Coronavirus: Five things India should do to pull out of the economic rut

Adopt ‘Jai Kisan!’ as the slogan, for resilient rural India has bucked the pandemic so far. And, oh, stock up on cheap oil.

WrittenBy:David Devadas
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India ought to do these five things immediately:

  • Build oil storage facilities so that a large amount of petroleum can be bought at the current throwaway prices.

  • Spur procurement and transportation to take agricultural produce to market.

  • Give funds to panchayats to build infrastructure through an expanded MGNREGA scheme.

  • Transfer cash to the rural poor on the lines of the Nyay scheme the Congress party had proposed a year ago (suitably renamed PM gifts, perhaps).

  • Ensure that inputs and labour (with masks and other precautions) are available to sow the kharif crop.

These are urgent priorities for a combo of three reasons. One, the pandemic is concentrated in cities. Two, the large and economically vulnerable rural population seems to have escaped the worst of it. Three, more than most countries, India cannot afford the double whammy of pandemic deaths and economic collapse. National security will be a shambles if the economy remains comatose, and livelihoods slip further.

So, given the relatively better health of rural areas, the country ought to revive Prime Minister Lal Bahadur Shastri’s 1965 slogan, “Jai Jawan, Jai Kisan!” India’s soldiers mostly come from rural areas, which are precisely the areas from which the economy can be revived.

Corporates are shell-shocked

The corporate sector, which had already been tanking for a couple of years before the pandemic, seems to have retreated into a shell. Banks did not disburse the liquidity that the Reserve Bank gave them recently, keeping the money stashed away even when the RBI pushed down its reverse repo rate, the interest it pays on the reserves that banks store with it.

The amount banks have stashed with the RBI rose from a little more than Rs 3 lakh crore in the last week of February to a whopping Rs 7 lakh crore on 15 April. It was like a tragicomic game of lockdown musical chairs in which players carry their chairs around rather than risk losing a place. For, most of that increase came from money the RBI had given banks during that period to urgently disburse as loans. They simply pushed it right back at the RBI rather than risk future defaults. Such is the corporate panic!

It’s largely an urban pandemic

If there is hope, it is in India’s teeming rural population, many of whom grittily walked hundreds, even thousands, of kilometres when uncaring elites shut the country down in panic. That’s the sort of resilience we need as a nation in these very hard times.

India is lucky that those long walks do not seem to have carried the virus to the country’s vast rural stretches, at least not substantially.

There is speculation that infections, even deaths, may have slipped under the radar, but credible news platforms have reported that year-on-year deaths for the past few weeks have actually decreased. After examining the data sceptically, the BBC surmised that India’s “fatalities are unarguably low”.

“It is essentially an urban phenomenon,” a top official who is dealing with the pandemic confirmed to me in an off-the-record conversation. Mumbai alone has more than a thousand containment zones. The reason is simple: physical distancing is tough when “everybody is living on top of everyone”, as the official put it.

Most of the 27 districts identified as “hottest red zones” are in major cities. These include Mumbai, Pune, Ahmedabad, Surat, Vadodara, Delhi, Noida, Agra, Lucknow, Jaipur, Kota, Indore, Bhopal, Chennai, Coimbatore, and Guntur.

This urban pattern means that reviving industry and services is a bigger challenge than getting the agrarian economy back on track.

The sudden and extreme lockdown knocked the wind out of a plentiful Rabi harvest somewhat. Moving the produce to market was a problem. Finding buyers was a bigger one. And the government’s procurement mechanism did not measure up.

Therefore, my second recommendation up top: get crops to markets efficiently. My third and fourth points would boost rural demand.

Put money in the hands of the potentially hungry! Let them buy at least food. Demand for other things will follow.

The monsoon-dependent Kharif could be even more bountiful than the ill-starred Rabi was. This being a La Nina year, plentiful rain is expected. (In fact, we must guard against the possibility of floods.)

Given adequate inputs, market access, and buying power, the native genius of India’s farmers may ensure that the country recovers Phoenix-like from its villages.

A long haul ahead

It will take time. India’s lockdown, the largest and most intensive anywhere, has curbed the spread of the disease but the graph is still rising. Experts talk of a peak by October, but it’s worth remembering that the last global pandemic, the Spanish Flu, began in 1918 and continued till the end of 1920. Some researchers estimate the total number of deaths during that time at around 100 million.

No doubt the world is far better equipped now. Vaccines can be pretty efficiently administered quite quickly. Still, most experts say it will take 12 to 18 months before either a vaccine or a cure becomes available. That takes us well into 2021.

By late next year, the twin damage to the physical and economic health of the nation and its people could severely compromise national security. The best commentary on defence predicts a more insular post-pandemic world. We will have to fend for ourselves more than before, and having plentiful food is an essential base.

The alternative – shortages – could cause unrest. Already, distress among migrant workers has sparked minor explosions of anger. If this escalates, and it will if livelihoods are not bolstered, it could unsettle public order.

Industry, yes, but prioritise agriculture

I am certainly not recommending that we ignore industry. We should of course coax companies exiting China to come to India, as the government, particularly roads and highways minister Nitin Gadkari, has asked us to do. But let us keep in mind that our past showing on this is not encouraging.

When three score companies left China a couple of years ago, most went to Vietnam, Taiwan, and Thailand and only five percent came to India. Quite apart from our land and labour laws, power supply, roads and other infrastructure glitches, and our bureaucratic red tape, there is the little matter of culture.

What do I mean by culture? Not Bharatanatyam. No, not jatra either, or even Bollywood. Like it or lump it, the argumentative, inherently inquisitive, compulsively discursive Indian doesn’t seem to compete very well with what one might loosely call the more automated sort of worker, inspector, or official.

We are not the self-starter sort, you say?

Ummm, yes, there’s that too.

More to the point from an outsider perspective, we don’t stick to a point. Our rules and taxes tend to change quixotically – or should one say crony-logically? Investors don’t like that.

Still, as I said, there’s no harm in wooing corporations to set up factories here. But while we do that, let’s not lose sight of low-hanging fruit. Our rural cousins are obviously hardier, even after the awful nightmares many of them have suffered from the sudden lockdown.

Boosting the rural economy would give us more bang for the buck, for more than two-thirds of Indians are still in the mofussil. Rural public works (wells, roads, drainage, sewerage plants, health centres, schools) through an expanded MGNREGA would not only provide livelihood, the completed projects would improve the quality of village life.

And while we are trying out Keynes, let’s build some great big oil tanks. Petroleum is available for the taking. Vast numbers of tankers, full to the brim, are stuck on the high seas with nowhere to dock.

India has very little installed storage capacity compared with China or Japan. Though engineering petroleum dumps is expensive, think of it as providing much-needed work for labourers and others that will be at least as useful as many MGNREGA projects.

That’s why I put it on top of my little to-do list for the country. It’s a very good place to start – easily done and very useful whenever urban and industrial life does get ready to buzz.

Also see
article imageThe end of the lockdown won’t bring life back to normal. Here’s how the Covid-19 economic crisis is likely to spread
article imageWhy India doesn’t seem to care about its poor even during a pandemic


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