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As states in India extend lockdowns as the only means to arrest the spread of the virus, economic privation comes into focus for the second time in two years. In the absence of timely data on informal workers, we have to rely on survey-based reports to glimpse reality. The State of Working India 2021 report released by the Azim Premji University on 5 May 2021 makes for grim reading. It estimates that the number of individuals below India’s minimum daily-wage threshold increased by 230 million during the pandemic. But for covid, the number would have fallen by 50 million. That is a big swing. Even among the better off, confidence has been shaken. Health priorities and worries dominate spending, and family budgets have had to be reoriented.

Further, double-digit growth in corporate profitability when India’s real gross domestic product contracted by over 7% in 2020-21 means that profits of unlisted enterprises and wage income must have contracted significantly. This dichotomy bodes ill for social stability and future growth prospects. Without an underlying demand recovery, the corporate sector will find its own revival evaporate. We are seeing it in registrations for two-wheelers. It has cratered. Thus, the impact of the second wave could be insidious and prolonged, much like banking crises. These cast a long shadow on the economy, as the country witnessed in the last decade. We must do whatever we can to avoid a similar experience in the 2020s.

In late 2017, Bloomberg reported (bloom.bg/3uh1SGN) that chief executives of listed companies that were part of India’s Sensex index earned 229 times more than the average worker, the second-biggest gap worldwide, after the US’s ratio of 265. India already has a solidarity fund (PM Cares) and Indian businesses have contributed to it. But, according to a May 2021 report from Pathfinders, hosted by New York University’s Center for International Cooperation (bit.ly/3bOqXSY), some countries have both a solidarity fund and a solidarity tax. In recent times, one of the success stories of such a levy is that of Zimbabwe to tackle HIV. South Africa has a fund for dealing with covid. Both the initiatives have come in for praise for transparency in administration of the monies collected, the wider representation given to different stakeholders in such administration, and for their tangible benefits.

In India, revenue has low credibility among the public, although many pathbreaking initiatives have been taken in recent years and India’s corporate tax rate has come down meaningfully. Further, even temporary levies acquire permanence once instituted. Hence, companies and corporate leaders prefer to undertake voluntary efforts to address social and economic issues. While that is gratifying to the soul and ego, the reach and scale of the state is unparalleled. Hence, contributions to the state can reach millions more than what private initiatives can touch. Therefore, all things considered, the private sector must deliberate on ways to support the state with voluntary contributions that are many orders of magnitude greater than what they have given PM Cares.

Another element of the grand pact we need is between the government and opposition parties. Wearing down resistance to privatization, for example, is grunt work and the stuff of large hearts and small egos. Four years ago, this column highlighted an approach that Mexico had adopted (‘What is the fix for India?’, 21 March 2017). This actually happened, and in contemporary times. The Mexican ruling party held prolonged negotiations with opposition parties on a national policy agenda and concluded an agreement. Its implementation threw up challenges, but the country’s president displayed statesmanship in two ways. He gave priority to policy suggestions that came from the opposition, and when the opposition alleged foul play in local elections by the ruling party, he fired those responsible from his own party.

The current dire situation in India demands such extraordinary acts of visionary leadership on all sides. Low trust characterizes most interactions between the government and the governed. That needs to change if India is to recapture optimism about the future. A closed-door weekend meeting between political and corporate leaders undertaken in a participatory and non-hierarchical manner would be a good start. Anand Sridharan’s latest blog post (bit.ly/3oHStXD) is required pre-reading for this meeting. Agreement on key national priorities, such as vaccination, privatization, asset monetization, farm sector laws, labour laws and goods and services tax rationalization should be hammered out such that no political party upstages the other. Corporate leaders must commit to augmenting the Centre’s fiscal resources, and promise better governance, disclosure and fair treatment of workers and suppliers.

A grand pact among political parties and between governments and India Inc to address short- and medium-term national priorities will reverse the public mood of diffidence and pessimism over the future. The national mood will be transformed overnight for the better. Leaders who rise to the situation will be revered for generations. What holds us back from trying?

V. Anantha Nageswaran is a member of the Economic Advisory Council to the Prime Minister. These are the author’s personal views.

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