Covid-19 presents an opportunity to craft a new economic model, bridge rural-urban divide

By Srijan Pal Singh

As the number of infected rise exponentially every day, the COVID-19 pandemic will certainly bring about a major economic recession in 2020. Worse, unlike other downturns this is not due to an unhealthy economic factor, but due to virtual incapacitation of human productivity - and it affects every nation and every sector, simultaneously.

The total economic loss due to COVID-19 is expected to exceed $4 trillion, almost 5% of the global GDP as per Asian Development Bank, and these seem only conservative estimates. But we will recover from the health crisis of COVID-19 - maybe with a drug in a few months or with a vaccine in a little over a year. The world has already started finding ways to run the economy in virtual environments and operate factories while complying with the social distancing.

But this world during and after recovery will be different from the one we left behind with 2019. And with such colossal changes also come huge avenues for India to transform itself as a better and sustainable economic powerhouse.

India imports about $135 billion worth of crude oil and petroleum gases every year, the largest share of nearly $500 billion annual import bill. Arguably, given the lockdown on transportation and sharp decline in the oil price itself, this will cut by a third this year - saving some $45 billion for the economy in 2020-21. The burning of this fuel further adds a human cost to the problem with 1.2 million people dying as a result of air pollution every year in the nation totaling about $150 billion in economic losses, as per Greenpeace. A further 500,000 losing lives due to road accidents due to poor traffic management.

In this moment of crisis lies a new opportunity to permanently change the oil bill and pollution cost of Indian economy, forever. The global lockdown opened vistas for a generation of startups which could enable offices and public gathering in general to go online. And then, came Zoom.

And in the moment of lockdown, many of the India offices and schools immediately, and almost seamlessly, switched to this app. Zoom is an American company founded by an originally Chinese entrepreneur. Even Indian government officers were using it until recently.

This is where our economic genius should matter. The saving on oil import and the market creation due to the unfortunate current lockdown is also an opportunity to create the next generation of startup-led ideas which will transform the way we work now and more importantly in the post COVID-19 world. They could be our own remote office management services, green energy devices and technologies which improve fuel efficiencies in all three sectors.

In the past two decades, riding on cost advantages and some wise investments, China emerged as the factory of everything for the world. But the COVID crisis has eroded the faith of the world in the Chinese government and in-turn the Chinese factories. The world after COVID-19 will look for alternatives to China as a manufacturing in order to hedge the options - and no country will be better suited to avail this than India.

This is where the Hydroxychloroquine diplomacy should come in handy. India needs to set its sight on the new economic order of the world - where nations will buy not just based on price in the present, but also the record of past trust and value of future investments. This is the kick-start our manufacturing startup ecosystem would thrive on. The opportunity we lost to China in the 1990s - can be regained now.

Then we need to see how we can rebalance the rural-urban spread of the economy. From the 1990’s onwards, India became an economy relying way too heavily on a few dense financial pillars. There was a lack of focus on spreading the economic engine to cover a wider geographical area - leading to mass distress migrations into cities like Mumbai, NCR and Bangalore. This unplanned migration, purely driven by job opportunities did little addition to the quality of life - or long term economic growth plan. In fact, it added to a widening rural-urban divide. COVID-19 has forced a large fraction of first generation migrant workers to go back to their native villages and districts.

Now is the chance to build another model of economy - that which is spread out, geographically and sectorally. Incentives for rebuilding need to be directed at those sectors which can spread the engines of economic development beyond the handful of epicenters? Can we envision a world class manufacturing and service hub in the remote parts of the nation, connected by the massive highway infrastructure for movement of goods? Can we create village based agro-industries in 600,000 villages of the nation - following the model of Mahatma Gandhi of self-reliant villages or that of A.P.J. Abdul Kalam of PURA (Providing Urban Amenities in Rural Areas). This would stem distress migrations from rural areas and declutter the overcrowded cities.

PM Modi said something significant in his meeting with the CMs on the 11th April - “Jaan bhi, Jahan bhi”. What it hinted was that in our fight against COVID-19 - we need to ensure that the economy does not become a silent victim. His commitment is highlighted by the government’s directive about partial reopening of the economy in a phased manner.

There is no doubt that the COVID-19 crisis is an immediate mountain staring at us. But while we continue our hard path upwards, we must not forget that beyond that mountain peak, lies a flowery valley full of opportunities for the national economy. We must put everything in the fight against COVID-19 and yet not lose faith in our ability and opportunity to harness the most out of the post COVID world.

(The author is the CEO of Kalam Centre and was the Advisor for Policy and Technology to Dr. A.P.J. Abdul Kalam, the 11th President of India. He co- authored the book Target 3 Billion and Advantage India with Dr. Kalam.)