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Capital Grapevine

Virendra Kapoor

Lockdown cannot go on indefinitely but economy needs reforms to revive

It is now certain that the coronavirus will not vanish on May 17. And even if the lockdown is extended further --- there is some talk of extending it till May-end --- it may still be around to torment large sections of the population. In other words, we have to try and live with the virus till a definitive vaccine is found. Period.

But, clearly, we cannot keep the economy shut, waiting for the vaccine? Therefore, the authorities should begin to prepare themselves, and also the people, about the drill to be followed while living with the virus.

However, given the haphazard manner in which relaxations to sections of businesses and industries were botched by a lack of clarity and poor coordination between various branches of local and state governments, as also between various State governments, it would suggest that the reopening would be a chaotic affair. To illustrate, what use is the permission to small and medium industries in Gurgaon and NOIDA to reopen if neither the employers nor their employees can make a to- and fro-daily journey. Insisting that they stay put where their factory is is foolhardy.

One can cite a number of such ill-considered directives. People are keen to risk the virus to resume economic activity, but governments should cease creating hurdles in their path. The first set of relaxations suggested the government was still assailed by doubt even about the need for gradual opening up. Or it may be that a calibrated opening of the economy will anyway pose more hassles than keeping it shut down, a point forcefully made by a couple of leading industrialists who have called for a comprehensive reopening.

There is nothing more pressing in favour of a full exit from the lockdown than the plight of the poor and the daily wagers. They cannot survive without any sort of daily income. It is not that they are assured of abundant food and productive work back home. No. Desperation had forced them to head for the city in order to feed themselves and their families. When the pandemic forced the city to forsake them, they are now headed home. At least there will be a roof over their heads while they can somehow rustle up something to fill their empty stomachs. More importantly, a social anchor, unavailable in the city, would be on hand to share common sorrows and minor reliefs.

That a number of welfare schemes are directed especially at the rural poor, returning migrants can always benefit from them. Making themselves useful in sorting out the harvested rabi crop and in sowing the kharif crop could be one of the avenues. In States like Punjab and Haryana there is a huge shortage of farm hands while the migrant workers are headed homewards.

Indeed, Modi 1.0 had focused almost exclusively on welfare schemes for the rural poor, causing some of his middle-class supporters to complain that their interests were ignored. It was due to the Jana Dhan scheme, subsidized supply of cooking gas, tens of thousands of rural toilets, cash payments to farmers, etc., that explained his huge win in 2019. The sight of tens of thousands of migrants headed home can momentarily mislead observers, while the truth is that the Modi Government has done very little for the middle class and zilch for the industry and commerce.

However, now that the economic activity is at a virtual standstill, the government needs to shed its ideological blinkers and undertake urgent structural reforms in labour, finance and land. Without removing the shackles on growth in these key sectors, India cannot profit from the exodus of foreign businesses from China. Modi has not lacked courage in the political sphere. It is time he showed it in the economic sphere as well.

To do this, of all the people in the ruling dispensation he himself needs to shed the simple-minded nostrums concerning economic growth and swadeshi that he learnt in the Sangh parivar. China, a closed society, opened its doors to foreign money and enterprise. In sharp contrast, we claim to be an open society, but we hate to keep our doors even slightly ajar for foreign investment and manufacturing.

Given that India is headed for a deep recession along with all other major global economies, given that the costs of fighting the pandemic and the resulting disruption of all economic activity threatens to push growth in the negative territory, reforms in labour, land and capital will once again fire the animal spirits of investors.

Neither piecemeal labour reforms by state governments nor myriad inducements by the RBI for fresh borrowing can work when the overall investment climate is unhelpful. The onus to create a conducive atmosphere for growth lies with the Prime Minister. Any more hesitation and self-doubt will hurt the national cause.

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Ignore the critics and seize the moment

Of course, no government can persuade the opposition from… well opposing robotically what it does or does not do. So, if Modi is holding back on carrying out the long-delayed second set of reforms for fear that he will be accused of a `sell-out,’ he is wrong. Those who have made it their business to abuse, will abuse, regardless of what he does.

Like this much-celebrated Hindi TV anchor. On April 30, he was bitterly lambasting the government for not allowing the migrants to go home. And the next day, when the decision to run special trains was announced, he was asking, `why now… when we are nearing the end of the lockdown… and these workers will be needed back on their jobs.’

The point is whether or not he undertakes reforms, which will provide a much-needed spurt in growth, attracting businesses leaving China by the droves in the wake of its more assertive foreign and defense stance, Modi cannot expect to win brownie points from those who are viscerally hostile to him. Why not, then, press ahead with the right thing?

Or is it that the purveyors of the voodoo economics in the Swadeshi Jagran Manch insist on continuing with the current control-and-command economic order? These backwoodsmen were wrong when Narasimha Rao unleashed the reforms in 1991. Modi now has a golden opportunity to prove them wrong yet again.

Now, a pandemic-hit India does not need a band-aid of tiny, incremental reforms, but a comprehensive package to pave the way for a double-digit growth in the next couple of years. Absent these vital reforms, we will be fortunate if we return to the ` Hindu rate of growth,’ and thus further bloat the number of people below- the poverty-line.

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