Opinion

Post-pandemic planning

Arun Kumar | Updated on June 09, 2021

India faces a host of systemic risks that must be tackled

We are in midst of a raging pandemic with many lives being lost on a daily basis. Fighting this crisis and saving lives and livelihoods are important but equally crucial is to proactively plan for a post-pandemic India.

The GDP growth rate, after registering 8.3 per cent in 2016, fell to 4.18 per cent in 2019, well below the country’s potential of 7-8 per cent.

India was indeed facing a structural slowdown even before the onset of the pandemic, creating doubts about whether it will be able revert to its full growth potential when the economic cycle normalises.

The pandemic has had a crushing impact on the middle class, the centrepiece of the Indian consumption story. According to Pew Research Centre, 32 million Indians fell out of the Indian middle class (those earning $10-20 a day) in 2020. This number could go up significantly in 2021. The labour participation rate fell to 40 per cent in 2020-21, well below the global average of 65 per cent.

Demographic dividend

A structurally low labour participation rate and insufficient job creation mean India is nowhere close to realising its demographic dividend. Limited fiscal headroom for more stimulus and relief spending is another big challenge.

Fitch Solutions expects the fiscal deficit to come in at 8.3 per cent of GDP in FY22, 1.5 per cent more than the government target.

The disastrous second wave of Covid shows the country has not distinguished itself in managing the pandemic. This has several geopolitical implications, both regionally and globally.

Long Covid, or the medical condition after once has recovered from the disease, is yet to be fully understood by the medical fraternity globally. The physical exhaustion, brain fog, etc., means there is no return to normal life for many patients. The associated healthcare costs, loss in productivity, and adverse mental and emotional effects, will require meaningful support systems for the patients. Covid has exposed the gross under-investment in primary and secondary healthcare across the nation, and long Covid is likely to further burden a woefully inadequate healthcare infrastructure. Young children who have lost both parents and families that have lost the sole bread winner will need support systems to help them both emotionally and economically.

India has made big strides in the technology sector, especially start-ups. According to a Credit Suisse report, the country today has about 100 unicorns (companies with valuation of $1 billion or more) with a combined market value of $240 billion

From a long-term perspective, the market opportunity in India will remain compelling and attractive, but with the way the country has handled the Covid crisis, it is likely that some of the entrepreneurs who relocated to India to commit themselves to building and growing their business will reconsider the decision and move back to their respective home base. For the last couple of decades India enjoyed a reverse brain drain, but that trend could reverse again to the detriment of a thriving start-up ecosystem and availability of high-quality talent pool.

It would be naïve to think that this would be the last pandemic or crisis of that India would face. With global temperature rising, the world is likely to face more extreme weather events and natural disasters. With a Climate Risk Index score of 16.67, India was ranked seventh in the top-10 most affected countries due to climate change in 2019.

India faces multiple systemic risks — climate change, natural disasters, pandemics, anti-microbial resistance, serious water shortages, cyberattacks and geopolitical issues.

Bold thinking, proactive planning and timely action are required to overcome these and multiple other challenges. If there is one nation in the world today that is consistently underachieving its full potential, it must be India. We don’t have to accept that as status quo.

The writer is a Partner in an Asian Private Equity firm, currently based in Singapore. Views are personal

Published on June 09, 2021

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