Adversities heightened by the pandemic call for a complete overhaul of the Indian economy

The judgments and decisions taken by various nations in the aftermath of Covid-19 will be assessed rigorously by the future generations. Though India has managed the epidemic with relative preciseness, we cannot refute an inevitable emergence of a new socio-economic order, where the comeback is going to be hard-earned. This is not the first time the planet has faced an economic catastrophe and won’t be the final.

Can a country like India, which might be one of the few countries to come out of the crisis with a breakneck pace take lessons from preceding recovery frameworks?

Here are a few comeback frameworks: Even though the very nature of the current health crisis is distinct from the past disasters like World Wars and their repercussions in Europe, the US and Japan,  the data indicates that ambitious recovery plans made these nation-states more wealthy than in the pre-crisis era.

Comeback lessons from the western world after being hurt by the two World Wars and the Great Depression in between, the western world indicated remarkable recovery to achieve post-war full employment and solidified income levels. The very nations that were once in the ruins because of the crisis are the brightest spots in the world today, demonstrating the fact that if policies and energies of the citizens are utilised in the right manner, wonderful things can happen.

Almost three decades between World War II and the 1973 recession (“Glorious Thirties”), the countries like the US, Canada, Germany, and France experienced a golden era of financial improvement. In the US, the labour productivity grew at 2.82% per year which meant that productivity doubled every 25 years (thanks to better engines driven by electricity and internal combustion engines, exemplary education and huge capital investment). The world wars stimulated technological inventions in energy and manufacturing and extensively enhanced the labour supply.

Retrieval of Japan after World War

Hardly hit by the war, Japan’s incredible growth from 1950 to 1990 is another instance of a nation using extraordinary hardships to motivate itself towards prosperity. Post-war liberalization was strengthened by multilateral trade agreements and export promotion schemes. That hurled the Japanese economy to extraordinary heights making it the second-largest economy at the moment. Apart from fiscal stimuli, tremendous efforts went into bolstering human capital by improving R&D and skilling activities.

Suddenly, Japan became one of the most inventive economies churning out one innovative commodity after another in fields like electronics. In expansion, initiating quality systems made Japan the first Asian economy to become a developed country.

Recoveries based on moralities and technological inventions

All the above comebacks are embedded in modern values like establishing, exploring and encountering challenges. While large enterprises garner a lot of attention, the position played by huge skilling and consequent technological innovation should not be ignored. Skilling and innovation facilitated the creation of goods and services of the future.

Climate change and recovery

Also, the successful recovery plans by the present day developed nations did not have the accountability to strategise for an upcoming climate change hanging over our heads like a double edged sword by a thread.

The times were distinct; the needs were different: more importantly, the indication was not as certain as now. For example, a 2018 study titled ‘Earth’s future’, forecasted that India will lose 10% of its GDP annually in a 3°C scenario and lose 14% of its GDP annually in a 4°C scenario in the long term. And the moment to act is ‘now’, as the effects of inaction are existential.

China’s incentives after the 2008 financial disaster with an emphasis on green technologies were fast-forwarding in nature to the 21st century. The 2008-09 Chinese economic stimulus plan pumped in $586 billion to manage the crisis. With significant money of $586 billion going into boosting selected industrial sectors to firm up its presence in the global value chains (GVC), interestingly, a sizeable portion of that amount went into green technologies.

China discerned that if the planet is delivered with cheap green technologies on a large scale, the states will incentivise the increasingly environmentally aware consumers to buy these commodities. Weaponised by plans like “Ten Cities, Thousand Vehicles and “Thousand Talents Program (TTP)” and generous state incentives, China became a global leader in e-automobiles. Chinese-made buses started roaming prominent boroughs across the world, something which was traditionally dominated by European makers earlier.

Powered by substantial capital infusion, China also achieved leadership in solar panels, batteries and associated supply chains in a short period setting up an equitable growth model. Also, the 2008-09 Chinese economic stimulus plan is condemned for raising the Chinese debt levels, hence giving us lessons in fiscal diplomacy.

Should India opt for a green recovery model?

Can a developing country like India afford to allot a substantial quantity of its valuable reserves toward a green recovery model? Rapid economic growth and sustainable development are not mutually exclusive.

A three-pronged strategy is suggested for recovery:

1. Investment and stimuli for green economic activities in the selected sectors, such as automobiles and energy. Ambitious investment and incentives in solidifying futuristic green economic activities in selected sectors. Developing, manufacturing and deploying low carbon products could help India create more jobs: the kind of jobs that will survive into the future. With Giga scale battery and solar manufacturing plans already underway, there is a huge demand globally for the sustainable supply chain of even traditional sectors such as textiles.

India could choose 5 sectors where it can fill the sustainability vacuum helping the sub-continent emerge as a new global leader in those sectors. India has the potential to scale up currently ready technologies like e-VTOLs (intra-city electric aerial mobility), which will upend the global mobility modules, increasing the profitability of the growing Indian e-mobility supply chain. Companies like Hyundai who have already announced the manufacturing of e-VTOLs should be attracted to India.

Crises often provide policy windows, where all the stakeholders are empowered, and historically time-consuming decisions are fast-forwarded. If India manages to efficiently remove regulatory bottlenecks and creates standards for e-VTOLs before anyone else, it will take a huge chunk of the global future mobility pie.

2. Resolve regulatory and on-ground legacy issues. Aggressively resolving on-ground legacy issues and challenges. Shackles around entrepreneurship from labour laws to clearances regimes should be broken one by one. It could be done by leveraging the cooperative and competitive federalism evidenced through the crisis under the able leadership of the Hon’ble Prime Minister. And the current policy window might be an ideal opportunity for Indian democracy to deliver.

3. Focus on skilling people. A big-ticket omnichannel skilling architecture should be instituted.  Universities should be empowered and enabled to come up with new-age educational programmes to serve futuristic industries. A special focus should be given to developing enough trainers to train the millions of Indian youth getting ready for the labour market every year, in new-age skills.

Adequate online-offline training courses must be designed in a way that does not affect daily wages drastically. The big-ticket vocational programmes, especially directed at the informal sector which constitutes more than 90% of the total workforce, have the potential to employ displaced and poor labourers.

A strategic skill committee may be empowered to dynamically identify key skills and tweak the training modules. This can be integrated with the Ministry of Environment’s Green Skill Development Program to train 10 million youth by 2030. The issues discussed here are important for achieving sustainable and inclusive growth.

Conclusion

The current pandemic calls for deep-set forces and scientific concepts of development for building a dynamic and modern economy. Green growth is one such concept that will add a new dimension to the economic dynamism of the sub-continent helping it serve the aspirations of its citizens.