Opinion | India and global economy in a post Covid-19 world

The world’s bourses have over the last seven days mirrored the panic that is slowly taking hold of the world. Desperation hit new highs as countries moved to lock down their borders, especially after the US declared a national emergency.

While Covid-19 (previously referred to as coronavirus) disease continued to spread, with the latest count by the Johns Hopkins University pegging it at 142 countries, the cure for the SARS-Cov2 continues to be elusive. The only silver lining is that the spread of the disease has peaked in China, presuming the authorities are being honest with their disclosures. The bad news though is that the rest of the world, given that the virus spreads exponentially, is only beginning to catch up. In short, the worst, despite all the precautions, is in all likelihood, yet to come. India, given its poor health and hygiene standards, together with a high density of population, is particularly vulnerable.

At the same time, most experts are of the view that the Covid-19 threat will eventually be overcome though the disease will not be eliminated and will become endemic to our lives, such as bird-flu and SARS. So what will the post Covid-19 world look like? Indeed what will it mean for India? Here are some broad conjectures.

First, the phenomenon of globalization as we have known of it (described so well in Tom Friedman’s cult book, The World is Flat) is all but over. The magic has been fading for a while, captured in the growing number of global protests. Covid-19 would have accelerated that demise. This would in turn force a fundamental shift in the world order, already apparent in the rush to reset global supply chains and raising of trade barriers. Those who yearned autarky have got what they wished.

Second, flowing from the above it is clear that China, which undoubtedly has been the biggest beneficiary of this process of globalization, will be under pressure. The one time global factory of the world was already under pressure as global trade started to shrink, a trade war with the US escalated and its own internal fiscal excesses have begun to catch up; the devastation caused by Covid-19, which incidentally originated in Wuhan, will make it extremely difficult even for even the remarkable Chinese zeal to overcome.

Third, drawing from the above the era of cheap goods may be all but over. Given the protectionist predilections of most global leaders, multinational corporations are going to be under pressure to locate their bases closer to home. Without the Chinese underwriting of cheap labour and inputs, it is only logical for costs to go up. Consumers will need to brace for higher prices; now what that means for the social order when combined with growing unemployment is anyone’s imagination.

Take the three possibilities together and the message for India is obvious: it has to pivot, and quickly at that. With world trade unlikely to recover for a very long time no prizes for guessing that the domestic economy has to be the key priority.

For far too long the political establishment has allowed social and economic drift and the consequences are visible. This “chalta hai” attitude has to be shed. Yes, the wages of past sins are going to exact a national price; but it would be small in comparison with what will be incurred if things are to persist as before.

Given the magnitude of the task at hand, one can almost begin anywhere. Socially a state like Kerala with extremely limited resources has demonstrated, first with Nipah and now with Covid-19, that even the toughest odds can be overcome. Economically the nation showed in 1991, when it came together collectively and pulled back from the brink to emerge in the subsequent decade among the top-10 economies in the world, that “Yes, it can”. We have seen South Asia bury the hatchet in the backdrop of the biggest health threat of this Millennium; surely domestic politics cannot afford to lag behind. Our political leadership will be judged for their present and not their past. The writing is on the wall.

Anil Padmanabhan is managing editor of Mint and writes every week on the intersection of politics and economics.

Comments are welcome at anil.p@livemint.com