Covid-19 crisis: Is it time to rethink long-term national economic strategy?

• The long term vision for India for most policy makers today is essentially based on raising the country’s GDP to as high a growth rate as feasible.
• There are serious doubts on both the viability and desirability of this vision and strategy, which have been brought to the fore with the ongoing Covid-19 related crisis.
• A few days back, the sight of migrants attempting to trek back to their villages, often hungry and thirsty, brought home the fact of the fragile living conditions of a vast bulk of India’s citizens.
• The chief reason why vast numbers of people migrate to cities is the agrarian crisis in the country, and the severe lack of productive non-farm employment opportunities in the rural countryside.
• It is time for India to relook at its economic vision as a country and even for citizens to question the impact of their lifestyle choices on the economy and the planet.

The current Covid-19 crisis, which is unprecedented in terms of its nature and scale, is causing grave damage on both the humanitarian and economic fronts. Understandably, governmental efforts to address this immense challenge are focused on immediate, short term and medium term measures. In this article, we take a step back and explore the implications of this crisis for long term national strategy making in the economic and social spheres.

There are two ways to think about this issue: one is to assume that things will essentially remain the same and concern ourselves with what is required to ensure that economic recovery can be effected in the shortest time period feasible. The second is to use the current disjuncture as a point of departure, and attempt to formulate an alternative long term vision for the economic and social system of the country, which may be different from the existing system in several fundamental aspects.

The long term future vision for India as currently held by most policy makers, is essentially based on raising Indian GDP to as high a growth rate as feasible, so that the country can grow richer in material terms (the vision of the five trillion dollar economy). It is assumed that the achievement of this primary goal shall lead to the well-being of the nation’s citizens. There are however serious doubts regarding both the viability and desirability of this long term vision and strategy. These doubts have now been brought to the fore, thanks to the ongoing Covid-19 related crisis.

As we all saw on our television screens in recent days, the lock down announced to counter the spread of the virus, came under great strain in its early phase due to the attempt by a section of the vast migrant population to return to the rural hinterland. Although there are no reliable estimates about the size of the (rural to urban) migrant population, this number may be as high as a 100 million. The sight of many of these migrants attempting to trek back to their villages, often hungry and thirsty, brought home the fact of the fragile living conditions of a vast bulk of India’s citizens. Most of these people are employed in the informal sector of the economy – in activities like construction, small scale industries, petty trading, household work, etc. They are mostly daily wagers who do not enjoy the social security measures that workers in the formal sector do. So precarious is their situation, that they cannot live without finding work even for a few days.

The chief reason that these vast numbers of people migrate to cities is of course the agrarian crisis in the country, and the severe lack of productive non-farm employment opportunities in the rural countryside. The fragmentation of land holdings, the risks created by the vagaries of weather, inadequate irrigation facilities in many parts of the country and rising prices of agricultural inputs has led to the crisis in agriculture. But an equally grave problem is the lack of gainful non-farm activities in rural India.

The lack of non-farm jobs in Indian villages is not a recent or incidental phenomenon. It is the logical consequence of the economic strategy adopted by practically all governments in post-independence India. The famous Gandhi-Nehru debate regarding the socio-economic vision for independent India was settled in favour of the Nehruvian vision. Gandhi, having seen how the import of textiles manufactured in England had devastated the Indian textile industry and led to large scale unemployment and destitution of Indian artisans, desired that independent India should adopt a strategy focused on reviving traditional Indian manufacturing industries in villages and small towns. The Indian village, in his vision, would largely be a self-reliant unit, growing its crops and manufacturing industrial essentials in the village itself, using labour intensive techniques where possible.

Nehru on the other hand, was in favour of Soviet style industrialisation that was capital intensive and exploited scale economies in production and distribution. All successive governments in the post-Nehru period continued this basic strategy based on capital intensive industries. The economic liberalisation initiated in the early nineties, while reducing state control and regulation and allowing the private sector and market forces freer play, persisted with the large scale, capital intensive model of industrialisation and economic growth. This strategy has continued to the present day.

While the use of the capital-intensive industrialisation strategy has led to growth in industrial output, which in turn has supported the growth of the services sector, it has also generated serious problems. First and foremost, it has led to limited employment opportunities, and these too are largely located in urban areas, which have the supporting infrastructure in place. Too few modern manufacturing jobs have been created in rural areas. As a consequence, the rural labour force has had little choice but to migrate to towns and cities to seek employment.

The urban infrastructure of the country has consequently come under great strain. The concentration of industrial economic activity in urban areas has also led to the concentration of service sector activity in urban areas, as a result of the demand and supply linkages between the industrial and service sectors. The rural economy of India has been hollowed out, with many villages almost bereft of their entire population in the working age group.

As the current crisis has starkly revealed, this situation is undesirable and unsustainable. Vast numbers of people crammed in slums and densely populated cities are an ideal breeding ground for disease. It is virtually impossible to implement social distancing measures under these circumstances. It appears that a de-concentration of the Indian population would have to be effected in order to deal with the current and possible future outbreaks of disease. This in turn requires a radical de-centralisation of economic activity.

How can the above be achieved? After all, the clock cannot be turned back. However, if one thinks creatively and in an innovative fashion, a number of opportunities and options present themselves. For example, the services sector of India, such as that catering to IT and Business Process Outsourcing, can be geographically decentralised. What is required for this to happen is the presence of sound IT infrastructure in rural areas such as broadband availability, and availability of skilled IT workers in these locations. The government may need to work in mission mode to achieve these twin pre-conditions.

A broader de-centralisation of economic activity requires not just IT infrastructure but an upgradation of rural infrastructure more generally, both physical and human. In recent times, the road network has been improved in many parts of the country. But the social infrastructure, such as that involved in the provision of medical services, remains woefully inadequate in rural India. Indeed, this is a great worry in the context of the current crisis. But more generally, skilled and aspirational workers would be unwilling to work in villages until high quality schools, hospitals and other basic amenities are available in reasonable locational proximity.

This leads to the issue of expectations regarding life style. Social and cultural norms may lead to the demand for ‘modern’ amenities to be made available in rural areas. If this involves aspiration for possession of expensive cars, branded luxury consumption goods, and regular visits to large, glossy malls, then the decentralisation model is doomed. Replicating metro style lifestyles in the countryside would be economically inefficient and do serious damage to the natural environment. Living in the countryside would be a feasible option only if the residents would be happy to forego some of the superficial glitter of urban life. A life characterised by greater simplicity and in harmony with the natural environment would be called for.

Interestingly, the current lockdown has sensitised many urban residents to the charms of a quieter city with less traffic, better air quality and clearer skies. The requirement for families to be together for extended periods has also led to the rediscovery of the pleasures of having dinner together, and of unhurried family conversations. The forced substitution of passive consumption of entertainment activities such as involved in non-essential shopping by the pursuit of one’s forgotten hobbies and passions, may lead to re-evaluation of lifestyle choices. An exclusive reliance on material consumption as the primary source of satisfaction may give way to cultural and social activities as a source of joy. Paradoxically, social distancing may bring people together on the emotional front and may actually lower the real social distance.

The Covid-19 crisis is also a wake up call with regard to the natural environment. The virus itself is likely to have emerged as a result of faulty animal breeding practices. While in earlier times, and especially in India, domesticated animals were treated with great respect, the modern industrial system of animal farming is often inhumane. The virus crisis was preceded by wild forest fires in both the Amazon and in Australia on a massive scale. The year 2019 was amongst the hottest years ever recorded. Mother Earth is clearly telling us that she is under great strain. We humans need to be more sensitive to the environmental impact of our economic visions and strategies, on an urgent basis.

As Gandhi pointed out, there is enough in this world for everybody’s need, but not enough for everybody’s greed. Our long term vision for the country and for the world must take cognisance of this eternal truth. A fundamental re-think is in order.


Dr. Vivek Suneja is Professor of Strategy at the Faculty of Management Studies (FMS), University of Delhi. As a Felix Scholar, he studied for his doctoral degree from the University of Reading in the United Kingdom. For over a decade, he taught at various premier Universities in Britain including at the University of Salford, Manchester and at the Open University Business School, Milton Keynes. Prof Suneja has published several books and papers in the areas of Strategy, Marketing, Entrepreneurship, Economics, Culture and Public Policy.  Among his prominent books are “Markets: A Multi Dimensional Approach to the Market Economy” published by Routledge, U.K.; “Policy Issues for Business” published by Sage, U.K.; and the “Economics of Marketing” published by Edward Elgar, U.K. His most recent book “Economic Theory and Policy amidst Global Discontent” has just been published by Francis & Taylor, U.K.  Prof. Suneja has done consulting and training work for several prominent international and national organisations and firms. He is deeply committed to furthering societal well being. The views expressed here are his own.
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Kumar
Kumar
1 year ago

I couldn’t agree more on this and firmly believe that true growth in India can only be achieved if it’s rural population gets the benefit. It is high time the decentralization of the Indian economy happens now than later.

Shruti Vishnoi
Shruti Vishnoi
1 year ago

Great article..cottage and small industries like biogas plants, eco-friendly sanitary napkins production, honey bee rearing, milk dairies, papad making, khadi etc. At local level can contribute a lot in preventing migration and r eco-friendly too

Megha Bharti
Megha Bharti
1 year ago

Such a well framed article ! Gives you a lot to think about ! It’s definitely high time to initiate plans towards making India a more self- reliant unit with more ecologically friendly means of sustenance.

Anubha Batra Grover
Anubha Batra Grover
1 year ago

Very well articulated article.
Reminds me of 2 concepts
-Small is beautiful
-We cannot base our happiness on someone else’s unhappiness. This someone else includes people of different religious social economic strata and other life forms

Viraj Shah
Viraj Shah
1 year ago

Superb article. The throwback to a Gandhian way of business is refreshing and needs to be pursued. The social sector realizes the challenges of mass migration which manifest themselves in myriad fashion. Maybe COVID-19 can act as a pause and reset.

Ishika Dey
Ishika Dey
1 year ago

The article aptly captures the cause of the current crisis has been a domino effect of human negilgance, the policy bottle neck and ways ahead..

Vishal Gaurav
Vishal Gaurav
1 year ago

Thanks you for this article Sir. You have raised very pertinent points around meeting up an alternative long term vision for the economic and social system of the country through a radical yet creative de-centralisation of economic activity.

Ram Kumar Gupta
Ram Kumar Gupta
1 year ago

Happy to read an article on inclusiveness, the actual GDP can only be realized only if decentralization is effected which calls for rural development and upliftment to meet basic needs of the rural population. This shall bring equity in development.

Rajesh Sikka
Rajesh Sikka
1 year ago

Very relevant and thought provoking article. There is definitely a need to create jobs in rural areas and small towns of India. It would require major shift in policies. Present situation may bring about a change and trigger steps in this direction

Shyam Dubey
Shyam Dubey
1 year ago

Well said sir

Debashis
Debashis
1 year ago

Prof. Suneja, Very thought provoking and fundamentally actionable ideas. Really enjoyed reading it.

Mohan
Mohan
1 year ago

Thank you sir for a great and insightful article and a much needed thought process in this pivotal point. It brought back the memory of several thought provoking lectures in FMS.

Deepak Singh
Deepak Singh
1 year ago

Can’t agree more !

Loved your lectures – be it in class or digital world

vikas rohella
vikas rohella
1 year ago

Could not agree more ! But the view is Utopian. It is unlikely that the Govt will like to experiment. There are issues of leadership,economic capacity and deeper commitment to societal well being. We need to educate our next gen for these challenges.

Vivek
Vivek
1 year ago

Very well articulated sir. The virus outbreak is tragic on one hand but a wake up call for the humankind. A vengeance from nature on the blatant exploitation of its precious resources by an irresponsible mankind.

Richa Misra,
Richa Misra,
1 year ago

COVID has raised matters which need utmost attention for formulating future growth and sustainability. With lakhs of rural population migrating to cities in search of jobs leads to exploitation of Urban Infra and under development of rural India.

Pankaj Goswami
Pankaj Goswami
1 year ago

Social Infrastructure. Very rightly pointed out.

Tarun Karanam
Tarun Karanam
1 year ago

Reading this transports me to the rare persuasive and relaxed temperament of your lectures. Best wishes.

Class of 2009-11

Neha Thakur
Neha Thakur
1 year ago

Agreed on so many levels. Perhaps we newd to revert to ‘Small is Beautiful’ mindset of sustainable growth.

Sumer
Sumer
1 year ago

In-depth Analysis of current situation with multidimensional approach.

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