Modi's calculative and calibrated- C2- strategy!

-Brig G B Reddy (Retd)  

 

In his address to the Nation, Modi announced a Rs. 20 lakh crores or trillion rupee ($264bn) economic package to help the country to revive economy. Majority did not expect such a bold decision, that is, nearly 2/3rd of annual Central budget as stimulus package.

 

But, the greatest concern would be “how to tame the corruption” that such a large stimulus package would result in. The inherited lineage of corruption is well known. With such large funds allocation, surge in corruption is inevitable. India is a witness to large scale misappropriation and graft in the aftermath of floods, earthquakes and Tsunamis in the past that failed to reach the beneficiaries. Even during wars, there have been many examples of corruption. Abhijit Banerjee and Ms. Gita Gopinath have already suggested stimulus funds to adopt and implement the mechanisms of “Direct Benefit Transfers) and “Targeted Stimulus”. With great funding comes great responsibility. Greater transparency and civil society vigilantism is absolute necessity.

 

 

 

Sans bias, Modi’s speech was inspirational for “Young aspirational” India. But, will the nation rise to the occasion to overcome the unimaginable economic downslide or will politics takes center stage to derail Modi’s plan? Modi and India’s success in winning the war against Coronavirus and economic recession will largely depend upon effectiveness of grass root level implementation. Well before address to the Nation, Modi had given enough indications that economic revival plan will be “Calculative and Calibrated”. Rightly so, Modi’s focus on dual front: reducing transmission rate of Coronavirus; and revival of economy – supply and demand side.

 

Inspired by the 'Self-reliant India campaign', Modi’s economic package is explicit: “for our cottage industry, home industry, our small-scale industry, our MSME, laborer, farmers, middle class, and industries. And, Modi has assigned the task to his Finance Minister, Ms. Nirmala Sitharaman, to spell out the details of macro level allocations covering all sectors and rightly so. Furthermore, Modi had tasked the Chief Ministers to give their feedback on relaxations for Lockdown 4 to be announced by 17 May 2020. Like a good team leader, Modi is attempting to carry all Chief Ministers on board to fight the “War against the Pandemic” both economically and medical point of view. However, some Chief Ministers have already expressed dissenting voices against relaxations particularly Maharashtra, West Bengal, Telangana, Rajasthan, Karnataka, Odisha, Chhattisgarh and Kerala.

 

Most worrisome, almost all Chief Ministers want their ‘pie’ in the cake of stimulus package so that they can use it as per their wishes. The danger exactly lies therein. Surely, Modi and his team have taken adequate care to plug all loopholes. The state governments must be allowed to take additional loans from the market or at reduced interest rates from the RBI. Similarly, the “Big Corporate” Houses may be allowed to draw higher working capital from the Banks. Next, Maharashtra was against the lifting of “lockdown’. Bihar sought an extension of the lockdown till May 31 in the meeting — and followed it up with a decision to the effect later at night. Telangana struck to its decision on 29 May 2020.

 

Almost all of them wanted continuation of strict “Lockdown” in containment zones while relaxing it elsewhere. In particular, Rajasthan wanted the decision to decide and announce relaxations to be left to the Sate. Most important, the State Chief Ministers of Punjab and Haryana asked that states be allowed to decide on red, orange and green zones, and containment areas. Kerala asked for easing of norms in green and orange zones. Karnataka wanted the lockdown to be strictly implemented in containment zones, but did not favor resumption of international or domestic air travel and favor resumption of public transport in non-containment zones. Odisha, Chhattisgarh, Kerala, Telangana, and Bihar expressed apprehensions about the resumption of limited passenger rail services.

 

Surely, Modi appreciates the problems arising out migrant labor issues with their return in UP and Bihar. Also, the fallout on account of their exodus from other States particularly from Maharashtra, Karnataka, Telangana, Punjab, Haryana etc. In no way, one can expect the migrant labor to quickly go back to those States that failed to take care of them in times of their distress.

 

Having considered dissenting views or suggestions, Modi has laid down the road map for the nation to traverse in the fight against Coronavirus spread and incrementally resuming economic activity. Modi is no amateur to fall a prey to the pressures on him from all sides. By his past, Modi has emerged as a “professional” to wars on multiple fronts. He has taken into consideration that COVID-19 will stay for a long time to come until a vaccine is discovered.

 

That is why Modi wants the nation to counter the second front, that is, revival of economy. And, he has already advised all alike to effectively implement the “Social Distancing and Masks” norms effectively whilst resuming economic activity. Be that as it may, let me reiterate that the Central and State government machinery must formulate a well defined format or mechanism to monitor the expenditures incurred, jobs revived and business turnovers, like as one expert has suggested to draw lessons of the TARP mechanism used by the US during the 2008 crisis.

 

Otherwise, sooner than later would emerge that the stimulus package funds have been transferred to safe havens abroad by “Hawala Means” or used as “Corpus funds” by political parties for the next round of elections. Monitoring mechanisms must be highly effective and stringent laws to violators of criteria must be enacted and implemented. Otherwise, revival of economy will remain a mirage in short term context and the Welfare of Aam Admi would remain a forlorn hope. The issue of migrant labor will remain controversial and contentious issue for a long time to come. The States most affected due to return of migrant labor to native places include: UP, Bihar, West Bengal, Rajasthan, Jharkhand etc.

 

And, the States most adversely impacted due to migrant labor exodus include: Delhi, Gujarat, Karnataka, Maharashtra, Tamil Nadu, Telangana etc. When reviewed from the “Unemployment Rates” of all the affected States, there is enough scope to fill the gaps of exodus of migrant labor. But, the real problem lies elsewhere. States with high unemployment rates like UP 9%, Bihar, 7.2, West Bengal 11.4, Jharkhand 7.7, etc., can absorb returning migrant labor by creating jobs using their skills. In contrast, the unemployment rate in Gujarat is only 1.2%. Thus, the State has to perforce depend on migrant labor to run their industry. However, states like Delhi 9.7%, Chandigarh 9.0%, Assam 8.0%, Punjab 7.8%, Haryana 8.6%, Telangana 7.6%, Tamil Nadu 7.6% etc., have a complex problem to overcome.

For example, in Telangana unemployed youth are not prepared to work as agricultural labor or semi skilled labor in factories or construction workers. Majority of them want a peon’s job in government service or real estate brokers as opposed to developing as individual entrepreneurs. Unless such a mindset changes dramatically, Telangana will have to depend on migrant labor.

Thus, Modi’s call for “Self Reliance” and his emphasis on “every Indian has to become vocal for their local, not only to buy local products, but also to promote them proudly.” Post COVID-19 whenever it happens in posterity, India and Indians must change dramatically in the ways they think and act with focus on “Local” to achieve “Self-Reliance” in tune with technology breakthroughs. At the cost over emphasis, anti corruption agencies and organizations must enforce anti-corruption best practices developed in the past ab initio and “catch the thieves” before they loot and scoot. Finally, Modi-critics must appreciate that strategically even the present stimulus package is only one such financial allocation with others to follow as per situational complexities faced by the nation in posterity, if required. Surely, Modi and his team of advisers have kept the cushion and avenues open for appropriate interventions in posterity.