India beyond the coronavirus crisis

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Updated: Jun 03, 2020 2:30 PM

India is two months into its economic lockdown meant to control the coronavirus pandemic.

India is two months into its economic lockdown meant to control the coronavirus pandemic. Controls are being relaxed in a phased manner, with variations across different parts of the country, based on local situations and estimates of local risks from re-opening. To get a sense of where India is headed, one has to assess the performance of its leaders and policymakers so far.

I have not been alone in arguing that the lockdown was poorly implemented, causing unnecessary hardships, especially at the bottom of the pyramid. This is so obvious that the best that some of those responsible (directly or indirectly) can do is to blame the states for not dealing well with the mess that the national government created. The approach to decision-making in evidence here reminds one of the concentration and centralisation at the top, reducing complex policymaking to the gut reactions of a few. It is also worth remembering that the fiscal response required to compensate for the draconian lockdown has also been inadequate, perhaps for similar reasons.

The country’s progress during the lockdown has reminded us of weaknesses in India’s public health infrastructure, and the failure to invest in innovation as well as in human capital. The ramp up of testing and analysis of the pandemic’s spread at the national level have failed to rise to the challenge. India’s institutions of knowledge production and training have been developing in an uneven manner, and are not geared toward scientific progress for the public good.

This is not to say that a quality response is absent. Scientists and social scientists within India, as well as those of Indian origin in numerous other countries, have been providing analyses and policy suggestions. One example, on the Ideas for India website, is a vulnerability index developed by three researchers, which seems to be better thought out than the government’s own threefold classification for re-opening. On the other hand, there appears to be no substantive analysis of what is happening to the Indian economy, or how to manage it re-opening and revival, on the website of the national government’s premier think tank, NITI Aayog.

What is coming from the national government are slogans or platitudes, including the most prominent one of “self-reliance,” but also “rural development” and “reconciliation with nature.” The prominence of self-reliance in the rhetoric is particularly worrying, especially in the context of a recent tendency to raise tariff rates to protect particular segments of Indian industry. Of course, “Make in India” also has the danger of falling into this way of thinking, rather than a more promising approach based on building dynamic comparative advantage. Indeed, while the pandemic is the latest challenge to the globalisation of the last three decades, which was focused on the rise of China, increased migration, and, to some extent, the playing out of commodity cycles, globalisation is not going to disappear. The Internet, long-distance transportation technologies, and global capital and knowledge-sharing will still matter. Indian policymakers should be developing a clear and confident strategic vision of how India will thrive in a post-pandemic world, but there appears to be nothing forthcoming in this direction.

Despite some criticism of the states, coming from the Centre, many of them have done decent jobs of responding. They have been hampered by the Centre’s dysfunctions, and measures such as suspending alcohol sales will only make the states’ dire fiscal situations worse. But state level bureaucracies have handled their challenges fairly well, albeit again with exposure of weak points in governance such as the quality of training of police (more so in the North). A crisis of this sort is actually what the structures of the Indian government, inherited and almost nurtured, from the colonial period are best at dealing with. It is unfortunate that the current national government’s centralising tendencies may undermine the states in the future, rather than building on the confidence gained from handling the pandemic crisis.

This is not to say that the states are paragons—the Centre’s plan to rationalise and reduce barriers to domestic agricultural trade will overcome long-standing barriers driven by state-level political economy constraints. Creating a national market for food products could be an important step toward realising gains from exporting where India has some comparative advantage, such as serving markets in the Middle East. Again, this is nothing to do with “self-reliance,” though it can promote rural development. But the conceptual framing at the national government level does not seem to promote strategic analysis of future economic opportunities in a world where India has less than 5% of global GDP. International trade is a central subject, and the states will need support and partnership with the Centre to develop, rather than being undercut.

“Never let a good crisis go to waste” is an old saying. In 1991, the balance of payments crisis provided political room for needed liberalisation of the economy. The 2008 financial crisis did not have quite the same bite for India, and the response ended up weakening the financial sector, though domestic politics in the second UPA government were a major driver of that weakening. In the present case, it seems that the current government will waste this crisis, at least for promoting economic development, though perhaps not for other, non-economic objectives.

 

Professor of economics, University of California, Santa Cruz. Views are personal

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