India’s Story – Its response to stimulate economy in the face of Corona Pandemic

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The COVID Pandemic has put the entire world in a spin and undesirable imposition on all of us. Every Government suddenly finds itself in uncharted waters and faced with newer and stranger realities. Across the globe, several governments have fashioned their policy responses, keeping in view their population profile and unique challenges, to invigorate their economies in the face of the Corona Pandemic. For instance, Indonesia has adopted a number of measures targeted at the deprived sections by allocating US$ 2 bn for poverty alleviation, relaxation of import & export regulations and benefits extended to low income groups in housing sector.

Keeping in mind its unique challenges, India too has recalibrated its policy approach to deal with social and economic obstacles that the pandemic has posed. India is a big country with a huge and dense population spread across several diverse regions. The pandemic has posed a host of challenges to India, which are health-related as well as economic and social in nature.

Recently, the Government of India promuglated the Aatmanirbhar Bharat Abhiyaan (self-reliant India), whose objective is to merge domestic production and consumption with global supply chains.  It is also about being self-sustaining & self-generating, without being isolationist.

By its idea of self-reliance or Aatmanirbharta, India does not seek self-centred arrangements or turning the country inwards. The call for Aatmnirbharta is not about reverting to economic isolationism. Its essential aim is to ensure India’s position as a key participant in global supply chains. Through building capacities at home, India also intends to contribute to mitigating disruptions in global markets. India seeks to identify products and commodities where it has the ability or potential to expand domestic production and enhance global availability. As such there is no contradiction between an India that is building its economic capacities, and an India that is looking to play a bigger role in global business, trade and innovation.

The US$ 300 billion stimulus scheme is directly aimed at empowering vulnerable sections of Indian society to ensure inclusive social protection & growth. The vision of Aatmanirbhar Bharat, as the Prime Minister said, will stand on five pillars of: economy; infrastructure; India’s system driven by technology; demography; and demand.

The stimulus package of nearly USD 270 billion launched by the Prime Minister under the Abhiyaan aims to both reinvigorate the economy and provide a social safety net to our vulnerable sections. The programme also endeavours to mitigate the socio-economic impact of the pandemic in the short term, but also to instill confidence in Indian businesses and industries, make Indian manufacturing globally competitive; integrating Indian agriculture and small farmers with global food supply chains and embracing both investment and technology.

The size of the economic relief and stimuli measures under the Abhiyaan is equivalent to 10% of India’s GDP. Structural reforms and relief measures under the Abhiyaan cover every section of the Indian economy, including small farmers, migrant workers and labourers, agriculture, the MSME sector, small businesses, start-ups, housing,industrial infrastructure, healthcare, and education, among others.

Under this pro-poor package, so far the Government has already transferred an amount equivalent to US$ 4.2 billion to 200 million families and US$ 2.4 billion to 90 million farmers – all the money directly transferred into individual bank accounts. It has further allocated US$ 6.7 billion for creating job opportunities.

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Indian private sector participation has been given a big push in eight areas, including coal, minerals, defence production, civil aviation, power distribution, social infrastructure, space and atomic energy. New Public Sector Enterprise policy will be a significant step in enabling private participation in a greater number of sectors. These are just a few examples of opening previously restricted sectors to private participation. Access to affordable capital has been made easier by GOI for small businesses, which are important economic engines and job creators.

On the monetary front, the Reserve Bank of India, which is India’s Central bank, has slashed policy rates, eased asset quality norms, provided loan moratoriums, taken measures to support exporters and allowed states to borrow more to meet their financing requirements. It has also pumped in massive liquidity to support banks, non-banking financial companies, mutual funds as well as taken measures to push the flow of funds to the MSMEs and the corporate sector.

Another innovative initiative of the Government of India is the Skill Mapping of Returning Indians ‘SWADES’, which helps returning Indians from overseas and facing job uncertainties to match their skills with available jobs. This also addresses the problem of bridging the demand-supply gap in Indian industry.

While dealing with the economic and social fallout of the pandemic, at the same time, the Indian Government has been very mindful of augmenting its health sector spending programmes. It has committed US$ 3 billion to expand hospital facilities, ramp up test-track-treatment capacity and extended insurance coverage to frontline health workers engaged in COVID 19 response.

There is a widespread feeling that this pandemic can be brought to rest only through a medical breakthrough in the form of a vaccine. Along with several other prominent global pharma countries, India is leading world efforts in its search for a vaccine.

Two Indian companies are currently working on a vaccine and have got Govt approval for clinical human trials. India remains strongly committed to this and was among the first countries to recognise the need for global engagement on the Covid-19 crisis.

India took the lead in engaging world leaders for evolving a coordinated response. At the recently held virtual Global Vaccine Summit, India pledged USD 15 million to GAVI, the International Vaccine Alliance. Prime Minister of India also highlighted that during the pandemic India had tried to live up to the teaching of seeing the world as one family, Vasudhaiv Kutumbkam, by sharing medicines with all countries and by provide specific support to countries that sought it.

Besides individual governmental domestic stimulus and welfare measures, global engagement and cooperation have become quite critical to deal with the pandemic and ensure economic recovery across the globe. It is imperative now that countries need to pool their collective efforts and resources to develop vaccines and therapeutic treatments to contain the virus, while working together to ensure that the economic fallout of the pandemic is mitigated.

The author can be reached at rgururaj@yahoo.com

(By Raghu Gururaj, Consul General of India to Sumatra, Resident in Medan)