S Gurumurthy was the speaker at the webinar with opening remarks by Prafulla Ketkar (top right) and Q&A session moderated by Hitesh Shankar (bottom right)
A webinar on 'Rebuilding Indian Economy: Challenges and Opportunities' was organised by Organiser and Panchjanya Weeklies on May 11, 2020 at 5.00PM in collaboration with various national media houses in which Shri S Gurumurthy, Editor of Tughlak, Economist and Writer on Economic and Political Issues spoke on the topic.
In his opening remarks Editor of Organiser Shri Praful Ketkar said no society or sector is immune from the impact of the Global Pandemic of COVID19 which emerged from China. But after the loss of lives, livelihood through revival of economy is the biggest concern. As the lockdown continues to severely impact enterprises and workers around the globe the COVID-19 pandemic continues to severely affect not just the public health but also caused unprecedented disruptions to economies and labour markets. Everyone is concerned about, what are the challenges for the Indian economy? Are they going to be temporal or long-term? Are we in a position to face the challenge and which sectors are likely to face the greater impact? These and some more similar questions are haunting every one of us as both the models of both Global Capitalism and Communism have failed to give the sustainable employable options for development is a foregone conclusion which is further underscored during the COVID19 crisis. With China losing the credibility of global manufacturing hub, India has got the golden opportunity to gain the similar pre-eminence. To answer questions on if India is in a position to take advantage of the changing global dynamics, the right path for India and the world in the long run and other related questions, we have S Gurumurthy who is the best person to talk on the subject.
S Gurumurthy speaking after his introduction said that he was more into understanding the model in India rather than fitting a model to India. COVID19 like situations bring about a total change in perception, he said. There are 3 things that are the key outcomes of this crisis. They are:
1. The days of global one size fit all model for the world is over
2. Ever shortening shelf life of the paradigms - colonialism, mercantile, Marxism, globalisation, have all collapsed. There are value systems that transcends time which we must cherish and recognise.
3. Globalisation was never a durable idea which was impractical from the beginning. Economists thought so and ran the world. WTO an outcome of this globalisation model, is in ICU today. Dispute settlement mechanism has ceased to exist. Global supply-chain model which put dictatorships like China in an advantageous situation has virtually come to an end. There cannot be an understadning with a dictatorship and a democracy. Global deals can only be with two democracies and not with any dictatorship. It has to be compatible with mutual benefits.
Putting the above 3 together, there will be a new global-political-economic order after Covid19 as compared to what existed before the pandemic. Earlier, to be part of this so-called 'globalised' world, one have to give up their local culture, philosophy, way of life and only then they could have been part of this global order. G20 nations declaration that one-size-fits-all does not work and we need localised solutions. Each country needs its own model.
Way back in 2010, the UN itself had observed that one-size-fits-all would not work. Niti Aayog was the first to say that one-size-fits-all does not work and we have to have a model that works for us. One-size-fits-all was theoretically discarded by the Niti Aayog but economic institutions, Bureaucrats, are continuing with the same old western model. This has put India in a very disadvantageous position for long. For example, even today India cannot print its own currency. Simply put Rupee gets created only when dollar comes to India. Classical economists never solved the 1930s economic depression hence we should be wary of them.
On the need for Swadeshi model
Stock Market listed companies contribute only about 5% of the GDP. It is the small companies and MSME sector which contributes 50-60% of our GDP. But many companies have been declared as un-eligible for loans due to wrong norms being followed. India is following wrong prudential norms. Banks are unable to lend money when money has to be lent to companies. After 5-6 months bottom of the pyramid will start to turnaround. We are a family based country. But elite business and lifestyle will take a hit. Indian society has been able to manage the crisis just like it did during the demonetization. Ours is a society based on trust unlike the western countries.
When people ask if Swadeshi model is an alternative, I say it is a functioning model. It is already working with communities and families running businesses all over India. We need to have a re-look. Because of the social cohesion, family support we have been able to weather the storm but our economic thinking is not in tune with the Swadeshi model. This has to change. The world itself if going towards the protective model.
COVID19 shock has made us realise that we need to do something different from what we have been doing thus far. Nation standing on its own strength to create its own money instead of depending on someone else to loan us. India has been a moderate culture, moderate consumption, moderate in lifestyle, etc. Small and medium entrepreneurs will rise in India and will help India rise economically.
Subseqeuetly, S Gurumurthy answered a host on questions posed by the viewers in a Q&A session moderated by Shri. Hitesh Shankar, Editor of Panchjanya. Following are excerpts of the same.
Q. How successful has Make in India (MII) been? What can the govt do to make MII work better?
Ans. Make In India will succeed only if there is sufficient production for our local industries. We were able to ramp up mobile phone production and become a automobile hub of the world by increasing duties. We have to come up with our own model and not by serving global supply-chain models. MII was a great concept but not adequately supported by policy framework.
Q. How to change mindsets of Indians towards buying gold? How important is Gold for India?
Ans. You have to use gold to become a global power. There is an estimated 25,000-40,000 tons of gold. India is the richest country in terms of such liquid assets. Govt should get this gold by way of voluntary contributions from people with one time immunity/exemption. This gold will transform into foreign exchange and can change the outlook of India. We have to think about gold in the Indian way and not the western way.
Q. Will traditional saving behavior will help Indian economy now? What will help us the most: gold, foreign exchange or share market?
Ans: Foreign exchange will depend on how the world will contain china. Gold has been part of our lives. Not many people are into share markets, derivatives and very few people understand these instruments. Our traditional saving behavior will bail us out as always.
Q. Assuming that proposed Swadeshi model will be more bottom-up, how to address issur of employment of migrants? How can we increase manufacturing in India without resorting to policy of globalisation?
Ans: Entire world is thinking that they want to have something safe not just cheap. China provided cheap option but now everyone is thinking of a better alternative. Total migrants labour in India is about 30 crores while those who move inter-state is about 3.3 crores. Only 15-20 lakhs want to go back home. Migrant labor is not one homolithic group. Only those migrant labor who have no facilities are moving back. Business models which provide better facilities to migrant labor will evolve taking their interests into considerations. Migrant labor will not remain cheap in the coming days and we have to be aware of this.
Q. What should we do to boost our export?
Ans: Export strategy has to be in two parts. We have to go for more technology exports. Many brilliant people are used only for body shopping. Indian company Zoho reelased a 4G chip and everyone wondered how this was possible for a Indian company. We have the capacity to achieve higher but we are more interested in day to day affairs. If we dedicate, 3-4 years towards building our technical capacity, we will be leaders in making techno-products in the future. Nanotechnology is another area for India for the future.
Q. How will the post-Covid scenario influence education, small businesses and the travel industry?
Ans: Small businesses will settle down in 4-6 months. Travel industry will take a hit due to lessened travel, stay, personal interaction, physical distancing, etc. Cinema and travel have to re-invent themselves. Malls will find it difficult to survive but small businesses will recoup soon.
Q. How long will subsidy and welfare model go on?
Ans: Subsidy model will go on for a long time and we have to live with it. However, the subsidy we give is nothing compared to what countries like US give to its citizens. There can be a efficient model of transfer of this subsidy.
Q. How will rural economy revive in the post-COVID scenario?
Ans: Link between urban and rural economy should be more defined. Rural economy should be kept away from urban economy. Urban economy which has huge environmental costs, law & order costs, is not the ideal for Rural economy. Rural economy should be independent and evolve on its own. Govt should support it and recognise buying from rural industries directly. We need to understand that being rural does not mean underdeveloped and we have to emerge out of such notions.