Finally, the result is out. We are in the negative. It is neither 16 per cent nor 18.5 per cent, as estimated by different agencies. It has actually slipped by 23.9 per cent. A  double-digit negative growth would have certainly given sleepless nights to the policy-makers.

This is the shape of the Indian economy after the country was put under strict lockdown for nearly 100 days. This estimation has been done by none other than the Ministry of Statistics and Programme Implementation (MoSPI) last week for the June quarter. Hence, the figure cannot be refuted.

In less than a month, the second quarter will also come to an end. Will it be worse or the worst? We could neither control the virus nor the economy from deep diving. When the 21 days’ mantra of  ghar mein rahiye, surakshit rahiye (Stay home, Stay Safe) got extended multiple times, we all knew that the worst was yet to come. 

The sad tale of the migrant labourers and daily wage workers walking back to their villages barefoot, without food and other basic necessities, should have been enough to wake up the government from deep slumber.

We saw our finance minister conducting conferences very often during the lockdown, presenting a brave face, as if the government was trying to overhaul the machinery. But now, the ministers are as invisible as the virus is. We rarely get to listen to them. We do not know whether Prime Minister’s Atma Nirbhar Bharat scheme will kick off. We also do not know whether the government is capable of rejigging the economy. But we certainly know that the government perhaps has to do something big, something out-of-the-box to actually kickstart the economic activity.

Our readers may be thinking that since we are in unlock 4.0, what else can the government do. Like diligent professionals, they have been telling you to work from home, wear masks, maintain social distancing, avoid venturing out etc. But is it all that the government should have done?

Come September 7, the loss-making Metro shall also be given a new lease of life. Of course, the schools and colleges are still locked in view of what the US faced. A question that comes to mind is; if we had closed ourselves, only to open when the infections were at its peak, why did we close at all? 

People may have contrary views on this. Yet, this question often pops up during candid discussions. Had we adopted a different strategy, we would not have landed ourselves in this deep trouble. Anyway, let bygones be bygones.

The loss the nation has suffered cannot be recouped with a magic wand. It may take years to revive the economy. Yet, the government cannot sit idle, with the leader giving only  speeches and waiting for things to settle on their own. It has to come up with the CFO mindset – maximising output, reducing cost, analysing its assets, creating new opportunities so that people have money in hand to kickstart the cycle.

Currently, the government may have announced unlock guidelines. People have certainly started coming out of their houses. But one quarter of inactivity has led to pay cuts, job losses, business shutdowns etc. People are not keen to spend because of the uncertainty in the market. The current increase in Covid-19 infections, deaths and topsy-turvy behaviour of various state governments — announcing sudden lockdowns, short curfews –- have led to a lot of fear and uncertainty. People are not willing to spend as they fear loss of savings or jobs.

This volatility, coupled with high inflation, will not give the much-needed boost to the economy. The government may have to think out of the box or may have to look back, deep dive into our history to find a solution. The current crisis can be somewhat related to what we saw in 1991.

At that time, Saddam Hussain’s Kuwait invasion had created a debilitating oil crisis in India. Something similar to what Coronavirus has done. The two situations may not be same but they are comparable. We had a huge pile of sovereign debt and the only option that the government had was to pawn its gold reserves. 

The news of the government pledging gold and airlifting of 21,000 kg of metal had sent shivers down everyone’s spine. We may not have sovereign debt right now but what is disturbing is the negative growth of the economy. Poverty is increasing manifold after decades of consistent decline. In other words, factually circumstances may differ but their effect on the economy can be said to be similar.

With consistent devaluation of the rupee, dwindling foreign reserves, the late PV Narasimha Rao placed the new industrial policy in Parliament. The move was said to be drastic. Except for 18 industries, the government had abolished the licensing system. The industrialists were free to enter any sector, expand into new avenues, without going through the cumbersome and time-taking approvals and licences. 

The government opened the doors for foreign investments. The limit for foreign ownership was extended from 40 per cent to 51 per cent. The public sector undertakings were allowed to sell their shares. Had the government not taken those drastic steps, India would have never grown at such a fast rate.

The government had struck all the right chords. They could analyse what actually was stopping them from growing. Similarly, the present government needs to sit, analyse and come up with a strategy of reviving the economy, creating more jobs, generating money and demand. 

The most pertinent question that the government should answer is how to get funds cycle-kicking once again. Considering the slowdown in the foreign market, right now, we may have to look inwards.

Before Covid-19 made its entry, India Inc., was already struggling with its banking sector. Needless to say, this is one sector, which is crucial for driving demand, either by printing notes or by making available finance to the general public. 

However, considering the current financial crunch, people may not be ready to borrow. They might be suppressing their demands.  At the same time, the corporate sector is struggling for money to revive businesses.

One way of looking at the current situation would be to restructure existing loans for genuinely distressed corporate borrowers, something which the RBI has already announced. However, this process needs to be done scrupulously without giving any benefit to consistent defaulters. This may give some leeway to the corporate houses to start their business, thereby generating jobs for the jobless.

Similarly, what may drive an individual to purchase products is again looking at loans from a different view or repackaging them differently. People usually don’t buy when they have an existing EMI to serve with limited income. In case, the same EMI is lowered and spread across a longer time, they may have more money in hand for buying newer products. Of course, the loan servicing cost may increase. Yet, this seems to have worked generally.

The government can sell off its share in Air India, BPCL and other PSUs for generating revenue for meeting its deficits, and pumping that money into profitable ventures. However, it has to instil confidence in the general public in this VUCA environment.

In case the Modi government is able to bring the country out of this crisis, the world will look at India differently. It is time to write a golden chapter in India’s history just like that of 1991. But then, Modi has to make a difficult choice of choosing economy over politics.

(The writer, a company secretary, can be reached at jassi.rai@gmail.com)

(Published on 14th September 2020, Volume XXXII, Issue 38)