The world economy is changing and if we can adapt to the changing world after the Coronavirus outbreak, we can be in an advantageous position. Every new change opens up a pitfall for a few while bringing new opportunities for others. India as a country has done good work to develop and strengthen infrastructure. The Coronavirus pandemic is a game-changer which is bound to alter the economic situation of the world. I consider this pandemic as an opportunity for India rather than a setback. Definitely the pandemic has been a big loss for human society but we have to move on and make tough decisions not only to recover but to excel in this changing world.
To understand the actions to be taken we need to first understand the socioeconomic changes bound to transpire after the Pandemic comes under control. Although there will be few hiccups in supply chain reestablishment and that also needs immediate attention but that will be short-lived. So let’s focus on macroeconomic, microeconomic, psychoeconomic and socioeconomic implications post COVID-19 outbreak.
Increasing criticism for China and a potential loss of consumer base
For any economy, the most important part is the faith of its customers but after the Coronavirus pandemic, China has lost the faith of the world where the countries for themselves are helpless at the discretion of China for medical and other supplies. Even the doubt that this virus was cultured in a Wuhan lab will always make the world look at China with suspicious eyes. This is for sure that now the world will be looking at a second option who can work like China in the manufacturing sector. India is already working with most of these international companies for fulfilling their IT and digital requirements.
Lack of press freedom and transparency
Now the whole world is looking forward to trading with countries which are apparently transparent in their actions rather than a country like China which doesn’t have unchained press/media. It’s not easy to understand the real situation of China by Chinese news agencies. Earlier the world was fighting with closed economies and closed markets so that all global business communities can have equal opportunities in the global marketplace, but now a new requirement has come up which is unchained media. Any country which does not have free news media can be potentially inappropriate to trade with and can prove vulnerable for the trading countries at any point in time. On the other hand, India is a vibrant democracy and it’s really easy to understand India through its news telecasts. I just mean to say that the countries who have less opportunity to hide something will be at advantage.
The ‘Just In Time’ philosophy will no longer work
The world was talking about ‘Just in Time’ but now they have realized that a substantial amount of inventory is required. Everyone has seen the importance of inventory and pipeline of finished goods. This will again push the global demand of products and industries like pharmaceuticals, Medical equipment, Food Products, Groceries, Sanitizing chemicals and equipment. Although this requirement will be temporary, it will continue to affect the demand for at least two years which is positive news for countries which were worried about an economic slowdown
Psychology to overcome
The economic slowdown and economic growth both are bound by the psychology of the human population and business communities. When people start thinking that the economy is slowing down they stop investing and spending, this slows down the rotation of money and results in a recession and vice versa. Most of the countries have faced a big setback due to the coronavirus pandemic and when there is a setback every business will work towards recovering the loss which can be utilized up to a large extent to boost the economy. This will bring a few challenges but big opportunities for countries like India.
There can be no possibility of China becoming a world power but one thing is sure, that China is definitely dreaming for the same. China is able to dream because it is continuously increasing and enhancing its capability to produce everything that has the potential to be sold anywhere in the world. This brings China at an advantageous position and if China and Russia together plan not to accept the US Dollar as a reserve currency then there will be a big change in the world economy because the world cannot avoid China at this moment. This is not my fantasy, even economic analysts like Charles Wallace are speaking on the same lines. After the Coronavirus outbreak, it is an alarm for western countries and the economists of these countries would be thinking on the same lines.
This will definitely bring up India as an option for becoming a manufacturing hub. To utilize this situation we need to compete with China on the lines of cost of production and quality because the world is an open market and political will can influence business up to some extent only.
Now what we need to do? and the answer to this question is present in following points:
Skill Development, labour management and government support
Here I want to start with a question. what is the use of investing in any scheme which doesn’t uplift people’s lifestyle? The government should support the change in people’s lives so that they can become self-dependent but schemes like MANREGA are rather focussing to reduce the challenges in people’s life by giving them no opportunity to grow and are making them more dependent on government support. Our focus should always be to bring up beneficiaries of government schemes to become contributors to the economy. We should develop schemes where the Government can provide skilled labour for industries. When we are already paying for the workforce and they are contributing to most of the unproductive work why don’t we provide these labour to industries? The situation of many industrial units is also worrisome because they are getting most of their labour from unorganized labour contractors. We cannot leave our workforce in the hands of unorganized labour contractors. Now the time has come when India should focus on complete labour takeover and industries will have to use the labour provided by the government.
On the other hand, we are providing support to new manufacturing units in the form of subsidies on loans taken by these companies. Time has come when we should rethink the use of subsidies. The objective of most of these subsidies is to generate employment opportunities. Now, what if the Government starts supporting these industries by providing them with skilled and unskilled labour instead of giving them direct monetary benefits. This can be a big help to the industry during the phase of initial set up. This is also logical because the workforce is directly getting benefited by the same. Later on, after the initial phase, the labour wages have to be deposited to the Government agency and these labour forces continue working for the industry but getting a salary from the government. A complete working plan needs to be developed where all these funds of MANREGA and subsidies can be clubbed up and used for the same purpose. This way the government will actually be paying for employment generation rather than adding money to someone’s p&l.
Convertible loan Instruments
Banks can launch convertible loan schemes for new industries where banks will have the facility to convert their loan into transferable shares after a certain period of time. This will promote banks to take more risk which is important to boost Indian economy because this way they will be able to recover their NPA from successful ventures and options can be given to these successful ventures to buy back their shares on peariodical basis.
Banks’ involvement into Business
It is seen that most of the NPA happen not because of the failure in the planning of a venture but due to the change in the plan which is sometimes hidden from the banks. The funds are not actually used for the purpose they were given by banks. If banks have an option to employ an industry expert at their customers’ place, the banks are able to participate in day-to-day activities of the companies. Thus, they will have better control over their invested money. Where every bank can have asset management staff having expertise in certain industry segments monitoring the business and ensuring the minimal possibility of NPA, the industry will also be benefited by an experienced advisory from the banker. These asset managers will not only check but can also be of help when a company needs money for certain requirements and they can facilitate swift short term loans to boost the health of their customers.
Export oriented business
The government should promote export-oriented industries and also monitor the international demand and finding avenues for the consumption of manufactured products. We should be working on this with a very practical approach where we can produce whatever is in demand rather than a scattered approach where the business is started with the fantasies of a business person. If we have experts in government agencies their expertise should be utilized to make successful business people in the country and fulfil the demand of products. Export-oriented industries should be rewarded for their contribution to Indian ‘Balance of payment’ records.
If a discussion can be started on these lines then we can reach towards taking some concrete step. No doubt in-depth planning is required around this basic theory to convert it into a working plan, but if executed it has the potential to change the future of India and the world.