What approach should we adopt to stimulate the economy after Covid 19?

Given that those are the two major strands of thoughts on ways to overcome economic stagnancy, I think till now the government has chose the middle path:-

1. Neo Liberal aspect- Focussing on liquidity via promoting credit to MSME and other such measures 

2. Marxist approach- Focussing on MGNREGS by increasing per day wage and increasing the intake of workers. Also food provisioning announcement made yesterday. 

While the final picture will be clear by week end when all tranches will be announced by the Honourable Finance Minister, I think the most holistic approach will be what was suggested by C.Rangarajan recently in an article on The Hindu. He suggested three approaches the government should take 

1. Increase potable income of household to ensure demand doesn’t slide (amidst decline in saving and austerity mindset amongst people)

2. Relief to poor and MSME - to prevent crash of that sector and destitution of the vulnerable 

3. Bailouts to industry- To create a situation where industries ensure supply chain remedies and kickstart economic activity.

Easier said than done due to fiscal constraints but I’m optimistic.

Question: What approach should we adopt to stimulate the economy after Covid 19?

My perspective: 

Most of us begin to imagine the numbers, sectors and players when we are asked this question. That's problem solving at surface level. We need to dissect this problem thoroughly as it will determine not just the length of our pockets but also the quality of our lives, lifestyle and choices. 

Let us make few things clear before even we ponder upon this question:

1. We cannot solve this problem "after" covid19, we have to solve this problem "with" covid19. The virus is here to stay for years to follow in the future. The contact ratio (q) is very low for this virus and almost the whole population is susceptible to infections over the time. We will have to move forward considering the virus to be a part of our lives and also the lesson that this virus gave us in the last few months. 

2. The demand and supply conundrum seems like a tiger but in reality is just a paper tiger. It hardly matters, because the demand and supply will eventually be back to business as people have to earn and live at the end of the day. It will happen. The real focus should be on how fast can we "afford" to grow considering the significant changes that will happen in our lives in the following times, How fast can we travel so that we don't crumble to the shocks and be on a stable trajectory? We cannot afford to fall, gather and run with every obstacle in the future. We need a steady marathon and the foresight to dodge the uncertain times.

3. Another question. What should be our direction? The current sentiment is de-globalization and self-reliance through domestic economic activity. Let's go back to 1991 and see what all did we get to have in our lives due to the LPG reforms. From technology to quality, From Education to Emigration, From choices to competition, we reaped a lot benefits from that. Should we lose out on that? Should we give our domestic economy that bandwidth to be callous about quality and prices in the name of self-reliance? Look at china, infamous for it's heavy domestic production albeit with substandard quality. 

4. The most important aspect for any economy is the development of that economy. Covid19 presents a unique opportunity for our economy to bring back the much needed focus on this aspect to insure and secure our country from unforeseen threats that can catch us off-guard like Covid19. The need of the hour is setting up everything right in the social infrastructure so that we are fully prepared to rage against the unknown tides and conquer the game of milestones. 

Now that we have a clear idea about the things that can affect us, let's get back our focus on answering this question. 

1. About the demand and supply gap. It's a temporary issue. As soon as there is ray of confidence, people will demand for things and people will also supply things. The problem here is that of confidence. How do we make people confident enough for this to happen? Through the same old strategies.

(a)Through measures that will foster ease of business in the world with Covid19. Relaxation and simplification of regulations and procedures to better adopt to the Covid19 world.

(b)Through fiscal stimulus and relief packages for those sectors that are deeply affected by covid19. 

(c)Through labour intensive job creation in avenues that have suddenly gained demand in the Covid19 world. PPE, Sanitizers, Hygiene products, door to door delivery, push-carts based sales to reduce crowding in markets etc for day to day activities, Corona safe day to day products and much more.

(d)Through reforms like privatization and disinvestment so that the government can focus maximum on setting up the social infrastructure right. It's only when people get that confidence that we have enough capacity and capability to deal with any future pandemic or any other catastrophe, we can see a lot of investments coming into the market from both foreign and domestic side. Investors need that confidence that things won't go so bad. Also, give the investors a bit more space through liberalizing investment norms.

2. About the direction of economy: Being self-reliant is very good, but at the same time we shouldn't over-protect our domestic economy so that it's becomes lethargic and does the opposite of what we expected. It's important for India to still keep the global gates open so that there's a healthy competitive pressure on the domestic side. India should send a signal to the world that globalization can still exist in the Covid19 world. Countries will look up to our country with a lot of respect in the long-term for taking this stance in difficult times. 

3. The time is ripe for the government to get people out of poverty and give everyone of us top-notch medical and educational infrastructure. If this is not solved, we will keep falling and be at the mercy of many more pandemics and disasters. Yes, it will take a lot of deficit financing, a lot of tax burden on us and future generations, but it's worth that pain as the gain will be multiple times more in long term. The Covid19 is an eerie mirror that is showing us all the deficiencies in our system. The garbage in our medical infrastructure, the plight of migrant labourers, the wide-spread poverty and illiteracy about rationality. This needs to be rectified with the highest priority so that India stands out from the rest as the flag-bearer of hope. 

4. Covid19 World will open up a lot of opportunities for creativity/innovation in various sectors. This can be one-stop solution for India's unemployment nemesis for decades to come. Research and development should be carried out with fast pace so that India comes up with unique solutions to deal with Covid19 in various aspects of life. This can provide a lot of employment if we are first to arrive at solutions. 

The road ahead is uncertain, The times ahead is unknown. But the hope that has kept the mankind going forward has been alive for eons. The creativity of humans will outlive the nuisance of a silly virus. Let's hope for the best. :) 

There is a "Middle Path". The concept ofTrusteeship, propounded by Gandhiji. Sometimes I wonder, how well he knew about Indian society.

I couldn't summarise this article (due to lack of time), apologies for that. But attaching images.

There are two.major streams of thought woth regard to this.

The neo- liberals call for stimulating the economy by increasing money flow to job creators and businesses, and at the same time cash transfer to the migrant workers directly. They propose, relaxing labor laws like UP has done, providing sovereign guarantee to companies that can be avoided from going bankrupt , raising capital through treasury bills, perpetual bonds, etc.

The challenge here is that spending money by the government is not going to help with lockdown induced supply side constraints. It is not that there is no demand - which the government would like stimulate, but that demand cannot be met because of supply chain being interrupted.

There is also an argument given by Marxist economist like Parbhat Patnaik . They suggest government going for food provisioning, village panchayat based enterprises like early China, not relaxing labour laws and oppose policies that give money to business owners and not workers. They are calling for re focusing on MNREGS and coming up with Urban Employment Guaranttee scheme to stimulate economy in urban areas.

These two approaches are poles apart, and we will have to see what the government actually does.

Given the PM's speech on self reliance it is unlikely that he supports schemes that make people dependent on government doles. 

@Naadan_Parinda Gandhi’s philosophy is so broad that there is no walk of life which cannot be understood from Gandhi”s perspective.

Gandhi. And Marx. Which is why when you write an Essay, even if the topic is AI or cyberspace to something as abstract as happiness, you can always analyse the issue from Gandhi and Marx perspective.

The left saw him as complete supporter of capitalism. To then he was friends with the capitalists. The capitalists saw him as anarchist. His ideas of village led development, charkha, vocational education was criticised by Tagore as being completely unscientific, often dogmatic and would perpetuate the poverty of those already poor.

Gandhi can be interpreted in a million ways, and thus criticised in as many ways.

Agree sir...Gandhi himself denied the existence of ‘Gandhism’. But with time, Gandhi’s thoughts to various social, eco & political conditions gained inc relevance & acceptance. It started to represent a distinct & unique world view (like any other ideology - liberalism or Marxism) and may be this is why he can’t be fitted into any pre-existing idea or theory.

In fact, Marx too didn’t claim to represent any world-view. He is reported to have said, “All I know is, I’m not Marxist”.

These giant intellectuals, probably would have said so out of modesty or may be they didn’t knew of their greatness.

Also, You can read somewhat leftist approach to vaccine development here

https://www.evernote.com/l/AXQYsPVC51BKTKBE3r5FaAC4im_cMC_V3zM

Stiglitz is again critical of free markets, and a known Georgist. 

My personal non expertise view is as follows :-

1. Non operationalisation of IBC for 6months 

A. Could be beneficial for those enterprise who have become stressed and/or insolvent due to Covid. Will provide them additional time to get over the stress via extended time/liquidity to keep afloat 

B. But if it is being non operational, it must be supplemented with identification and quick hand holding measures for these enterprises (or majority of them). If this doesn’t happen, more likely many of these enterprises will see their valuation deplete over 6months. So in effect the non operationalisation may backfire on them and stakeholders. 

2. How the government may finance measures (major ways)

A. The additional 4lakh crore market borrowing will help 

B. The aid/loan coming in from World Bank, AIIB, New Development Bank could help with some expenditure 

C. Printing new money as last resort - in a contracting economy, printing money shouldn’t have immediate inflationary effect

Nope. In Gandhian literature, the first thing you may read is that there is no -ism in Gandhi !