Crisis economics: the economic fallout of COVID-19

I pick up the strings from my last few weeks’ attempts at crystal-ball-gazing the contours of the post-COVID-19 world and focus my attention on point no. 2 of the list I brought out in my second article in this series (For context, here's the link to that article: https://www.dhirubhai.net/feed/update/urn:li:activity:6648979264211386368/): Global Economics / economy(ies) in the post-Covid-19 world.

As our Program Chair at Harvard, Prof. Sunil Gupta, liked to say, transforming the business model, i.e., cannibalizing the existing revenue and profit drivers of an organization towards a new business order (think Adobe’s subscription vs boxed software, New York Times’s paywall-protected vs free-for-all online access, Apple’s foray into content and streaming vs hardware-only business-model transformations, for instance) whilst still continuing to solicit revenues and profits from the existing models is akin to changing the engines of an aircraft mid-flight. The aircraft, hitherto buffeted in the stratospheric calmness by the momentum of its past actions, would soon come face-to-face with the vagaries of turbulence, aka, a changing business environment. The realities of ‘g’, the Earth’s gravitational pull, too, would inevitably come calling at the first signs of sputtering engines. Those manning the aircraft controls must therefore not only try to keep the thing flying, but also send messages of solidarity and confidence to those trying to change the engines, one at a time, as the aircraft hurtles toward the ground. 

Those huddling (hopefully, with their masks on) in the boardrooms of the world’s various Central Banks are faced with a similar Hobson’s Choice as above in the present COVID-19 world: do nothing and see their economies crash to the ground OR start changing the engines mid-flight- even though nothing you do would be enough- hoping for a V or a U-shaped flight trajectory whilst having that nagging feeling that not everyone in this squadron of Central Banking high-fliers will manage to pull out of the g-dive and live to tell the tale.

Put this way, though, there’s really no choice- Hobson’s or otherwise- for any of the world’s 200 or so central bankers and governments. Something obviously has to be done. And people have got into the act. Among the first off the block has been the US Fed with their announcement of unlimited Quantitative Easing- a term that came in vogue in the immediate aftermath of the Global Financial Crisis (GFC) of 2008-09 and scandalized many old-school monetary theorists but which is really just a fancy moniker for printing of money, albeit of the digital kind, and really used for Central Bank-Commercial Bank transactions than to be distributed among the masses- shall be allowed to assume whatever dimensions as are necessary to massage and oil the hinges of the American economy back to life. This would include buying up debt and securities from the primary market, i.e., from fresh debt issuers themselves, in what would be a total departure from the Fed’s playbook the last time around when it only mopped up secondary market securities from commercial banks and so on.

The above is on top of the US$ 2 Trillion stimulus announced by the US lawmakers a few weeks ago in what is the largest-ever such stimulus in the history of mankind. This stimulus, called CARES Act, shall strive to put money directly into the hands of beneficiaries such as individual families and shall, in all likelihood, be the first of the many such future stimuli expected to be launched as the situation evolves.

Elsewhere, in the UK, the Bank of England, too, has announced their own Quantitative Easing program with the promise of putting some 300 Billion Pounds out into the task of underwriting upto 80% of people’s pre-COVID-19 monthly incomes for the next many months, in addition to providing a slew of other benefits such as unlimited credit lines to small and medium enterprises, some deferments of taxes, and so on till the situation is brought under control. The ECB over in Frankfurt has made similar declarations about sucking up whatever member-government bonds that need to be sucked up, to a ceiling of € 750 Billion- a ceiling that may yet be revised upwards provided there are no legal challenges to this from some of the member states such as Germany. Over in the East, the governments of Singapore and Malaysia, too, have announced big-sized stimuli and so have a gamut of other Central Banks rolled up the shutters of their money printing presses. The bottom line is that everyone is doing something, as something ought obviously to be done, without knowing, at any rate, at this time, the full extent of the dent COVID-19 is likely to cause to various economies of this world.

Let them do what they are and start our game of speculations, or kite flying, then. Let's begin with the European periphery. It may be an empty afternoon’s kite flying to speculate how the Italian Lira or the Greek Drachma or the Portuguese escudo would have fared under the full onslaught of COVID-19 had they still been operating today as the independent, sovereign currencies of their respective countries. The truth of course is that one can’t be too sure, but we can certainly speculate on their trajectories: For one, had they continued to operate after 1999, they would all have had multiple devaluations by now, just as the Franc used to have with such amazing regularity in the 1960’s and 70’s. The relative weakness of their economies and their lower productivity vis-à-vis the Northern Europeans would have seen to that. Italy, who has, if anything, gone a step back in its GDP growth over the last 2 decades, could have, at least in theory, used those devaluations to boost its exports, and also eroded away at least its Lira-denominated debt, if not the whole deal. But wouldn’t that devaluation have come with its own attendant scourge of inflation? And what of exports? One of Italy’s biggest exports is culture. Italy doesn’t have to send its culture abroad. People flock to it from all over the world to imbibe it. Going by the hordes of Chinese and American tourists I saw taking rides on the gondolas in the frigid Venice in December-2018, a strong Euro never really came in the way of people wanting to continue coming to Italy and spending on the good life on offer there. In matter of fact, it is my belief that for all the hardening of emotions one’s seeing on the Italian side on the matter of the European Union’s response to the calamity playing out in Italy, the Italians would have been in a far direr situation today in their war on the Virus, had they been on their own. One only needs to look at their total governmental debt as a percentage of GDP. Going into the COVID-19 crisis, it was already 135% of the GDP. Now, with the slew of stimulus measures they have already announced, and the few more that are in the works, it’s a matter of simple arithmetic work out that come September 2020, their governmental debt would have edged past the 150% mark. And that would be as a percentage of their GDP going into the COVID-19 crisis. It’s now all but sure that the Italian GDP- as indeed that of most of Europe and the world- would surely contract in the coming two quarters, as a minimum. Taken as a percentage of this contracted GDP, the Governmental debt percentage could even work out to something in the range of 155 to 160% of the GDP. Even so, being a member of the European Union, and given that the ECB, at least in theory, has already announced the removal of caps on how much of any member government’s bonds it would be willing to partake in, means that Italy shall get to service this still higher debt at interest rates close to- if not all the way down to- zero percent.

An argument can be made that the above presupposes that the European Union shall continue to operate in its present form in the post-COVID-19 world. You will need a bold person to take a wager on that, especially with what is seeming, so-far, to be a successful exit the UK has made from Brussels. The Italians, in their present state of mind, certainly won’t. But I do believe that the fissures- as clearly evident as they are at this moment of charged emotions and every man for himself scenario- shall find a way of mending themselves, one way or another, given the overall common good that being a (reasonably) strong and large economic block affords the Europeans. As anyone in Greece or Portugal- the two countries who have managed to avoid, so far, the full brunt of COVID-19- will tell you, even with all the austerities they must put up with for their past sins of living beyond their means, such a price is well worth paying for the seemingly unlimited underwriting power the ECB commands, and the halo effect it lends to the Euro, a power and a halo that can readily be appreciated at times such as these. You can also add Ireland to that list, and so many more.

In conclusion, let’s be clear about one thing: the war on this pandemic shall need vaults and vaults of floor-to-roof stacks of money and resources. It’s hard for me to believe that countries such as Italy and Spain would have been able to contemplate pledging economic stimuli of 10 to 15% of their GDP’s had they not had the power of the Euro, underwritten by the AAA-rated ECB, backing them up. No one can argue against that.  

All the above must lead to some obvious follow-on questions: Be it the United States or the UK, or the European Union, how will all this newly minted debt be paid off? Will it be paid off? What happens to the Western governments’ fiscal policies in the aftermath of COVID-19? And finally, with all this newly printed money sloshing around in the system, what about inflation?

A short answer to the second question could be: some of it will be paid off, some of it won’t. It’s hard to see how the unlimited credit lines being offered to medium and small-sized businesses in the UK and the United States- many of whom wouldn’t survive, in spite of their governments’ best intentions and efforts- will be recovered fully. And yet, the extra-budgetary allocations made to extend these lines of credit shall continue to show up in the debt balance of the UK government's ledger for years to come. The investments made in shoring up healthcare infrastructure and in making one-way cash transfer to make up people’s wage losses too will remain on the governmental books as new debt for many years. As happened in the aftermath of the GFC, the bonds issued by the respective governments to pay for these stimuli, being investment grade (IG), shall be lapped up by various commercial banks and financial institutions. They shall, in turn, sell these bonds off to their respective Central Banks as part of the Central Banks’ QE programs. So, in a very round-about way, the bonds (liability) issued by these governments shall ultimately end up with their own Central Banks as assets, the corresponding liability-side book entry on the Central Banks’ balance sheets being all that newly printed cash with which to buy these bonds! How long can the governments keep issuing bonds and raising money from the markets? In theory, they can continue doing so for as long as their economies’ benchmark interest rates- as determined by their Central Banks- remain at or near zero. In other words, they can continue financing the stimuli for as long as they, in theory, can continue to service the interest on this new debt which, for the foreseeable future, looks set to remain at or near zero.

But surely, at some stage these debts shall have to be repaid? One can’t be sure. Traditionally, whenever the economy started showing sign of heating up, say, as observed in employment rates and/or the CPI inflation indexes, governments would start scurrying into action, raising taxes and tightening their budgets to shore up the fiscals, and so on to cool things down. The Central Banks too would start dialing the benchmark interest rates up (‘Inflation targeting’). But, a queer feature of the post-GFC debt financing was that all that cash flowing into the global financial system did not lead to any CPI inflation. As a matter of fact, going into the COVID-19 crisis, the Western world experienced 10 years of near-full employment, especially in the United States, Germany and the UK, with hardly any CPI inflation to show for it. The same was the case with many other advanced economies such as Japan (who have been in a near-zero inflation now for a few decades), Singapore, Netherlands, the Nordics, France and so on. No wonder then that the post-GFC QE, that kicked in in the US and Europe around the 2010-11 mark, continued in one form or another in various parts of the Western world till as recently as 2019. And whilst the United States Fed did raise its rates to 2 to 2.5% once things had stabilized in the post-GFC world, they could still offer a US$ 1.4 Trillion tax waiver to their corporates without registering a blip on the CPI inflation radar that continued to remain stubbornly below the Fed’s targeted inflation rate of 2%. Try as they would, the Central Banks in the Western world- with the sole exception of the United States, where too the GDP growth wasn't due to inflation but 'real' productivity growth- just couldn’t inflate their way out of the no-growth-GDP doldrums, no matter how much money they printed and for how long.

It is my belief that a similar phenomenon will likely playout in the post-COVID-19 Western world.

Demand of every nature that has been so severely dented, shall take a few quarters to build back up, just as the supply too shall take time getting back on track. Gargantuan stockpiles of cheap oil shall keep the energy bills subdued for the next many quarters. With many people unemployed but getting support from their governments, the gap between the haves and the have nots, at least on the matter of items of everyday use that form the CPI basket, shall not open out to such huge proportions as to foment a runaway CPI inflation. With any luck, beginning the last quarter of 2020, the phenomena of mass lockdowns hopefully behind us, people will start getting back into employments, albeit with reasonably filled stomachs. And let's not forget: the West is greying. Middle and advanced aged people can only consume so much of consumerist junk. No wonder, then, that in the West, with the clear exception of the United States, local consumption stopped moving the needle on the matter of GDP-growth a long time ago. Therefore, to me, all this points to the continuation of the era of low CPI inflation in the West, come the morning after COVID-19. The fact that the CPI inflation will continue to remain subdued shall give the Western governments a lot of elbow room for multiple waves of stimuli should things on the economic front in the forthcoming weeks and months not pan out the way they had wanted them to.

But if the CPI inflation isn’t expected to go out of whack, what about all that money printed by the Central Banks? Where does that go? My guess is that just as in the aftermath of the GFC crisis, most of this QE money shall ultimately find its way into inflating the values of the many assets that are currently out there, gasping for breath. Stocks, bonds and real estate: anything that has pedigree and is investment grade (for instance, Coca Cola issued their US$ 100 face value IG bonds in the third week of March; they were already trading at USD 129/bond when last checked a few days ago) shall start taking off starting, say, mid-2021, by which time the world would either have eradicated COVID-19 or ratiocinated the starkness of the mortality figures and learnt to look at the brighter side of things. Why am I so sure that things shall happen this way? Well, when you are AAA-rated, and can issue all the investment grade bonds that you want, and can print all the money that you want to buy these AAA-rated bonds with, and still have no CPI inflation to trouble you for all this, there’s only one place all this newly created money has to flow to. Share buy backs, those strict no nos of today- don't count them out, yet.

And that brings me to the final part of this section. What happens once the assets start inflating again? The same that happens every time: calls for raises in the highest-tax slabs, for introduction of new wealth, property and inheritance taxes statues, for universal basic income, for higher social security and so on. Only this time, with people having gone through so much and in so short a time, it may become difficult for the powers that be to let these shouts go unheard.

India

India has chosen to go by the playbook of China and Italy in its response to COVID-19: a complete 21-day shut down, bringing most economic activity to a halt. At the time of writing these lines, this lockdown strategy is still playing out and we will know soon whether it was effective in the flattening of the curve. What’s beyond doubt, however, is that this lockdown shall have profound, generation-defining economic consequences for the country’s masses, rendering the question moot- when the time of reckoning comes, in the 2024 General Elections- as to whether a developing economy like India’s decision to choose this path to COVID-prevention was well advised.

India has just announced its first stimulus package of circa, US$ 22 Billion to fight the pandemic. Given that a much smaller country, Malaysia, has already announced a package of US$ 54 Billion, and Singapore- a still small country- one of nearly US$ 40 Billion, questions have immediately begun to be asked as to whether India’s stimulus is sufficient (it obviously is far from that) and couldn’t India have afforded more. Whilst admittedly, the so-far-announced measures amount to less than 1% of India’s GDP, it needs bearing in mind that this is only the very first stimulus package that the Government of India has announced. More is certainly in store, the inevitability of it as clear and present as the fact that tonight will be followed by tomorrow morning. But, how much can India really afford to spend on a stimulus?

In recent days, a lot of my friends- especially those living in the United States and parts of Europe- have innocently exclaimed: why is the Prime Minister soliciting funds for COVID-19 under his signature, PM CARES, scheme? Why doesn’t the Reserve Bank of India simply print its way to glory, the way the US Fed or the UK’s BoE are planning to do, and provide whatever stimulus is required to make direct cash transfers- again, the way it’s being done in the US and the UK- to the day-wage earners, provide interest payment breathers to the masses, offer tax holidays to corporates, and spend a heap on buffeting the healthcare facilities, and so on? Put this way, the questions look simple and legit- the RBI should get the printing presses going, a la US FED; let’s print our way out of this morass.

However, look closer and you realize what a Gordian Knot this issue of money printing is for an emerging market economy. It would be a rank understatement to state that the variables that make up the equation that determines the contours of a currency’s value are too many. For instance, value as measured against what? Till the early 1970’s, the answer was Gold. Since 1972-73 and the collapse of the post-Second World War Bretton Woods Accord, the answer has been and continues to be the US Dollar. Now, it is a matter of record that for all that India has achieved in terms of GDP growth over the last decade, the value of the INR vis-à-vis the United States Dollar has gone down by over 80% over that same period. This number would probably not have been all that shocking, had it not been a fact, too, that for a good part of this decade past, especially since 2014, the inflation in India, as measured in CPI terms, has largely remained subdued in the sub-3% zone. As anyone in Zimbabwe would tell you over a pint of green-bottled Delta Corporation beer that was retailing for $24 last week but is today priced at around $35, inflation kills a nation’s currency quicker than one can pronounce anthropomorphism. If not inflation, what accounts for the fall of the INR, then?

Any number of factors can be offered up as a reason.

The first and the foremost is simply that the United States Dollar is, as on date, quite simply the asset of last resort for literally the entire world. Even though the US accounts for ‘only’ 25% of the global GDP, over 65% of the global forex reserves today are held in US Dollars! An almost equivalent proportion of the global debt and derivatives’ contracts are denominated in US$ terms. The US has a veto over the boardroom decisions of the International Monetary Fund, the international lender of last resort or, as they like to say, the organization whose certificates of creditworthiness are the touchstones that global debt syndicates like to live and die by. The US also controls SWIFT, the global system of cross-border funds transfer, most of it denominated in US$. Given all of the above, it shouldn’t come as a surprise that if someone in the US Fed sneezes, the rest of the world’s central bankers- and certainly those of the emerging markets- catch the virus, no pun intended. Now, to be sure, the US$ itself goes up and down in PPP terms in cycles of its own. At the beginning of last such cycle, somewhere in the immediate after math of the GFC around 2010-11, the INR saw itself appreciate to as high as 39 against a US$. Looking back from 2020, those days now seem to belong to the Precambrian eon. And whilst it’s true that historically the US$ cycles have tended to gyrate in 7-year boom-to-bust simple harmonic motions, this time, given all that the world has gone through in the last few years, the cycle seems to be extending itself. What else explains the fact that two to three weeks after the US Fed announced its unlimited QE program, adding, for good measures, that it wouldn’t be loath to make QE transactions in the primary market- something unheard of, till now- the US$ still continues to rule the roost, every other currency in this world, with the studied exception of the Chinese Yuan, having depreciated significantly by comparison? Take Euro, for instance, which is really merely a proxy for the German Bund (and Germany seems to be faring very well in the war against Corona, and likely to emerge out of the pandemic stronger and more powerful than all the other European nation states combined, something that will no-doubt give a lot of sleepless nights to the mandarins over at the Elysée Palace). It stands at a historical low against the US Dollar. Take Gold, if not the Euro. What exactly has Gold done vis-à-vis the US$ over the last 10 years? A mere increase of 27-30% in value over a decade? That doesn’t say a lot for the storehouse of value that, till the turn of the twentieth century, was all that humanity had sworn by through most of the modern era and even the pre-historic Egypt. Come the first signs of distress, then, and the global fund managers dump whatever the hell they’ve been holding all over the world- including the frontiers of the emerging markets such as India- to head for the warmth of the motherly bosom that is the US$. This is precisely what has happened to the INR (surprise, surprise) this time around, too- the net outflow of money from various Indian debt instruments being upwards of US$ 9 Billion just in the month of February 2020. Faced with fleeing US$ denominated capital, how much ‘good capital’ can the Reserve Bank of India really squander into the propping up of the value of the bad capital that, in this case, happens to be its own baby, the INR?

The RBI spent over US$ 5 Billion of their US$ 475 Billion forex pile in a hectic week late in March-2020 to shore up the value of the INR against a fleeting Dollar, in the immediate aftermath of the announcement of the 21-day COVID-19 lockdown across India- the largest such lockdown anywhere in the world. To no avail. The INR promptly lost 5.5% of its value to crash down to 76 Vs 1 US$- its lowest ever. Now, one may argue that had there been no RBI intervention, the Rupee (INR) might have sunk down to 80 against a Dollar. But that would be like clutching to straws and, in any case, just as it’s true that night follows day, it is equally true that the INR shall get to 80, too, eventually. How is it that the INR, that fetched 11 US Dollars to 1 unit of its own in the year 1913 today fetches a mere 1/76th the value of a greenback is a discussion perhaps left for some other time and place, but how much and for how long could the RBI have gone on expending its precious forex reserves to prop up a currency that, by various measures, continues to be termed overvalued, is difficult to speculate on. After all, there’s a reason why countries build up their forex reserves: to use that money to spend on those items that they must import. India has traditionally had crude oil, gold and precious gems as its top three import items, paid for in the US$. To this has got added electronics, mobile phones and power production machinery in recent years. I am sure the inherent dichotomy between these two types of products isn’t lost on anyone. While stuff like gold and gems (a lot of them get reexported after some value add in India but India is fast losing its global export market share in this sector to the likes of China and Vietnam) sit in people’s safe deposit boxes as shore houses of value- really, a hedge against the depreciation of the INR, in the process sowing seeds for further depreciation of the INR, thus competing a quasi-non-virtuous cycle of race down the bottom of the barrel- the oil gets burnt as a feeder or raw material in varied economic activity, adding nothing, in the strictest sense, to the nation’s future productive capacity or factors of productivity. The fact that just like its above-defined vitamins, India must import its factor-productivity enhancing minerals, aka, the electronics and power machinery, too, from outside means that India is over-reliant on outsiders to keep its economy going. And since India must pay for these products in US$, the INR must obviously take a beating.

One may argue that in a WTO-driven, rules-based world order that’s premised on the universal benefits and goodness of Globalization, it should be fair game for India to open its markets to foreign products, especially when it needs them so desperately for reasons mentioned in the bygone paragraph, when the promise of globalization is equally its own to enjoy by virtue of exports. And here it has to be said that from every available evidence on offer, India clearly seems to have missed the boat on the matter of exports. In a decade in which countries such as Vietnam and Bangladesh worked up wonders on the export front, India has really gone nowhere, being stuck at the same merchandise export levels in 2019 (~US$ 300-330 Billion) where it used to be back in 2011. There are those who argue that the INR must be allowed to devalue if India is to enhance its export competitiveness. It is my view that as tempting as the arguments in favour of devaluing the INR for export competitiveness sound, they all suffer from confirmation bias. I have yet to see a viable example of a country that has managed to recalibrate up, having once given in to the devaluation of its currency (or when devaluation has been foisted on it by the flight of capital). Export competitiveness requires a lot more- enabling environment, trained factors of productivity, trustworthy long-term tax incentives and protection from retrospective action, a reasonable, development-friendly judiciary, assured supply of raw materials, enabling land laws- than a devalued currency, as Zimbabwe and Argentina would like to remind anyone who is willing to listen. Many Ph.D. theses can be launched on this singular issue of India's loss of export competitiveness over the last decade. I don't want to bore you all any more than I might already have succeeded in doing. So, let's prod along, then. 

With exports not having taken off but imports growing an an alarming clip of 10% year-on-year, and for a whole host of other factors, it seems all but inevitable that the Indian Rupee (INR) would see a material devaluation in the months and years ahead. Add to its vows, the COVID-19 pandemic. The twisted logic that drives the West-centric global rating agencies would require the debt run up by the Indian Government (and the Indian economy, overall) to be adjudged High Yield at some point in a not-too-distant future and this would further exacerbate a run on the INR. Given all the above, the Reserve Bank of India would be ill-advised to print its way out of trouble, as some of my friends living in the United States and Europe would like it to.

So, what does it all mean for India in the short, COVID-19 term:

Firstly, I strongly believe that starting April 14th, Prime Minister Modi should start re-opening the economy for business, allowing for-profit establishments, means of transportation, and the entire agriculture sector to open in a calibrated, safe-distance-norms-applicable manner. Ditto with schools and universities. The socioeconomic costs of not doing so will be so disproportionately higher in the short to medium term, and the so-called demographic dividend of India so thoroughly compromised, that any worries on the COVID-19-posterity front, no matter how stone-cold barbarous that might sound today, must be allowed to take care of themselves. Even from the geopolitical standpoint of China having already reignited its economy into action starting February 2020 (and its March month PMI already exhibiting a sharp, V-shaped recovery), and its vassal, Pakistan, having already announced the reopening of its agricultural and construction sectors starting this week, India, who shares hostile borders with both these countries, can ill-afford the enormous strategic and tactical grounds it stands to lose to both of them, should it delay its economic reboot by even a few more weeks beyond the 14th of April.

Second, if India must run a high COVID-19 budgetary deficit that would get the global rating firms frothing at the mouth, then let such a deficit be run in the building up of new and augmented healthcare facilities- more hospitals, more hospital beds, more PPE manufacturing facilities, more healthcare R&D laboratories, and so on- that would act as ‘hard-asset’ infrastructure in the service of the most important factor of productivity of the nation: its human resource. Given that the solar winds emanating out of the COVID-19 event are sure to stoke socialistic angst among the masses, this investment in the country’s healthcare infra- grotesquely inadequate at the moment for a nation that aspires to be the world’s third largest economy shortly- would be an investment made in not only the right cause, but also an inevitable one.

Third, it is beyond doubt that India must transfer enormous sums of money to the lowest third of its population at the earliest (the first steps in this direction have already been initiated last week). In addition, that 300-million-ton food grain stockpile, the wasteful profligacy of which we never fail to lament, come every new Budget Day, too, must be thrown open to the masses at the earliest, if that hasn’t been done already. Else, as the nation, then British India, so painfully witnessed in the immediate aftermath of the War-time Churchillian policy of diversion of food from the starving Indians to top-up European grain stockpiles that triggered the Great Bengal Famine of 1943, starvation and tremendous loss of life, not to mention mass social unrest, would be the inevitable denouements of COVID-19, played out in the plebeian gullies and mohallas of India. Those tremendous sums that India undoubtedly stands to gain from the multi-decade-low oil prices, and the invariable taxes and duties it will start earning on the refined products as soon as the economy has been opened and people start putting their means of transportation to use, should be directed towards these social measures.     

Fourth, India must decide to act now, and act fast/immediately to garner as big a market share as it can of the manufacturing supply chains that are exiting China even as we speak. There’s a universal brotherhood of the co-sufferers. India’s lockdowns and its fight against the pandemic isn’t being lost on the world. The grit, determination and resourcefulness that the Central and the State Governments of India are exhibiting in fighting the pandemic are wining admirers far and wide. India’s actions in sending its aeroplanes to airlift its citizens stranded abroad are being noticed, as are the actions it is taking in ferrying the Western tourists stranded in India back home. Prime Minister Modi’s initiative in organizing a video conference of the SAARC leaders, though symbolic, is also being noticed for the positive spirit it has engendered among the nations of the Subcontinent. Also being appreciated is the Indian system’s ability to map out contact traces in the unlikeliest of places and the speed with which that is happening. All of the above goes on to show that the great Indian elephant can be moved, just that it usually takes a crisis to do so. Well, the elephant is not only moving now, it’s dancing. What better time, then, than this crisis to offer a veritable eat-what-you-can to any foreign multinational wanting to set up export capacity here in India, a five-year full-tax-holiday being just the first of many such enabling clauses of these investment term sheets. Granted, there will be some in India Inc who would be uncomfortable with this. But, this is a once-in-a-generation opportunity. This bus, once gone, shall remain gone.

Fifth, those that want to sell electronics and mobile phones to India, must make them here- India needs to be brutal about it. Period. Beijing wasn’t built in a day. Nor was it built by taking seriously the make-believe goodwill espoused in the WTO. China has managed to remain a part of the WTO and thrive whilst banning Twitter, WhatsApp and Gmail there and overseeing the departure of Walmart and Amazon from its shores. All of these businesses, and many more, thrive in India, as they should. Now, how about asking them to localize, and do so pronto?  

Sixth, India must roll back some of the capital market regulations and taxes introduced in the recent past. Some, such as the Long Term Capital Gains Tax on the profits made in the primary and secondary equity markets can easily be repealed without any loss of revenue. Others, such as curbs on promoters' ability to buck back their listed companies' shares, if lifted, shall act as new spurs to a stock market that has nosedived the most in the entire world in the aftermath of the COVID-19 crisis. Whilst its true that a country's stock market doesn't necessarily define its economy, it certainly is a mirror and a proxy on the country's economic position. Any positive sentiments engendered on the trading floors of the Bombay and the National Stock Exchanges can only be good for India.

In final analysis, the road ahead from here for India looks worrisome at this moment. At the risk of repeating myself, I must reemphasize that a country like ours, with a per-capita GDP ranking of 143 among the global league of nations, can ill-afford to have over a billion of its people locked up in their houses. Come 14th of April, a way has to be found for some of them to start tricking out of their homes and get into the act of getting India back on its tracks.