The unprecedented COVID19 pandemic has unleashed an economic crisis across the world in addition to the medical emergency. Governments and the private sector that was already struggling with their finances and lack of growth have been dealt a devastating blow. As a consequence most decision makers have either discarded the rule books or kept them in dusty drawers.
India in particular is facing serious challenges due to a very large population which is now unemployed, malnourished and very vulnerable to the medical crisis. It is certain that the current financial year will witness a large contraction in GDP with negative economic growth, disruption in supply chain and collapse of demand. We must examine imaginative ways of dealing with the economic fallout.
We certainly know the Washington Consensus that has driven the neo-liberal agenda is broken. We definitely remember the communist manifesto was disastrous for the world and we do not want to go back to anything that is a failed collectivisation experiment forced upon people.
There are very few examples of wholistic and balanced frameworks that can help us deal with the deepening economic and ecological crisis that is upon us in addition to the raging pandemic. Furthermore shrinking of trade and military aggression of neighbouring states has made matters worse. Amidst this crisis, we must chose the right policy instruments to realise our economic potential and the demographic dividend.
Where does a country as large, socially and politically complex as India go from here? Considering the Schumpeterian creative destruction paradigm, an alternative pathway can be designed to mitigate the current economic quagmire. Ever since our economic liberalisation in the 1990s we have been focused on the city and urbanisation as the mantra for our growth. Large population migration to big cities has created growth but also massive urban degradation and ecological collapse. Our migrant worker population is one of the largest in the world at over 46 Crore (460 million) and has suffered the most for survival during the pandemic.
It is therefore essential, that we must undo some of our development failings. Our focus should shift towards developing villages, Tier 3 and 4 towns along with the infrastructure connecting them. The Governance mechanisms and administrative capacity for both public and private goods needs to be enhanced. We have over 640,000 villages in India. Some of them had been hollowed out due to urban migration. The reverse migration of the last few months is likely to change the long term scenario. The recent revival of consumption in rural India is a significant testimonial of the potential.
Labour owning decent housing in villages live in abysmal conditions in cities to earn Rs 400 instead of Rs 300 a day they could earn around their villages. That Rs 100 differential is certainly not worth the degradation of dignity of life and ecology we are inflicting upon our fellow citizens. The migrant labour has tremendously suffered in the lockdown period and is unlikely to return to shabby working and living conditions in urban cities with little recourse to public support in testing times. A number of measures are needed to address the long term distress of the average citizen and set them on the path to prosperity.
The first measure required is a large public programme for rural housing and agriculture infrastructure which would be a major driver for rural and economic revival involving and central to the well being of migrant labour. The recent reforms in agriculture by means of three ordinances, Farming Produce and Trade Commerce, Farmers Agreement on Price Assurance and Farm Service will unshackle the potential of Indian farms from regulatory chains. This will set in motion a long term virtous cycle of productivity for small farms and small enterprises in the heartland. Reforms aligned with rural infrastructure development programmes will immensely increase per capita income.
The second measure required is making the rural markets more efficent. The market indigenously called the bazar is so pervasive that you would not have to go more than 5 kilometres in heavily populated states such as U.P. to find one. These can easily be restructured to produce and supply goods to urban areas. The mandis and bazars could do with large investment in infrastructure, information systems, digitilisation and logistics capacity to make two trade easy and feasible. These mechanisms would create high locomotive trade between the 720 urban districts of India and our vastly spread villages.
The third measure would be concerted effort in agriculture, horticulture, agro-forestry and forestry to provide a large source of structured jobs. Our rural areas are not as polluted as our cities, thus best environmental practises of could be applied. That would generate lots of new jobs and reduce the ecological burden on water and air quality in cities. Stimulating food processing industry would require investment in cold chain infrastructure, mechanisation, logistics and services to begin with. These programmes and schemes could be expanded over time given that we can rely upon the demographic dividend over the next decade.
The fourth measure would be the forward movement of rural society through mechanicatization, machines and technology. Road connectivity across states and electricity capacity has steadily improved. In brining urban amenities to rural areas, we would be able to retain the rustic charm while bringing in urban dynamism to communities. The proliferation of machines, consumer durables and consumer goods over a period of time has increased in rural area but not so much in the remote or backward villages. Instruments of economic progressivism will proliferate further in various development circles.
The sixth measure is the design of a labour market information system and skilling of the rural worker mapped according to regional competencies. Competencies that are aligned to production capability of the region. Demand based skilling liked to livelihood would generate the necessary push needed to improve the quality of life and wages. It is therefore essential to reorient the capacity for the supply chain to originate at the rural level from the rural enterprise. It is important that such a supply chain should be systems ready not only for reaching out to rest of India but also other parts of the world that may be source of demand for goods and services.
The seventh measure would be to address our national vitality by strengthening of the primary healthcare network. The primary and community health centres in the heartland of India have suffered from neglect for far too long. They require a serious capacity, infrastructure and technology upgrade. The focus must be on standard universal health outcomes. The healthcare network in the heartland requires very large public and private investment as the COVID-19 crisis has adequately demonstrated.
The eight measure required is the redesign of the primary school education to improve learning outcomes in the heartland of India. The new education policy will widely bring knowledge and learning back in to the primary school system. We must enable the public and private education establishments to effectively translate the policy in to learning mechanism. We have for too long ignored these capacity building measures at the cost of public good.
The nineth measure would be the urgent empowerment of the Panchayati Raj Institutions. The self governance structure for organising activities at the rural level are robust through the Panchayati raj system which pre-dates the Westminster parliamentary system. It is not economically empowered enough to be able to translate its reach into welfare of local citizens. While the Finance Commission of India has provisioned funds for empowerment of the 2.5 lakh (250,000) gram panchayats (village council), some state governments have not yet taken the necessary steps to empower the gram panchayats.
The financial architecture must be decentralised from central and state government headquarters to the district headquarter in the state and then devolving further to taluk or development mandals, if we are to realise the larger vision of economic resurgence. The mantra should remain centralisation of taxation by state and complete decentralisation of expenditure.
The tenth measure is to improve the state capacity to effectively deliver services and ensuring regulatory compliance without creating undue duress for the citizen. Each state capital and region of importance must create autonomous Institutions to understand, study and monitor progress in their respective heartlands. Such Institutions must identify reforms needed locally and implement them at the earliest. While implementing reforms we must gradually scale the change to allow society to organise itself and reduce discretionary power and intervention of state agents. The goal being to ensure compliance and standards without any harassment.
Private investment could thereafter be effectively mobilised for generating the economic progress necessary for the prosperity of the Indian heartland. An alternative investment fund for this purpose may be created for funding work in the identified area as per requirements of performance, equity and backwardness.
An increased emphasis on the heartland of India will uplift large masses out of poverty while ensuring our urban settlements of India are still livable. Shifting our approach of the economic engine will diversify the sources of the supply chain, declutter the cities, reduce the burden on crumbling infrastructure and further lead to rejuvenation for the population in our tier 1 and 2 cities.
The pandemic has tremendously damaged the prospects of an already fragile economic system. We as a nation have a limited window till 2040 to realise our demographic dividend and reach prosperity level of developed nations. This requires tremendous political will, unity of purpose, collective commitment, enhanced state capacity, deep reforms and most of all mobilisation of society to achieve this goal. All these measures must be undertaken simultaneously with firm resolve for the collective destiny of India hangs in the balance.
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