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Thursday, May 06, 2021

Disruption of global supply chains during pandemic creates tremendous opportunities to reindustrialise India

Over the last 70-plus years, India has frittered chances to become a centre of manufacturing on the scale of other Asian countries.

Written by Meghnad Desai |
Updated: May 3, 2020 8:03:09 am
Coronavirus, Maharashtra coronavirus, maharashtra lockdown, maharashtra industrial production, uddhav thackeray, India lockdown Restoration will be the urgent step which will take the economy back to a growth path. (Representational Image)

As and when it is over and we are out of the lockdown, the first desire everywhere will be to return to what we had, the Old Normal, regardless of its many problems. Everyone will need to feel that the dreaded epidemic has been eliminated and they can live again as they used to.

This is Repair. It involves helping many groups of people whose lives have been severely disrupted. All the people laid off due to the economy being shut down will need help with resuming their old life. Governments at the state level cannot help as they have been hit by loss of revenue due to the shutting down of alcohol shops and the drop in petrol sales, two sturdy sources of revenue. Only the Centre can help here.

The Old Normal was a phase of growth recession. The Budget had already acknowledged the need for a fiscal stimulus. Now, as all other economies are doing, a massive reflation will be necessary to accomplish the tasks of repair, restoration and renewal. Restoration will be the urgent step which will take the economy back to a growth path.

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The most needy group is the urban workers in the informal sector, especially the migrants. These migrants have returned to their native areas lately with help from their ‘original’ states. Now to bring them back should be the Centre’s task as far as financing is concerned. Ideally, the Centre should compensate the states which have paid to bring ‘their’ migrants back home.

The next task is to build a welfare state suitable to Indian conditions. Modi 1.0 began the task of providing health care, financial inclusion, digital access. MUDRA provided financial help for businesses run by women, Dalits, tribals. The need now is to address the biggest gap left by 70 years of economic policy — the large pool of the unemployed. The need is for a temporary unemployment benefit scheme for up to 100 days a year similar to the MNREGS so that urban workers do not suffer during short periods of unemployment. This will establish parity between rural and urban poor.

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Modi 1.0 also provided for rural housing on a large scale. The plight of migrant workers points to the need for urban housing. A massive programme of urban housing at affordable rents for eligible working families is needed across the large and small cities. Dharavi has been much romanticised in books and films. It should be a blot on Mumbai and India. The advantage of housing as a public infrastructure investment is its capacity for job creation as well as tackling homelessness. Given the large unfulfilled demand, this will have to be a multi-year investment project.

This housing programme will help resume growth and sustain it over a long period. But there is a need to renew industrial growth. Over the last 70-plus years, India has frittered chances to become a centre of manufacturing on the scale of other Asian countries. This was due to labour laws which protected the small formal sector. This has led to the overhang of unemployment. The disruption of global supply chains during the pandemic creates tremendous opportunities to reindustrialise India. No previous government has been equal to this challenge. Modi 1.0 launched Make in India. Now is the chance for renewal.

This article appeared in the print edition of May 3, 2020, under the name Need to renew industrial growth’

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