How India can emerge from the strongest recession: analysis
By the end of this fiscal year, India may need to recover approximately a 10% negative variation in its Gross Domestic Product (GDP) growth. No current policy maker or leader has faced such a crisis. India will need to design a suitable solution to deal with this. Crises provide seasoned politicians with the space to overcome resistance from vested interest groups. What steps can India consider to raise the economy’s long-term productivity? I can suggest some.
The virus has underlined that the most important market failure in the future is probably due to access and use of technology and digital data. During the shutdown, those with smartphones benefited; those who did not suffer A smartphone allowed access to health care, goods and services, digital payments, recycling and education. The government must help India overcome digital apartheid by introducing a new paradigm in which every Indian has a smartphone with easy access to data. Therefore, we should phase out the sale of feature phones and subsidize smartphones (recommended to be made in India) and data packages for Indians. You must also train a woman in each village to teach others how to access the full functionality of a smartphone. As we have shown time and time again, when given the right environment, Indians learn and prosper quickly.
The virus forced schools and universities to learn to deliver education digitally. Digital learning in primary, secondary, and higher education has the ability to increase flexibility, engage students, and expand access to more students. Governments must examine best practices for providing high-quality instruction remotely, supported by trained teachers, comprehensive student services, and robust online platforms. A substantial investment in digital education will make societies more resilient to any future emergencies that may require a transition to remote learning. It will also help reinvent and modernize education. Digital education will be a powerful lever to reduce educational inequality in the medium term.
Virtual care had its defining moment with many providers moving forward in weeks over what had previously taken years or decades. Denmark launched virtual consultation software for specialists in two weeks, Kaiser Permanente went from 15% of cancer care in virtual settings to 95% in one week, and Queensland Health expanded its virtual care capacity from 90 to 1,600 users. Therefore, governments must be bold in what they intend to do. Furthermore, coronavirus disease (Covid-19) has presented a unique opportunity for countries to reflect on the most essential characteristics of their system to improve health outcomes at the same cost or less. India needs to rethink its health systems and think of innovative ways to implement new models of care delivery, data and analysis, policy setting, payment and other important health issues.
Both industry and government have had to become familiar with modern ways of working. Now governments must ensure that they not only retain this momentum but also accelerate their methods. A simple start would be if the paper was removed from all bureaucratic offices. Can’t all files be moved digitally and the digital initials in the email become a substitute? Just think about the speed and transparency it would generate. Globally, the digital transformation has seen rapid progress with governments focusing on building data control towers that aggregate different sources of public and private data to aid decision-making and support scenario analysis. They have established digital platforms that help facilitate market operations in sectors where value chains have been severely disrupted. A lot can be done, but let’s start with the paper.
The pandemic has triggered lasting structural changes that will affect up to 1.5 billion jobs in the next decade. Many workers have already lost their jobs, and companies may want to get rid of some of the lost jobs, even when the economy returns to work. The government should focus on retraining workers in a mission mode. Large tracts of jobless workers should be supported by governments to gain new skills and improve productivity in core sectors in association with industry. You must identify the areas of need, areas capable of creating the maximum number of jobs: construction, health, textiles, logistics, schools, retail and everything that is low-skilled and where our productivity is low. We should consider how we can use technology and training to retrain and improve our workers.
Although agriculture contributes only 17% of GDP, it supports a large part of the population. Government actions regarding improving agricultural productivity should be celebrated and developed. Growing patterns should be reviewed and product prices should be aligned. Water and energy rates must be introduced. Improving productivity will free up labor from agriculture and opportunities must be provided in rural areas. Food processing industries and contract farming should be encouraged.
Finally, the climate crisis should be part of a post-Covid-19 green economy agenda. There is an opportunity to drive a fossil-free renewable electricity system. We need an urgent resolution of the disaster that is in our distribution of power. But more generally, I agree with numerous commentators on the need for India to consider its version of the New Deal or the Marshall Plan by accelerating investments for the national investment plan. Spending front-end to build much-needed infrastructure (roads, rail, renewable energy, affordable housing, and water supply) under a new agreement would be the right antidote to the economy. Spending on infrastructure even printing money will reduce transaction costs and increase productivity. As Benjamin Franklin said: “It can be delayed, but time cannot.”
Janmejaya Sinha is President of BCG India.
The opinions expressed are personal.