Could the ‘self-reliant’ dream provide with an opportunity to uplift migrant workers, labourers and the rural economy?

As I write this week’s post, we as a nation have been under lockdown for the 51 days in order to reduce the Ro rate. The government has had to make a trade-off of the country’s economy with the health of the overall nation as a whole. The trade-off is a much-required one because how would we function as an economy if our demographic dividend turned into a liability. There is uncertainty as to when will the Ro rate will be reduced and hence the impact of the decisions that are taken now need time to pan out in order for us to feel it’s effect. With this kind of uncertainty, the businesses have contracted and we might be entering a time darker than event the ‘Great Depression’.But is this entirely true? The key difference between the ‘Great Depression’ and the present-day scenario is that during the former recession, there was a huge decline in liquidity over a period of time and there was no fiscal stimulus to offer, but in today’s economy, when our Finance Minister, Ms. Nirmala Sitharaman announced a fiscal stimulus package of 20 lakh crore(which is not entirely being given by the government) amounts to 10% of our GDP, hence the situation would have a different effect on the economic turmoil that our country is in.

Prime Minister Narendra Modi in his recent address to the nation emphasised on the need of being ‘vocal for local’. In his speech, he talked about increasing public spending, promoting welfare and increasing interest rate, policy reforms to improve the domestic economy and essentially making India ‘self-reliant’. The becoming of this ‘self-reliant’ nation lies in first understanding our current dependence on other countries in terms of raw materials, energy sources, consumption etc. According to CII, around 88% of the components of the mobile handsets industry are imported from countries like China and over 60% of countries medical devices are imported as well. The key issue to scaling up of Indian businesses is not the inability of the Indian labour or businessmen but the policies that foster that growth. It’s such unprecedented times that enable structural shifts in the society. The last time the economy was at such a momentous shift was in 1991 as an aftermath of rising oil prices due to Saddam Hussein’s invasion of Kuwait. The increasing oil prices and the exodus of Indian immigrants from Middle east disrupted the foreign exchange. India needed a bailout and International Monetary fund was ready to offer that but only if the Indian market opened up to the world. Thus this bailout led to our removal of the industrial licensing regime and the formation of the free-market economy. This shift from command market economy to a free-market economy led to our growth rate being 8% rather than the former 4%.

In another situation of a country’s economy being turned in a free market economy was China, which opened up to the world in 1978, after 30 years of communism. 40 years later, it is one of the most influential economies in the world. This growth was fuelled by the reforms that were brought in by Deng Xiaoping, who showed that for a large economy it is possible to be both self-reliant and globalised. The transformation also emphasised on the fact that free-trade in itself doesn’t create dependence when both imports and exports are given equal importance. This transformation in which US also had a major role to play led to the decline of people living in poverty from 90% in 1981 to less than 2% in 2013. The per capita GDP grew 24 times from 1978-2017. So when we talk about ‘self-reliance’ what are we heading towards? Is it about the economy turning inwards or is it about trying to grow substantially in exports as well?

The pandemic has exposed the cracks in the supply chain network in thee country and the fact that we choose to increase our ‘self-reliance’ at such a time paves way for a hopeful future. Our country doesn’t have dearth of food supply or housing but is facing a shortage of medical equipment and health care innovations. More than 50% of the approved antibody kits and RT-PCR kits are manufactured by foreign companies and in times of high demands for such kits, it creates a shortage in supply. This further adds pressure on the healthcare system of the country. It’s not as if the industries in India are not exploring options of developing these testing kits but at the scale at which it is required, it needs support from the government in terms of liquidity as well as solidarity in terms of scaling up the production. In the fiscal stimulus that was announced recently, 90 % of it attributes to the monetary and financial interventions being taken by the government and RBI in order to ease credit flow. The guarantee being offered by the government if there is default in loan payments by the MSMEs will help in stirring the economic activity by some extent. Niti Ayog has been parallely developing a national consortia of business enterprises and domestic research institutes which would be interested in improving health care innovations through collaborative approach. This could help in reducing import dependence and also help in leveraging our technology post-COVID19 through global supply chains. Essentially this could improve export trade, similar to Deng Xiaoping’s idea of growth.

The pandemic has finally led to execution of amenities and necessities for the distressed migrants who would not have been so distressed or neglected has this been done earlier. It took the exodus of migrants to their respective homes for the government to realise that affordable rental housing is a must because the in-human conditions that end up living in due to lack of affordability, often becomes the breeding ground for the viruses. The announcement of affordable housing rental schemes under Pradhan Mantri Awas Yojana has been in a nascent stage since last year’s budget but it took a pandemic to implement. The announcement of ‘one-nation,one Ration card’ has been in process since 2018 but had only 4 states agree to it but now it has 20 states as a part of the intra-state portability of the ration cards and the one’s who do not have a ration card will be supplied with 5kg of grains and 1kg chana per person for the next two months.

India still has 70% of its rural households depending on agriculture for their primary income but the contribution of agriculture to the country’s GDP has been declining from 1951-2011. Even though we have food sufficiency we have still not developed ways of making it a tool for improvising economy. The supply chain has had loopholes and even though there has been an advancement in technology, farmers do prefer to use regional methods/demands of raising crops which doesn’t prove to be sustainable(envrionmentally or financially) in the long run. China through its agriculture reforms introduced in 1978 by Deng Xioaping ended up changing the agriculture landscape and its importance in the country. It surpassed India in terms of produce and export with it’s reforms. The reform aimed at incetivising farming after the collective farming model failed. It was called ‘responsibilty system’ where each farmer signed a household contract that required him/her to take charge of a tract of land. They were assigned a quota for crops or livestock raised and when meeting quota they sold their goods at fixed priced paid by the government.Once they exceeded the quota they could sell it in the open market. This financially incentivised farming and helped in pushing them out of poverty as well led to increase in quality in order to fetch better prices. On similar lines our government through its package is also trying to financially incentivise farming by bringing in a law to implement agriculture marketing reforms so as to allow farmers to sell at attractive prices. This would be enabled by removing inter-state barriers and providing e-trading for agriculture produce.

For what its worth , the pandemic is helping in addressing the cracks in the system with an urgency that has been missing for the past years. It also drew light on migrants, labourers, farmers, and all those who toil hard to sustain the economy but often do not end up reaping benefits as part of this free market economy. It’s not only the MSMEs and the large scale enterprises that contribute a large chunk to the the country’s GDP and its growth but it is also these people who get lost in the background on whose deprivation lies our affluence.

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