The topic of this essay may invite a lot of apprehension amongst those who understand what is inherently wrong with the largest democracy of the world. This has been laid bare with the incidence of multiple challenges on the security, economic, and health fronts. Incidentally, our politicians have been actively touting the making of an Atmanirbhar Bharat (self-reliant India), while simultaneously allaying suspicion amongst critics for whether the strategy will take us back to pre-1990s economic policymaking. Such is the Indian anguish that the race to find a COVID-19 vaccine had a metaphorically patriotic deadline of 15th August 2020. India’s administrative struggles are deep-seated because of our conscience screaming centralization despite the truly “federal nature” of an otherwise sweeping pandemic. Hence, this “federal nature” better equips the local administration and authorities to curb the spread of the virus with relevant information for identifying solutions. This also means that there is not a better time to test the government’s cooperative federalism framework. But should we expect the Indian State, seeking to thrive on unrestricted (and unaccountable) power, to accommodate significant administrative changes as a consequence of the ongoing pandemic?
Economic Russian roulette
In India, economic resilience is disarming and has its roots in the informal sector economy. An argument made against the resilience of our economic system, post the twin-shocks of Demonetization and GST, by former Chief Statistician and Principal Economic Advisor – Pronab Sen – highlights that since the informal sector’s contributions to Gross Domestic Product (GDP) are arrived at once every five years, “…despite palpable damage to significant parts of the Indian economy, GDP growth in 2017-18 was estimated at 8.2% – the highest since 2012-13. Unfortunately, this was an optical (or more correctly, a statistical) illusion.” Hence, without any regard to the negative shock borne by the informal sector, the “formal sector actually gained at the expense of the informal and the small”. The government’s much-avowed forbearance (or lack of it) confining a greater part of the COVID-relief package to supply-side interventions (credit-guarantees, liquidity injections, and rate-cuts) are proving superfluous while underscoring the rigidity in assessing consequences of a situation in which banks are unwilling to lend. Cash assistance, as an immediate social protection response, is being junked as it may “deter people from returning to the workforce when needed and starve industry of labour” and instead of spurring demand for goods and services, beneficiaries will “resort to a precautionary motive to save”. Perhaps the series of measures taken post-Global Financial Crisis (GFC) that triggered high-inflation and a currency crisis continues to haunt our policymakers. However, the primary cause of the 2012 crisis that stoked high-inflation was due to a stimulus overdose. In this health shock, the long wait for a vaccine will continue to dampen consumer sentiment, enhancing risks for a timely economic rebound. To blame our conservative stance solely on past failings is also mistaken as the nuances of Atmanirbhar measures may cost us years of economic prosperity (see Move to give boost to ‘Make in India’: Govt puts import restrictions on colour television).
Breaking the pernicious cycle through participation
In a slew of policy measures announced by the Finance Minister in May, a key announcement was to allocate an additional Rs. 40,000 crores to the MGNREGA, rooted in the expectation that this would address the messy exodus of migrant labour turning to their home states for survival and employment opportunities. For a greater part of COVID-hit India, rural areas have been spared the disruption in activity wrought by the pandemic. However, with the relaxation in lockdown and resumption of activity, the conditions that originally pushed people out of their state in the rural setting would compel them to move again. Given the implicit hope to achieve herd immunity, there seems no doubt that the Indian policymaker is attempting to address the situation through nature’s course rather than solely relying on vaccine discovery. The situation is indubitably uncertain and peculiar, however, and given the incongruency of implementation with the existing laws to support migrant labour, their plight strikes a sharp blow to bureaucrats’ lack of foresight to make adequate provisioning in the first place.
To mitigate the perpetual cycle of out-stationed labourers’ hopelessness, the crisis calls for re-assessing their predicament. Initiatives like the PM Awaas Yojana are visionary in the sense that it holds the government and society accountable to them. This is an opportunity to realise a more suitable socio-economic provisioning by allowing and encouraging the participation of communities and individuals, spearheading a bottom-up approach. Fiscal and cooperative federalism equips States to strategise as equals, harnessing fraternity through trusting laws and kickstarting the virtuous cycle of economic growth. Going back to basics to address such eventualities by focusing on health infrastructure and improving administrative procedures – testing, decisions based on testing, comprehensive addressing of lockdown, preventing future lockdowns, etc., may allow for a suitable, if not an adequate, response strategy.
Navigating the path ahead
Former Governor of RBI – Raghuram Rajan – has recently argued that “authorities should be more discriminating in the firms they support, allowing the market to do most of their job”. This is a fair concern as today’s rising debts may burden future generations who are already grappling with the grim realities of depleting productivity, underinvestment across education and health, and climate change. Even with strides in technological innovation, rising productivity will be limited to those sectors which can employ people with requisite skill sets. Hence, the focus should be on upskilling the workforce and embracing the demographic advantage that many have purported in the past. The pandemic is changing the way we react and interact in today’s ever-evolving circumstances. The move forward includes repurposing the fundamental objectives of strengthening soft-infrastructure (education, health, etc.) and building trust across sectors and individuals for a resilient and responsive social and economic system.
Tanya Rana is a Candidate of M.A. Public Policy at the Jindal School of Government & Public Policy (JSGP), O.P. Jindal Global University (JGU).