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Covid-19 caught the world off-guard. It is embarrassing. It is embarrassing that the economic distress is more acute in India than in the rest of the world, especially when India was projected by many as the emerging star. Published data indicates that GDP contracted by 23.9 per cent during the previous quarter, businesses have had to shut down, jobs are vanishing, incomes are stressed and with unfriendly taxation structures the expansion plans and investments by most businesses are on hold.
Even as factories try to shore up production with the gradual unlocking, the efforts to make labour laws more employer friendly are stressing the labour market. Consumer demand has weakened, supply chains are disrupted, the MSME and the informal sectors are faltering and, as jobs continue to dry up, consumer sentiments are tanking. The road ahead is not easy.
The future, as it is unfolding, is worrying. The VUCA concept, so familiar in the corporate world, is mild compared to the current state of the Indian economy. The Niti Aayog had released a report in 2019 that more Indians have fallen into poverty, hunger and inequality in the past two years. The Covid-19 lockdown will certainly have pushed many more into poverty. The unemployment rate in India, which averaged 9.21 per cent from 2018 until 2020, reached an all-time high of 23.5 per cent in April of 2020. It is as if India is on a mountain road and with the weather turning humid and sticky, the road ahead is expected to be treacherous. Continuing straight on the path will further destroy economic value. The option is to take a hairpin bend and change course to reach the destination. Many skilled navigators are recommending manoeuvring the hairpin bend before the road conditions get worse. The navigator must take a call.
The choice requires good judgement. If it continues straight, India will consolidate nationalist pride and achieve the religious unification of the country. The loss of economic prosperity will probably be offset in the short term by the fervour of reclaiming the past that is so deeply embedded in the complexed psyche of its people. It will take them back to the concept of destiny, uncomplaining and helpless resignation to fate. Religion is, after all, the opium of the masses. It will help if they are shackled to the past and continue hallucinating for a future, believing that the Gods will bless them for their patience. This route may appear simpler but in reality it is like quicksand and more treacherous.
The hairpin bend, on the other hand, leads to tougher terrain and is much more difficult to navigate for laymen. It requires vision, professional expertise and willingness to identify and accept weaknesses to find solutions. It leads India to a scientific temper. It embraces a dream of equality and brahminisation through economic upliftment and liberalism, questioning of religious dogmas and pursuing excellence. It radiates across five fingers -- agricultural reforms, industrial output, employment and jobs, national security and strengthening of democratic institutions.
If India aspires to be a superpower then it has to demonstrate its ability to navigate the tough terrain. It needs to evolve beyond the identity of a unified religious nation. The Covid disruption is an opportunity to get back to the basics and to focus on economic prosperity which every individual needs and aspires towards.
Subroto Roy, who studied economics at the Delhi School of Economics before becoming an RBI banker and then an entrepreneur, says: “We have to return to the Keynesian era of welfare economics. India is a young nation of 120 crore people who need food, work and income. In the post-Covid environment, the focus must be to ensure that everyone is gainfully employed as propagated by Keynes. The need is to create employment and put money in the hands of the people. If we rely only on the free market mechanism that insists on economic efficiency then companies will want to reduce liabilities to protect profits and return on their investments. The post-Covid situation will be exceptional and the government has to play a crucial role.”
It is, after all, the leadership tasked with steering the country to economic prosperity.
The Covid Syndrome and its impact is perhaps the biggest crisis of the century and has thrown up several faultlines that we have ignored until now. Unless corrected, India is headed to a typical situation that the erstwhile BIFR would have classified as ‘Sick Business’ and in need of a turnaround strategy. A turnaround situation is amongst the toughest challenges that businesses face -- often, because they refuse to acknowledge that they need help and the remedial action keeps getting postponed. For a turnaround strategy to be successful, it presupposes an acceptance that the business has begun to self-destruct.
Turning around a disrupted business is far more difficult than accelerating a successfully running business. India is facing all the typical challenges of a turnaround situation -- dropping revenues (GDP), insufficient profits (growing deficit), cultural dissonance, demoralised and complexed employees (weakened institutions) amongst others -- and requires clear vision and policies that cut through clutter to only focus on making the business healthy. The crisis is being accelerated by the systematic dumbing down of society which, in turn, is creating tunnel visions and discourages critical thinking. We seem to have switched off our minds as though on a roller-coaster ride in an amusement park, paying for the thrill and novelty, mistaking it for a momentary thrill and expecting things to be normal when the ride stops. We need to quickly get off the ride and accept reality. There is a growing gap between the euphoria of hope and the ground reality. The only ideology that will work will be the ideology of economic welfare.
India needs to reevaluate its two routes to becoming a superpower. Either continue on the path of systematic social change at the cost of the economy or take the hairpin bend and focus on economic revival and social stability. Navigating the hairpin bend will be tough but if India does not course correct now then the revival will be even tougher. India will have been caught in the turnaround trap.
Himanshu Manglik is founder and president, WALNUTCAP Consulting LLP. The views expressed are of the author