser and more deliberative approach to balancing the often-conflicting objectives of economic progress and environmental protection, then much good would have come of it. India has already taken a leadership position in this effort.
Like other countries, India is also seeking to steer a judicious path between the need to insulate the population, and to revive the economic engine. The rigorous national lockdown has succeeded in slowing the spread of the virus, and the current thinking in the government is to open the country for business in a carefully calibrated manner, focusing on reviving sectors like agriculture (this sector should have received huge attention, but did not). The Covid crisis ensures that only this restructuring will prepare the base for our rehabilitation, and then manufacturing, and services; while isolating geographic hotspots and vulnerable groups. The most compelling requirement for reviving the economy is to effectively manage the emergence from the lockdown, ensuring that supply chains are reopened, that manufacturing and service enterprises are free to operate while ensuring basic health hygiene.