From UPSC perspective, the following things are important :
Prelims level : Various components of the economic package
Mains level : Paper 3- Impact of pandemic on India economy.
The article broadly discusses the impact of the pandemic on the Indian economy. While the package has been declared to alleviate the economic pain, the government faces the challenge of finding the resources to plug the gaps. Though pandemic erupted from China, it successfully controlled it. This along with the its calibrated approach towards strategic progression is going to stand China in good stead.
Grappling with the “unknown unknowns”
- Several weeks before the advent of the COVID-19 pandemic, India’s Minister for External Affairs delivered a lecture.
- In the lecture, he had observed that “what defines power and determines national standing is also no longer the same. Technology, connectivity and trade are at the heart of the new contestations.”
- He did mention a point about “known unknowns”.
- But the pandemic has forced us to face the “unknown unknowns”.
- Within a few weeks, his prediction would be overtaken by a tectonic shift in the global situation thanks to a virus and a pandemic.
Impact on India’s economy
- What distinguishes the present pandemic from earlier ones is its economic impact.
- The economic impact is perhaps even more threatening than the human costs involved.
- In the case of India, all forecasts have had to be shredded.
- Job losses have been massive, specially in urban areas.
- India’s exports in the month of April, for instance, were the worst in the past 30 years.
Finding resources for the stimulus package
- Well before pandemic India had been witnessing a persistent economic downward slide.
- Prime Minister Narendra Modi’s announcement of a ₹20-lakh crore stimulus package was, hence, timely.
- Even though economists now believe that in real terms it amounts to around 2% of GDP rather than 10% .
- Finding resources for even this stimulus package will, however, not be easy.
- The Centre’s finances are not in the best of health. It has already had to resort to a second tranche of $1 billion loan from the World Bank to support COVID-19 relief measures.
- The finances of States are, to say the least, in a perilous state.
- Questions are, thus, bound to be raised as to whether adequate funds would be forthcoming for relief purposes.
China’s calibrated approach: Strategic progression
- Since its early recovery, China has followed a calibrated approach — one that stems from a policy of deliberate strategic progression conceived over the years.
- It may be worthwhile to understand the facts so as to underscore the gap that currently exists between China and India.
- In 2015, China’s President, Xi Jinping, had floated the idea of “a Community of Common Destiny of Mankind”.
- In this, he outlined China’s viewpoint on aspects such as economic globalisation and the information technology revolution.
- The Belt and Road Initiative — which encompasses policy, infrastructure, trade, financial, and people-to-people connectivity, and, implicitly also, security ties — was an adjunct to it.
- The 19th National Congress of the Communist Party of China (2017), thereafter, gave its assent, considering it essential to enable China to achieve pre-eminence status within the global order.
- Ever since, China has focused on-
- i) attaining economic and technological progress.
- ii) defining how power would be determined in the new globalised era through devising new international norms in many emerging domains such as cyber, space, artificial intelligence, etc.
- China also set about rewriting international rules, premised not so much on governing where global goods are made, but on setting standards that define production, exchange and consumption.
- China Standards 2035 plans to set new standards with regard to the Industrial Internet of Things (IoT) and define next-generation information technology and biotechnology infrastructure.
- China is hoping, to reap the “early bird” advantage, even as other industrial nations struggle to recover from the devastation caused by the COVID-19 pandemic.
- Internationalisation of Chinese standards would provide China a clear advantage by providing it an opportunity to set the standards in emerging industries such as high-end equipment manufacturing, unmanned vehicles, new materials, cybersecurity and the like.
- This would enable it gain a dominant position in the global economy.
India must plan well to cope with the China challenge
- Mounting an effective challenge to China at this time would require a well-conceived and carefully calibrated plan of action by India.
- As of now, this is not evident.
- India and China will certainly emerge from the pandemic more diminished than previously, but to varying extents.
- Each country will, no doubt, suffer an economic setback.
- But while both nations would be among the very few that would still have a positive growth rate in the near future.
- Which is 1% in the case of China and 1.8% in the case of India, according to the International Monetary Fund.
- Given the size of China’s economy, it does not translate into a massive shift in India’s favour.
Consider the question “Economies across the world have been bruised by the corona pandemic. There have also been talks of India being the beneficiary of changes in the global supply chains. In light of this, examine the issues and challenges that India may face in this regard.”
India would more than welcome some of the entities exiting China, but there are no “green shoots” to suggest that such a shift has, or is, about to take place. Many alternatives are available to these companies and it would be excessively optimistic on our part to hold on to the belief that India is the only alternative choice for most of them.