Jobs, Growth and Sustainability: A New Social Contract for India’s Recovery
India is beset with a perfect storm of shocks. The COVID-19 public health emergency has led to an unprecedented, months’ long lockdown of 1.3 billion citizens, which has displaced millions of migrant workers, put the economy under severe stress and stretched administrative capacity. The Government of India has announced a special economic and comprehensive package sized at 10 per cent of GDP, which includes interventions for immediate relief, liquidity, and payment deferrals. These announcements have been made in phases, starting with a relief package of INR 1.70 lakh crore (USD 23 billion) in March 2020 under the Pradhan Mantri Garib Kalyan Yojana (PMGKY) to provide food and cash in hand to the poorest of the poor; interventions by the Reserve Bank of India (RBI) worth INR 6.50 lakh crore (USD 86 billion) — 3.2 per cent of GDP — to support businesses, in particular micro, small and medium enterprises (MSMEs), and the broader, economy-wide interventions declared in May. Faced with the dilemma of containing the outbreak and saving lives, on one hand, and preserving businesses and livelihoods, on the other, the government has devised fiscal and monetary policy responses to cover two planning horizons: Immediate, to address relief measures to cushion the nationwide lockdown; and medium- to long-term, to deal with the socioeconomic aftereffects in terms of public healthcare, priorities for state expenditure, and regulations to operate businesses and establishments. This road to recovery also critically depends on the exit strategies from the lockdown. Post lockdown public finance would have to focus on two areas: A fiscal stimulus to alleviate the adverse impact on firms, self-owned enterprises, and migrant workers, and structural economic recovery through stabilisation of financial institutions and inflation rates, and increased rate of economic growth. The COVID-19 pandemic gives us an opportunity to shape the economic recovery in a manner that would deliver a new social contract between the state, the citizen and the enterprise, one that rests on two pillars: commitment to jobs, growth, and sustainability; and a razor-sharp focus on tail-end risks.