Economy Revival Leads To Covid-19 Spike: Four New Priorities For Modi, Including Amnesty For ‘Our SOBs’
The focus must be on boosting investments in two crucial segments of infrastructure, and incentivising ‘Make in India’ so that we consciously engineer a shift away from trade dependence on China.
It is no coincidence that even as signs of an economic rebound are visible in many places, India’s Covid-19 cases continue to spiral.
On 2 July, the total number of cases crossed the 6 lakh mark (604,641, to be precise), doubling from half that level some 18 days ago. At current levels, the daily increase in total cases is over 3 per cent, but falling.
At a doubling rate of 15-18 days, by 1 August we will be close to 2.5 million cases, possibly second only to the US; by mid-August we will be No 1. Adjusting for population, this is still better than the US, but given our health infrastructure, it is actually a scary scenario.
On the plus side, the unstated but conscious decision of governments (both Centre and states) to focus on livelihoods rather than lives is showing results in spades. Goods and services tax (GST) collections in June were at Rs 90,917 crore – nearly thrice as much as in April (Rs 32,294 crore), the month when the lockdown was stringent.
Manufacturing PMI (purchasing managers’ index) is at 47.2 – just a hop, step and jump away from the 50 mark that signals positive growth momentum. PMI is moving away from contraction mode.
In one line, putting livelihoods over lives has improved the economy and worsened our Covid-19 case rates. We cannot know when the latter will peak. The decision to privilege livelihoods is obviously the right one, but it implies that India must now refocus its infrastructure investment strategy to meet the new challenges of rising health care costs.
And with a rogue superpower threatening us on our borders, 2020-21 and possibly 2021-22 should be seen as transformative years where the country’s investment priorities changed. The focus must be on boosting investments in two crucial segments of infrastructure, and incentivising ‘Make in India’ so that we consciously engineer a shift away from trade dependence on China.
In the remaining four years of Modi’s tenure, India has to…
1) Raise health spending three-fold from the current 1.29 per cent of gross domestic product or GDP (both Centre and states), to closer to 4-5 per cent. Seventy years of spending deficits have to be corrected in one term, even though health spending in per capita terms has doubled during the last five Modi years (2015-20), from Rs 1,008 to Rs 1,944, according to this Mint report.
No better time than Covid-19 time to do this. It is needed, and it will always stand us in good stead. Healthcare is the first infrastructure priority for us.
2) Road and rail infrastructure have to be refocused in the short run to build border and defence-related infrastructure and invest in defence capacity building inside India. The money for this can be found from shifting infrastructure expenditure from other heads, and also by forcing the Defence Ministry to start selling its excess land in urban areas.
For example, there is no reason why Hindustan Aeronautics Limited (HAL) should be occupying prime land to build aircraft or helicopters inside Bengaluru city when it could get cheap and more plentiful land well outside city limits – which may also be less vulnerable to terrorism and sabotage.
Many cantonment areas and other defence factories situated in urban areas should be incentivised to move out of cities gradually without disrupting production. The Defence Ministry should be told that any extra savings from land sales will be put in a non-lapsable fund to buy whatever armaments and hardware it wants.
3) The third investment priority should be to undercut China’s overwhelming domination of trade with India. This means incentivising more local production of crucial pharmaceutical intermediates, chemicals and electronics items, encouraging Indian startups to develop useful apps to replace Chinese and Western ones, and subsidising scale economics in products where there is both local demand and high possibilities of replacing China as the prime source of supplies.
4) The fourth focus should be subsidising jobs creation and reforms – in labour, land and agricultural laws. The goods and services tax should also be streamlined and made easier to comply with even while making evasion near impossible. These costs can be financed easily if Modi can bring himself to announce a really generous, no-questions-asked amnesty scheme for black money and illegal money hoarders.
This may seem like a reward for crooks and cronies, but here’s the reality: when dangers lurk both inside India (from Covid) and outside our borders (China), we should always side with our crooks to bail us out.
In 1939, US president Franklin Roosevelt was reportedly asked why he should be supporting a dictator in Nicaragua. He is alleged to have said, “He may be an SOB (son of a b***h), but he is our SOB.”
When India is starved of cash, we have to rely on our SOBs, even if they remain SOBs by definition.
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