Moving resolutely toward the post-pandemic future

Jayant Sinha  

A moment comes, but rarely in history, when a nation seizes control of its destiny; when a new Atmanirbhar era begins and when the people of a nation move forward with confidence. It is fitting that this moment has come during the global novel coronavirus pandemic. Even as the world is reeling from the impact of the pandemic, India is recovering with fresh energy and making bold plans for the future.

The pandemic began spreading around the world just a few months ago. Yet, it has plunged the global economy into its deepest economic contraction since the Great Depression of the 1930s. Trillions of dollars of economic output have been wiped out, most countries will take years to return to pre-coronavirus levels, and billions of people are confronting a shrunken future.

Calibrated measures

India has avoided this fate. The government of Prime Minister Narendra Modi has undertaken a series of decisive, calibrated actions which include: implementing a rapid lockdown to save lives; providing abundant relief to protect livelihoods; and, simultaneously positioning the economy for strong revival through the ‘Atmanirbhar Bharat’ policy package.

On March 24, 2020, Mr. Modi announced a historic nation-wide lockdown that was eventually lifted on June 1. The national lockdown dramatically dampened the disease’s exponential growth rate and gave the country time to prepare. Without a lockdown, the cases of coronavirus would today be several times higher than now. More importantly, coronavirus fatalities would have been even higher since the case fatality rate has declined dramatically in the past few months.

Lockdown was essential

A terrible human tragedy was swiftly and decisively averted. During the lockdown, the nation got ready to face the pandemic. Every citizen learned the value of masks and mask wearing, social distancing, and hand washing. Hospital beds, intensive care units, ventilators, oxygen cylinders, personal protective equipment kits, and N95 masks were procured in vast quantities and supplied to every district. COVID-19 care and quarantine centres were established in every block. Testing capacity increased from thousands per day to almost a million per day. Testing labs are now available in 80-90% of all districts. Extraordinary medical advances have also happened in the past few months: several drugs have proven to be efficacious, treatment protocols are now widely available, and many vaccine candidates are now in the final stages of testing. The national lockdown has thus saved lakhs of lives.

Along with lives, livelihoods have also been saved through bold action. Soon after the lockdown was announced, the Prime Minister announced the Pradhan Mantri Garib Kalyan Yojana — a massive relief package for the needy. Through this programme, around 80 crore fellow citizens are being provided rations through the Public Distribution System. This has saved them money and put cash in their pockets. Over 20 crore Jan Dhan women account holders have received Rs. 30,654 crore directly into their bank accounts. Around 2.3 crore construction workers have got Rs. 4,313 crore, while 2.8 crore beneficiaries in the National Social Assistance Programme have received Rs. 2,815 crore.

The rural economy, which supports 60-70% of India’s population and accounts for 46% of GDP, is surging. The excellent rabi harvest has resulted in over Rs. 75,000 crore in farmer payments by the government. Almost 10 crore farmers have received Rs. 40,000 crore as income support through the PM Kisan Samman Nidhi. Over 4 crore households are benefiting from the expanded Mahatma Gandhi Employment Guarantee Act scheme. Thus the rural economy has received over Rs. 2 lakh crore of cash directly into beneficiary accounts just from the Central government. State governments have run their own relief programmes as well. These massive cash payments have driven rural confidence, with consumer goods, motorcycle, and tractor purchases at or above pre-pandemic levels now.

RBI and policy actions

Micro, Small and Medium Enterprises (MSMEs) and large corporates have also been provided substantial relief through coordinated action between the Reserve Bank of India (RBI) and the government. Compliance filings and tax payments were extended by several months. Borrowers received a loan moratorium of six months. Moreover, the RBI has cut rates by 115bps and pumped in more than Rs. 9 lakh crore in liquidity into the financial system; Rs. 3 lakh crore have been made available as guaranteed collateral-free loans for MSME borrowers. with close to half of that being sanctioned already. The National Bank for Agriculture and Rural Development, Small Industries Development Bank of India, National Housing Bank, and Non-banking financial companies have all been provided refinancing facilities. The RBI has undertaken vast long-term repo operations to bring down the yield curve. As a result of all these policy actions, credit markets have stabilised, credit is available, and spreads have come down to normal levels.

With the loan moratorium coming to an end on August 31, the RBI has now announced a one-time restructuring scheme to provide relief to stressed sectors. Borrowers will be able to restructure their loans to match their cash flows, thereby protecting their businesses and jobs. The net result of these relief actions has been to prevent widespread business failures and job losses, which would have resulted in permanent damage to the Indian economy.

Key reforms

After these relief measures were rolled out, the government introduced the Atmanirbhar Bharat revival package. Following the adage that a crisis is a terrible thing to waste, the Prime Minister has launched bold policy reforms in agriculture, defence production, electronics manufacturing, coal mining, and the public sector. These reforms position India for the future and generate confidence among business people and investors.

The agriculture sector has seen the most transformational changes. Unfortunately, the architects of industrial policy transformation in 1991 have chosen to not commend the agricultural policy transformation of 2020. Through a series of ordinances, price controls have largely been removed in agriculture, farmers can now sell their crops to anyone anywhere, and contract farming has been allowed. Kisan credit cards are being provided to all fishermen, dairy farmers, and other agriculturists. An additional Rs. 1 lakh crore has been earmarked to build rural infrastructure such as storage depots, refrigerated warehouses, and other post-harvest facilities. Animal husbandry has been sanctioned another Rs. 15,000 crore.

Defence production is being indigenised with 101 items meant only for domestic production. This will likely generate over Rs. 4 lakh crore of revenues for domestic defence producers in the next few years. Defence foreign direct investment of 74% is now allowed through the automatic route. Similarly, the government has completely opened up coal mining to the private sector to ensure that imported coal worth over Rs. 1 lakh crore is replaced with domestic coal. Finally, in yet another historic decision, the government has declared that there will be full disinvestment in all public sector enterprises in non-strategic sectors.

Production-linked incentives for electronics manufacturing are likely to result in lakhs of crores of smartphone production in India for domestic use and exports. Current projections are that India will soon be among the top smartphone manufacturers globally. In sum, these game-changing reforms have prompted domestic and foreign investors to start pouring in billions of dollars of investments into our economy.

There is confidence

During these uncertain times, India remains a safe haven. The rupee has strengthened against the dollar, the world’s reserve currency. Opinion surveys consistently show that Prime Minister Modi is the most popular elected leader in the world; in fact, tracking polls show that his popularity has actually gone up during the pandemic demonstrating that the Indian people approve of his handling of the coronavirus crisis. Confidence in the government has also increased. Many countries are stumbling through the pandemic. Meanwhile, India has seized control of its destiny and is marching resolutely toward the post-pandemic future.

Jayant Sinha is the Chairman of the Standing Committee on Finance in Parliament and a Lok Sabha MP from Hazaribagh, Jharkhand. The views expressed are personal