COVID-19 has impacted individual lives and collective communities, making it more urgent than ever to rethink the way our economy runs and the aspects it chooses to focus on. The macroeconomic aspects set the stage for microeconomics, since the latter can be geared according to the former. But macroeconomics can be counter-intuitive and needs to be understood before the other aspects of the economy can be discussed. This is also true in the context of a lockdown. In his book Indian Economy’s Greatest Crisis, Arun Kumar bases his analysis of macroeconomics on the understanding of what happens to variables like incomes, investments, savings, exports, imports and the growth rate of the economy.
In India, the lockdown was substantially loosened June onwards; given the state and spread of the virus in the country, this relaxation came at a time when the pandemic was not brought sufficiently under control. The number of tests was also far below the adequate or ideal number. While some countries have completely controlled the pandemic, it is still unlikely that it will be brought under control globally anytime soon. The economies of different countries have also been affected in different ways under their prospective lockdowns. China was initially reported to have ramped up production after the lockdown ended. In the first quarter of 2020, the rate of growth of the Chinese economy slipped from about +6 per cent in the previous quarter to -6.8 per cent. But the brutal lockdown in the Hubei province ensured that the country could overcome the virus faster. This also ensured the lockdown could be relaxed quickly in the country. As a result, in the second quarter, the economy recovered to +3.2 per cent growth.
Indian Economy’s Greatest Crisis||Arun Kumar
According to Arun Kumar, the situation around the world now is actually worse than it was during the depression of the 1930s or during the world wars. A major difference between a situation of war or recession and that of a pandemic is that during wars or recession, while aspects of the economy might be affected adversely in significant ways, production does not stop. This however is not the case during a pandemic. In a lockdown, production cannot take place, so both supply and demand collapse.
Simultaneously, workers get laid off and their incomes fall, and most businesses close down and their profits fall and even turn into losses. The result is that a large number of people lose their incomes and, therefore, demand falls drastically. This is a unique situation and past experiences of dealing with crises have not been useful in predicting what will happen in the future and how one should deal with the present situation. Therefore, according to Kumar, we need a new understanding of and strategy for the macroeconomics of the nation. The macro-variables—output, employment, prices, savings, investments and foreign trade—need to be reformulated and studied in the light of the changed situation.
In such a situation, the economy goes through three stages. From the normal phase, it declines during a lockdown, but even with the easing of lockdown restrictions, it is unlikely that the economy will immediately bounce back to the pre-pandemic phase. Due to continued wage cuts and unemployment, demand is likely to remain low. Many sectors of production will suffer and take long to revive, businesses will fail and the cost of doing business will rise. It is important that India learns from the trajectory of the economies of China and the US. The Indian economy, like the US and Chinese ones, is likely to recover slowly, especially due to its large unorganized sector which has taken a massive hit despite being at the helm of services which can easily be consider essential.
It remains to be seen how recovery and rehabilitation takes place in India, what the role of private businesses will be, and how the government will handle the new few years, which would end up becoming crucial in defining the trajectory of the country in the near future.
With the Union Budget under discussion, it is a good time to visit some essential reads that examine the socioeconomic landscape of the country. Here is a list of critical reads to keep things in perspective this Budget season:
Economics Without Tears||Ashok Sanjay Guha
Economics without Tears
by Ashok Sanjay Guha
If you are a layman wondering what economics is all about or a freshman student of the subject, this is a book you cannot afford to miss. Starting from the first principles and stripped of mathematics and almost all jargon, it introduces you to all the basic concepts of economic theory as well as to some of its more surprising depths.
Economics pervades every aspect of our lives and our world. This book shows how anyone can acquire an understanding of its key principles while finding the exercise not only an exciting intellectual adventure but also great fun.
Day to Day Economics||Satish Y. Deodha
Day to Day Economics
by Satish Y. Deodhar
The economy isn’t just for the economists to debate on. All of us are affected by its ups and downs—global recession, rise in interest rates, or hike in food prices. But do we understand the principles at work and how and why they really affect us? Day to Day Economics is an enjoyable, accessible, and extremely user-friendly book that explains the modern day Indian economy to the layperson. In this relevant book, Professor Deodhar explains the role of the government and its involvement in different aspects of the economy; the need for the RBI and its functions; and how taxes, stock markets, and recessions work. Day to Day Economics will help you go beyond the facts and figures in the budget and connect the trends to your daily life. As with all IIMA Business Books, it comes illustrated with numerous Indian examples and case studies making this the ultimate rookie’s guide to the Indian economy.
Coffee Can Investing||Saurabh Mukherjea, Rakshit Ranjan, Pranab Uniyal
Coffee Can Investing
by Saurabh Mukherjea, Rakshit Ranjan and Pranab Uniyal
Most people invest in the usual assets: real estate, gold, mutual funds, fixed deposits and stock markets. It’s always the same four or five instruments. All they end up making is a measly 8 to 12 per cent per annum. Those who are exceptionally unfortunate get stuck in the middle of a crash and end up losing a lot of money.
What if there was another way? What if you could make not 10 not 15 but 20 per cent compound annual growth rate (CAGR) on your investments? What if there was a way to grow your money four to five times whilst taking half the risk compared to the overall market?
Bestselling author of Gurus of Chaos and The Unusual Billionaires, Saurabh Mukherjea puts his money where his mouth is. Saurabh follows the Coffee Can approach to high-quality, low-risk investing. His firm, Ambit Capital, is one the largest wealth managers in India which invests with this approach and delivers stupendous returns. In Coffee Can Investing, Saurabh will show you how to go about low-risk investments that generate great returns.
Demonetization and the Black Economy||Arun Kumar
Demonetization and the Black Economy
by Arun Kumar
On 8 November 2016, the prime minister announced the immediate cancellation of all Rs 500 and Rs 1000 denomination notes, wiping out 86 per cent of the currency in circulation. This move, it was claimed, was made to wipe out corruption, deter the generation of black
money, weed out fake Indian currency notes and curb terrorism. India’s well-functioning economy went into a tailspin. Businesses, especially in the unorganized sectors, came to a grinding halt. India continues to grapple with the effects of this move. The black economy has not been dented; counterfeiting and terrorism continue; the credibility of the RBI, banks and currency is damaged; the accountability of the Parliament and the prime minister has been eroded; and the social divide has widened. There have been many arguments and counter-arguments from both sides, but they have missed the complete picture. Demonetization and the Black Economy lucidly explains the story of demonetization along with its effects on the economy.
Reviving Jobs||Santosh Mehrotra
Reviving Jobs
by Santosh Mehrotra
Every country in the world experiences the benefits of its demographic dividend, a period that comes but once in the life of a nation-when the share of the working-age population is larger than the non-working-age share. It has the potential to make a country progress towards higher incomes and development. But it can also become a nightmare if there aren’t enough jobs.
Since 2012, the number of youth entrants into the labour force has increased at an accelerating pace, while the number of jobs created has decreased. This situation might become graver between 2020 and 2030 as the labour force swells further. Reviving Jobs, the third volume in the Rethinking India series, offers suggestions on how India can make the best use of the remaining period of its demographic dividend-any failure to do so will cause millions to suffer in poverty for decades to come.
Leapfrogging to Pole-vaulting||RA Mashelkar and Ravi Pandit
Leapfrogging to Pole-vaulting
by RA Mashelkar and Ravi Pandit
An exhilarating manifesto for the future, this book convinces readers to make the shift from reactive leapfrogging to proactive pole-vaulting through radical transformation. The unique ‘3-4-7 framework’ demonstrates how a paralysing mass of problems can be brought down to a formidable formula, thus making every problem solvable, no matter how big and complex. The book is dotted with inspiring case studies that can instil confidence in people from across the world to put this framework into practice for assured success.
Dr Mashelkar and Mr Pandit ably show in this must-read book that-as an interplay of global issues constantly raise the bar for innovation today-there has never been a better time to use our learnings to pole-vault over those bars into a new future!
Some Sizes Fit All||Akhil Gupta
Some Sizes Fit All
by Akhil Gupta
An oft-repeated dictum every time a company fails to replicate its past successes when introducing a new product or entering a new market is that one size does not fit all. Business gurus advise that every new situation, market and environment calls for a fresh approach and requires ‘unlearning’ what one might have learnt elsewhere, even if that had met with great success. While this statement may appear to be obvious, it is often quoted out of context. The fact is that certain fundamentals of business-irrespective of line of business, geography or scale-are universally applicable. Some Sizes Fit All is an attempt to explain these fundamental pillars for any kind of business. An authentic and lucid presentation of management concepts and practices-which Akhil Gupta has tried and tested first hand through his illustrious career-this is a must-read for anyone trying to build a robust and financially sound business.
India Unbound||Gurcharan Das
India Unbound
by Gurcharan Das
India Unbound is the riveting story of a nation’s rise from poverty to prosperity and the clash of ideas that occurred along the way. Gurcharan Das examines the highs and lows of independent India through the prism of history, his own experiences and those of numerous others he has met-from young people in sleepy UP villages to chiefs of software companies in Bangalore. Defining and exploring the new mindset of the nation, India Unbound is the perfect introduction to contemporary India.
It is 2030. India is among the world’s top three economies. All Indians use advanced technology to either do their job or get their job done. All Indians have access to quality jobs, better healthcare and skill-based education. Technology and human beings coexist in a mutually beneficial ecosystem. This reality is possible. It is within reach. With Bridgital. In this ground-breaking book, N. Chandrasekaran, chairman of Tata Sons, presents a powerful vision for the future. To the coming disruption of artificial intelligence, he proposes an ingenious solution, where India is perfectly positioned to pave a unique path from the rest of the world. Instead of accepting technology as an inevitable replacement for human labour, India can use it as an aid; instead of taking them away, AI can generate jobs.
India Grows At Night||Gurcharan Das
India Grows At Night
by Gurcharan Das
Indians wryly admit that ‘India grows at night’. But that is only half the saying: the full expression is: India grows at night . . . when the government sleeps’, suggesting that the nation may be rising despite the state. But wouldn’t it be wonderful if India also grew during the day — in other words, if public policy supported private enterprise? What India needs is a strong liberal state, but, says Das, achieving this will not be easy, because India has historically had a weak state and a strong society.
Of Counsel||Arvind Subramanian
Of Counsel
by Arvind Subramanian
For nearly four years, Arvind Subramanian stood at the centre of economic policymaking in India. Through the communication of big ideas and the publication of accessible Economic Surveys, he gained a reputation as an innovator. Through honest pronouncements that avoided spin, he became a figure of public trust. What does it entail to serve at the helm of the world’s fastest-growing economy, where decision-making affects a population of more than a billion people?
In Of Counsel: The Challenges of the Modi-Jaitley Economy, Arvind Subramanian provides an inside account of his rollercoaster journey as the chief economic advisor to the Government of India from 2014-18, succeeding Raghuram Rajan as captain of the ship. With an illustrious cast of characters, Subramanian’s part-memoir, part-analytical writings candidly reveal the numerous triumphs and challenges of policymaking at the zenith, while appraising India’s economic potential, health and future through comprehensive research and original hypotheses.
Beyond 2020||A.P.J. Abdul Kalam and Yagnaswami Sundara Rajan
Beyond 2020
by A.P.J. Abdul Kalam and Yagnaswami Sundara Rajan
India 2020 is about to become a reality. Are we ready?
In 1998, Dr Kalam and Y.S. Rajan published the now iconic India 2020, a vision document for the new millennium that charted how India could become one of the top five economic powers in the world by 2020. Now, it is time to take stock of how much India has achieved and what lies ahead. In many ways, India’s growth story in the twenty-first century has been hamstrung by missed opportunities and slowdowns in project execution; but it has also been marked by new opportunities and emerging technologies that make faster and more inclusive growth viable. A renewed policy focus is now needed for agriculture, manufacturing, mining, the chemicals industry, health care and infrastructure to invigorate these sectors and boost economic growth, argue Kalam and Rajan. Alongside, education, job creation, emerging technologies, biodiversity, waste management, national security and the knowledge economy are some of the other vital areas that we need to build now that we have arrived beyond 2020.
Emerging India||Bimal Jalan
Emerging India
by Bimal Jalan
Bimal Jalan has closely followed the path of India’s economic policies across its changing trajectories, from before the time the economy was liberalized to the present. The pieces in Emerging India study the relationship between political and economic reforms and inclusive and incremental growth.
How to Read Amartya Sen||Lawrence Hamilton
How to Read Amartya Sen
by Lawrence Hamilton
This book offers a much-needed introduction to Amartya Sen’s extraordinary variety of ideas. Lawrence Hamilton provides an excellent, accessible guide to the full range of Sen’s writings, contextualizing his ideas and summarizing the associated debates. Hamilton reconstructs Sen’s critiques of the major philosophies of his time, assesses his now famous concern for capabilities as an alternative for thinking about poverty, inequality, gender discrimination, development, democracy and justice, and unearths some overlooked gems. Throughout, these major theoretical and philosophical achievements are subjected to rigorous scrutiny. How to Read Amartya Sen is a major work on one of the most influential economists and philosophers of the last few centuries. It will be illuminating for readers keen to understand the breadth of Sen’s vision, and an invaluable resource for scholars, policy makers and global activists.
The Indian Rennaissance||Sanjeev Sanyal
The Indian Rennaissance
by Sanjeev Sanyal
One thousand years ago, India was at the height of its power, influencing the world with its ideas and trade. Now, ten centuries later, India’s recent economic performance is once again attracting world attention as the country re-awakens not just as an economy but as a civilization.
In The Indian Renaissance: India’s Rise after a Thousand Years of Decline, Sanjeev Sanyal looks at the processes that led to ten centuries of decline. He also examines the powerful economic and social forces that are working together to transform India beyond recognition. These range from demographic shifts to rising literacy levels and, the most important revolution, the opening of minds and changed attitude towards innovation and risk-fundamental, if India is to take advantage of the twenty-first century.
In Service of the Republic||Vijay Kelkar, Ajay Shah
In Service of the Republic
by Vijay Kelkar and Ajay Shah
As a $3-trillion economy, India is on her way to becoming an economic superpower. Between 1991 and 2011, the period of our best growth, there was also a substantial decline in the number of people below the poverty line. Since 2011, however, there has been a marked retreat in the high growth performance of the previous two decades. What happened to the promise? Where have we faltered? How do we change course? How do we overcome the ever-present dangers of the middle-income trap, and get rich before we grow old? And one question above all else: What do we need to do to make our tryst with destiny?
As professional economists as well as former civil servants, Vijay Kelkar and Ajay Shah have spent most of their lives thinking about and working on these questions. The result: In Service of the Republic, a meticulously researched work that stands at the intersection of economics, political philosophy and public administration. This highly readable book lays out the art and the science of the policymaking that we need, from the high ideas to the gritty practicalities that go into building the Republic.
India’s Long Road||Vijay Joshi
India’s Long Road
by Vijay Joshi
India has been the subject of many extravagant predictions and hopes. In this powerful and wide-ranging book, distinguished economist Vijay Joshi argues that the foundations of rapid, durable and inclusive economic growth in India are distinctly shaky. He lays out a penetrating analysis of the country’s recent faltering performance, set against the backdrop of its political economy, and charts the course it should follow to achieve widely shared prosperity.
Joshi argues that for India to realize its huge potential, the relation among the state, the market and the private sector must be comprehensively realigned. Deeper liberalization is very necessary but far from sufficient. The state needs to perform much more effectively many core tasks that belong squarely in its domain. His radical reform model includes a fiscally affordable scheme to provide a regular ‘basic income’ for all citizens that would speedily abolish extreme poverty.
An authoritative work of tremendous scope and depth, India’s Long Road is essential reading for anyone who wants to know where India is today, where it is headed, and what it should do to attain its ambitious goals.
By now it is more than evident that the pandemic was different for the rich and the poor. Arun Kumar’s stellar research in his book Indian Economy’s Greatest Crisis helps us understand the real cost of the pandemic and those who have had to bear it.
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The Plight of Labour and Migrants
…The pandemic has brought into the open the terrible plight of the unorganized sector and its workers. They are the marginalized in society and policy seldom caters to their issues. They could not cope with the lockdown and now continue to suffer even with the lockdown eased under business pressure. …Without adequate testing, a large number of people will get infected as lockdown is eased. For herd immunity, if 60 per cent get the disease and develop immunity, 5 per cent of those infected will be serious, requiring hospitalization. That would be 4 crore people and most of them will be workers forced to go to their place of work. The poor are malnourished and don’t have the resources to get tested or get proper medical treatment. Even if only 2 per cent die, and this number will be larger if India’s weak medical system fails, 1.6 crore people will die—and most of them will be the poor.
Uncivil Conditions That the Urban Poor Live In
… Why was our medical system so weak and testing inadequate even months after it became clear in March that the disease would spread? It is a reflection of a political system and an executive that has hardly ever prioritized the welfare of the vast majority of the people it is supposed to serve. They are the residual, or the one’s marginalized in policymaking. If some benefits trickle down to them, that is well and good. If the poor rise above a given poverty line, the system claims it an ‘achievement’. The elite make it out that the poor ought to be grateful for the gains they have made since Independence.
The ‘achievement’ hides the uncivil conditions in which the poor live, especially in urban areas, and this now stands exposed thanks to the pandemic. They live in cramped and unhygienic slums, with little access to clean water and sanitary conditions. How are they to observe the lockdown and practise physical distancing? They live cheek by jowl and share toilets and water tankers. They have little savings, so they have to earn and spend on a day-to-day basis. With the pandemic, their earnings have stopped and they have turned destitute—this highlights the precariousness of their lives. One shock and they slip below the poverty line; one major illness in the family and they fall below the imaginary poverty line (Kumar, 2013). They had always been poor, but for policymakers, ‘progress’ was that they had jumped above the poverty line (APL).
Cause of the Mass Migration
…Industry and ruling elites capitalize on the poor working and living conditions of labour to lead their own comfortable lifestyle and make higher profits. Consequently, neither the state nor businesses grant workers their rights. For instance, a large number of workers do not get a minimum wage, social security or protective gear at worksites. They mostly have no employment security; often their wages are not paid in time; muster rolls are fudged; and there is little entitlement to leave. Given their low wages, they are forced to live in uncivilized conditions in slums. Water is scarce, and drinking water more so. Access to clean toilets is limited and disease can spread rapidly. There is a lack of civic amenities such as sewage. Their children are often deprived of schools and playgrounds.
Indian Economy’s Greatest Crisis||Arun Kumar
Now, using COVID-19 as an excuse, state after state has reduced even what little security was available to workers, by eliminating or diluting various laws to favour businesses. In Uttar Pradesh, at least fourteen of the Acts have been changed, such as the Minimum Wages Act, 1948, the Industrial Disputes Act, 1947, and the Payment of Bonus Act, 1965. It’s the same thing in Madhya Pradesh and Punjab. The plea is that this is needed to revive economic activity. The chief minister of Madhya Pradesh has said that this will lead to new investment in the state (Singh, 2020).
…In India, workers are characterized as either organized or unorganized. Those in the former category work in larger businesses and have some formal rights (which are being diluted) but, often, they find it difficult to have them enforced. Increasingly the big and medium businesses are employing contract labour provided by labour contractors from the unorganized sector, rather than permanent workers. Businesses pay contractors, who then pay the labourers part of the money they receive. So businesses claim that they are paying the minimum wage but the workers aren’t getting it.
In a scenario where even the minimum wage is inadequate for a worker to lead a dignified life, what chance do those receiving even lesser stand to lead a civilized existence?
Businessmen who now talk of livelihood have never shown such concern for the workers in the past. They have paid low wages to earn big profits. How else, at such a low level of per capita income, could India have had the fourth largest number of billionaires in the world? Clearly, most of the gains of development over the past seventy-five years, more specifically since 1991, have been cornered by businessmen. They have made money not only in white but also huge sums in black (Kumar, 1999).
Businesses have manipulated policy in their favour—before 1991, by resorting to crony capitalism, and since then by bending policy in their favour, curtailing workers’ rights and pressurizing the government to weaken its support to the marginalized sections on the plea that the markets be allowed to function. Now using COVID-19 as the shield, workers’ rights are being further curtailed. No wonder, then, that the country collects only about 6 per cent of the GDP as direct taxes despite huge disparities. The burden of taxation falls on the indirect taxes, such as GST and customs duty, paid by everyone, including the marginalized.
The lesson to be learnt from the pandemic is that India has not been able to cope with it because of the adverse living conditions of the majority of its people, namely the poor. Now labour laws are being diluted (such as increased working hours and reduced wages), which means a worsening of their living conditions (Kumar, 2020g). This will ensure that the country will flounder again when the next pandemic strikes. The tragedy is that India is today headed towards societal breakdown for short-term gains of some sections of society. But it appears that a rethinking of the prevailing ruling ideology always comes at a heavy cost.
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Indian Economy’s Greatest Crisis is a detailed and insightful work examining the various fault lines of the Indian social fabric and how they’ve been affected by the pandemic.
