Coronavirus – Economic Issues

Pandemic calls for deep-set forces and scientific concepts of development for building a modern economy


From UPSC perspective, the following things are important :

Prelims level: e-VTOLs.

Mains level: Paper 3- Recovery strategy after Covid-19 and adoption of green technologies.

The article discusses the recovery strategies for India. There are three examples from the past from which we can draw the lessons. 1) Recovery of the US and Europe after the World Wars 2) Recovery of Japan after World War 3) China’s stimulus package after the 2008 financial crisis. In the case of the first two, climate change was not the factor. But in case of the 2008 financial package, China emphasised green technologies and was benefited from it. Drawing on China’s example, the article suggests three pronged strategy for India’s recovery taking into account the climate change factor.

Decisions on recovery and lessons from the past recovery frameworks

  • The decisions and directions taken by states from hereon will be judged ruthlessly by historical lenses.
  • Though India has managed the pandemic with relative precision, we cannot deny an impending emergence of a new socio-economic order, where the recovery is going to be hard-earned.
  • This is not the first time the world has faced an economic crisis and won’t be the last.
  • Can a country like India, which might be one of the few countries to come out of the crisis without a recession, take lessons from past recovery frameworks?
  • Recovery frameworks: Even though the very nature of the current health crisis is much different from the past crises like World Wars and their repercussions in Europe, the US and Japan.
  • But the evidence shows that ambitious recovery plans made these nation-states more prosperous than the pre-crisis period.

Recovery lessons form the western world after the World Wars

  • Hurt by the two World Wars and a Great Depression in between, the western world demonstrated unprecedented recovery to attain post-war full employment and stabilized income levels.
  • Almost thirty years between World War II and 1973 recession (“Glorious Thirties“), the countries like the US, Canada, Germany, and France experienced a golden period of growth.
  • In the US, the labour productivity grew at 2.82% per year which meant that productivity doubled every 25 years thanks to better machines driven by electricity and internal combustion engines, better education and massive capital investment.
  • The world wars accelerated technological innovations in energy, manufacturing and vastly improved the labour pool.

Recovery of Japan after World War

  • Severely hit by the war, Japan’s miraculous growth from 1950 to 1990 is another example of a state using great adversity to propel itself towards prosperity.
  • Post-war liberalization was augmented by multilateral trade agreements and export promotion schemes.
  • That propelled the Japanese economy to dizzying heights making it the second-largest economy at the time.
  • Apart from fiscal stimuli, immense efforts went into strengthening human capital by promoting R&D and skilling activities.
  • Suddenly, Japan becomes one of the most ingenious economies churning out one innovative product after another in fields like electronics.
  • In addition, pioneering quality systems made Japan the first Asian economy to become a developed state.

Recoveries based on values and technological innovations

  • All the above recoveries are rooted in modern values like create, explore and meet challenges.
  • While large investments garner a lot of attention, role played by massive skilling and resultant technological innovation should not be forgotten.
  • Skilling and innovation enabled creating goods and services of the future.

Climate change and recovery

  • These successful recovery plans did not have the responsibility to plan for an impending climate change hanging over our head by a thread.
  • The times were different; the needs were different: more importantly, the evidences were not as irrefutable as now.
  • A 2018 study titled ‘Earth’s future’, estimated that India will lose 10% of its GDP annually in a 3°C scenario and lose 14% of its GDP annually in a 4°C scenario in the long term.
  • And the time to act is ‘now’, as consequences of inaction are existential.

China’s stimulus after the 2008 crisis with a focus on green technologies

  • Fast-forwarding to the 21st century, the 2008–09 Chinese economic stimulus plan pumped in $586 billion to manage the crisis.
  • With serious money of $586 billion going into upgrading selected industrial sectors to firm up its presence in the global value chains (GVC).
  • Interestingly, a sizeable portion went into green technologies.
  • China understood that if the world is provided with affordable green technologies at scale, the states will incentivize the increasingly eco-aware consumers to buy these products.
  • Catalyzed by plans like “Ten Cities, Thousand Vehicles and “Thousand Talents Program (TTP)” and generous state incentives, China became a global leader in e-vehicles.
  • Chinese-made buses started roaming famous cities across the world, the roads traditionally dominated by European makers.
  • Powered by generous capital infusion, China also attained leadership in solar panels, batteries and associated supply chains in a short period setting up a sustainable growth module.
  • A lesson in fiscal prudence: The 2008–09 Chinese economic stimulus plan is also criticized for raising the Chinese debt levels, hence giving us lessons in fiscal prudence.

Should India opt for a green recovery module?

  • Can a developing India afford to allocate a significant portion of its precious resources towards a green recovery module?
  • Unbridled economic growth and sustainable development are not mutually exclusive.
  • In fact, we might not have a choice, given the movement of global supply chain towards green technologies and tightening screws around strict sustainability standards.
  • European Commission, for instance, has announced that every euro into the recovery plan will be linked to green recovery.

A three-pronged approach is suggested for recovery

1. Investment and incentives for green economic activities in the selected sectors

  • First, ambitious investment and incentives in catalyzing futuristic green economic activities in selected sectors.
  • Developing, manufacturing and deploying low carbon products could help India create more jobs: the kind of jobs that will survive into the future.
  • With Giga scale battery and solar manufacturing plans already underway, there is a huge demand globally for sustainable supply chain of even traditional sectors such as textiles.
  • India could choose 5 sectors where it can fill the sustainability vacuum helping the sub-continent emerge as a new global leader in those sectors.
  • India has the potential to scale-up currently ready technologies like e-VTOLs (intra-city electric aerial mobility), which will upend the global mobility modules, increasing the profitability of growing Indian e-mobility supply chain.
  • Companies like Hyundai who have already announced manufacturing of e-VTOLs should be attracted to India.
  • Crisis situations often provide policy windows, where all the stakeholders are empowered, and historically time-consuming decisions are fast-forwarded.
  • If India manages to efficiently remove regulatory bottlenecks and creates standards for e-VTOLs before anyone else, it will take a huge chunk of the global future mobility pie.
  • Similar initiatives for other strategic sectors could be carried out.

2. Resolve regulatory and on-ground legacy issues

  • Aggressively resolving on-ground legacy issues and challenges.
  • Shackles around entrepreneurship from labour laws to clearances regimes should be broken one by one.
  • It could be done by leveraging the cooperative and competitive federalism evidenced through the crisis under the able leadership of the Hon’ble Prime Minister.
  • And the current policy window might be an ideal opportunity for Indian democracy to deliver.

3. Focus on skilling people

  • Third, a big-ticket omni-channel skilling architecture should be instituted.
  • Universities should be empowered and enabled to come up with new-age educational programmes to serve futuristic industries.
  • A special focus should be given to develop enough trainers to train the millions of Indian youth getting ready for the labour market every year, in new-age skills.
  • Adequate online-offline training courses must be designed in a way that it does not affect daily wages drastically.
  • The big-ticket vocational programmes, specially directed at the informal sector which constitute more than 90% of the total workforce, has the potential to employ displaced and poor labourers.
  • A strategic skill committee may be empowered to dynamically identify key skills and tweak the training modules.
  • This can be integrated with the Ministry of Environment’s Green Skill Development Program to train 10 million youth by 2030.

The issues discussed here are important for achieving sustainable and inclusive growth. A question based on this theme was asked by UPSC in 2019.

Consider the question “It is argued that the strategy of inclusive growth is intended to meet the objectives of inclusiveness and sustainability together. Comment on this statement.”


The current pandemic calls for deep-set forces and scientific concepts of development for building a dynamic and modern economy. Green growth is one such concept that will add a new dimension to the economic dynamism of the sub-continent helping it serve the aspirations of its citizens.

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