The current corona virus crisis is a great shock in the global world economy. India has to formulate policies to recover from this and have to aim for both short and longer term approaches to make the economy more resilient and flexible in order to deal with the opportunities and problems of the post-Covid world.
|The Barbell Strategy|
|1. A hedge should be maintained for the worst-possible outcome while progressing step-by-step with a Bayesian updating of information.|
2. The initial lockdown was the first hedge against the virus which helped in slowing down the spread and gave the space to arrange a large-scale medical response in terms of equipment, quarantine and testing capacity.
3. The Indian economic response during the lockdown phase was oriented more towards providing a cushion to the most vulnerable segments of society and of the business sector (such as medium and small enterprises).
4. The emphasis was given on food availability cash transfers to Jan Dhan accounts, government guarantees on loans to small enterprises, moratoria and postponement of financial deadlines.
5. Policy makers have focused on ramping up the demand and now an appropriate demand stimulus with investment can be formulated. 6. Carefully calibrated monetisation should also be part of the financing mix.
Adapting to a Post-Covid World
- Focus should be to invest in two things viz. Flexibility and Resilience.
- The agriculture sector reforms free-up farmers to sell their produce as they wish while those
involved in the supply chain can invest in storage without fear of being labeled “hoarders”.
- This will allow the farm sector and farm-related industries to adapt their activities to changes in demographics, climate change, consumer tastes and so on. India has the world’s second largest stock of cultivable land and there is no reason it shouldn’t be an export powerhouse in agriculture.
- Dozens of central labour laws have been reduced to four internally consistent codes. On one hand they strengthen laws related to safety and working conditions, on the other hand they allow employers greater flexibility.
- Other recently announced reforms related to bilateral netting, and trade finance factoring are also directly aimed at improving the flexibility of the financial system.
- To have resilience, the scheme of Aatamnirbhar Bharat or Self-reliant India has been promoted. The main idea of self-reliance is that India should become more resilient by leveraging its internal strengths.
- A big effort is being made on digitisation of records, the use of online applications and the rationalisation of defunct government bodies and a similar effort needs to be there for upgrading a legal process with 36 million pending cases.
India needs to adapt to the new changing global environment and focus on the changing dynamics of the economy. The Barbell Strategy is just an immediate response measure to the difficulties faced by the coronavirus pandemic. The long term response, however, is aimed at making the Indian economy more resilient and flexible in order to deal with the opportunities and problems of the post-Covid world.