May 26, 2021 6:13:12 pm
As the country reels from the massive second wave of the pandemic, economists, businessmen and the government are worried. The economic rebound that everyone was betting on has suddenly become somewhat distant. The projected growth figures for our economy are being revised. The governments, both in states and at the Centre, are trying to minimise economic disruption and the resultant hardship by customising lockdowns according to local situations. The RBI, too, is chipping in by opening its purse strings. Everyone is determined to protect our economy from a meltdown that we cannot afford. It is important to protect livelihoods in these challenging times. Experts are already talking of a projected third wave. Many countries have experienced a third wave and lengthy lockdowns. But, for a densely populated country like India, already struggling with a high rate of infections, the effects of a third wave can only be imagined.
In such a scenario of uncertainty, all efforts are needed to ensure that our economic engines keep running. But the lockdowns, even if not as strict, are pointing to a contraction in consumption which is bound to affect production at some point if demand does not come back strongly. Hence there’s a need for an effort to ensure that demand does not contract, or in other words, the economic bubble does not shrink. Here, a few learnings from the two lockdowns are important. One, demand will not come back evenly in all sectors. For example, at this point, demand in pharma, edutech, IT and other sectors that are useful in coping with the effects of the pandemic is consistently high whereas demand in transportation, automobiles, construction\housing and some other sectors is depressed. Discretionary spending has disappeared affecting many businesses. When the lockdowns are lifted, there will be some pent-up demand that will be expressed. Whether this will be expressed consistently as in pre-pandemic times or not is the question. Further, the economic hollowing of potential consumers due expenditure incurred during hospitalisation of family members and its psychological aftermath will have its own impact.
Therefore, the new normal that all are talking about once we overcome the virus through vaccination and other measures is more a challenge of behavioural modelling than a simple matter of linear economic logic. Stacked against multiple waves of the virus, pump priming tactics may end up wasting precious resources if not properly targeted. The pandemic is changing our worldview and our consumption behaviour in not so subtle ways. The repeated waves are reinforcing this behavioural change. Whoever went back to “normal” pre-pandemic behaviour after the first wave is now a chastised and circumspect person. The experience of the pandemic has made deep grooves in the human psyche and effected changes at the level of perception. Some are able to articulate it, some are not. But everyone on this planet is affected, without exception. Since our perception is how we define our world, this alteration in our perception is going to have far-reaching consequences.
In the near future, considering that the virus is still in circulation widely and is mutating frequently, a large part of our resources will be directed at dealing with it. The virus has also exposed the weakness of our economic bubble and how easily it got punctured. Therefore, as we rebuild our economies, we must make sure that we construct an economic structure that has more resilience built into it, a bubble that is not easily punctured.
Such an economic system should take into account the behavioural changes that the virus has engendered. The future economy will be heavily affected by these shifts in our behaviour which are not only affecting our consumption behaviour but also our perception. Our targeting of resources should have two pivots. One, building systems that ensure a sense of comfort to the citizen at the personal level. This would include revamped health systems, investing in related research, use of technology to eliminate or minimise disruptions etc. The other pivot would be investing in sectors that are in sync with what our evolving perception is pointing towards.
Objectively, that would mean not only an understanding of evolving consumption patterns which drive investment, but also an appreciation of the consequences of those decisions. In other words, a feedback loop that allows us to peer farther into the future. This will have to be done at a macro level in a sensitive and aware manner to provide guidance. We are at a stage in human evolution where we will probably soon see a lot of industries going into the sunset while many new ones, more in tune with the times, come up. We need to take charge of this process to minimise future shocks. Let us consciously design the new normal.
The author is a serving IPS officer. Views are personal
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