I mean, the simplest thing to do would be to go read the post in its entirety. The notes that follow are my way of reinforcing the key messages for myself, but perhaps they will help you as well.
This piece has five messages. One is that the best way to attract businesses is not to repel them explicitly. Second, it makes the case for a bold but transparent fiscal support. Third, it offers suggestions on how that money could be spent and four, it reminds experts that doomsday scenarios for India are not pre-ordained. Finally, it is important that the government channels the Covid crisis to usher in a decade of better growth than the previous one.
With regard to the first point, about not repelling businesses:
- The blog post emphasizes the need to facilitate clear instructions for businesses. The key message is that clear communication is always important, but it is literally a life-saver in these times. If you need to issue a clarification, you failed. It is that simple.
- A related point in this regard comes from an excellent newsletter that is equally worth reading in its own right. Facilitating business also means not throwing out the baby with the bathwater:
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“Now let’s look at why this is a policyWTF. India’s economy is facing a severe demand + supply shock. Of particular concern is the unavailability of domestic capital for long-term projects such as infrastructure (one of the reasons for this is covered in the India Policy Watch section below). Without long-term investment, India cannot achieve sustained economic growth. And without sustained economic growth, India’s geopolitical options get majorly constrained. An economically strong India becomes an ideal counterweight to China for the US and also an ideal market for excess Chinese capital. In contrast, a weak economy will eventually be forced to throw its economy open to the highest bidder at any point of time (ask Pakistan). Given this key national interest, making it difficult for Chinese investments to find their way into India is extremely counterproductive.”
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To be clear, this is not the point Ananta Nageswaran was making, but the point that Pranay and A.N. make stems from the root principle that in these times, we need to facilitate business, not hamper it. It can be hampered by a variety of things: unclear communication, blanket bans, or something else.
Now, on to the second point:
However, for a country with a young demographic and a potential for economic growth to exceed the cost of capital in the medium to long-term, the cost of excessive caution and prudence would be higher than the cost of excess action now. This would be so in the medium to long-term even if the short–term costs of excessive fiscal activism appear higher. One such fear is the fear of credit-rating downgrade. That reputational risk must be accepted and ignored, if it materializes. Rakesh Mohan, the former Deputy Governor of the Reserve Bank of India, had the right attitude towards them. In an interview for CNBC TV-18, he is reported to have observed that the credit rating agencies should have been the first ones to be put on the lockdown globally. He is right.
There is a time to worry about rating agencies, rising rates of borrowing, crowding out and profligacy. This, however, is not that time. We can err on the side of doing too little, or too much. There will be errors, we just need to choose which. I agree with A.N. – more is infinitely more preferable.
Suggestions on how money can be spent, which is the third point:
- Asset sales, by Andy Mukherjee (link gotten from within A.N.’s post)
- Building out health infrastructure, by the same author (and the same source for the link as above too)
- Shankkar Aiyyar has an article on BQ that finds mention in A.N’s post, and also has this excellent, excellent analogy:
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“Epidemiology tells us vulnerability to Covid-19 rises with pre-existing conditions. This is true for economies too. India’s economy, frail from co-morbidity, tripped from slowdown to lockdown.” - And Vikram Chandra on Twitter has some suggestions:
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Note that the list isn’t (and can’t be) exhaustive. But these are all extremely good suggestions!
Fourth, we need to keep reminding ourselves that it’s not all doom and gloom, health-wise and economy-wise, or as A.N. puts its, “experts are poor at predicting”. (Ahem)
And fifth, the bottomline from his blog-post, which I quote in its entirety:
“Finally, that persuades me to throw the ball to the government to play. In times of crises, society looks for guidance and leadership from the rulers. This is time-tested. Therefore, the onus is on the government to demonstrate clarity in thought and purpose in action. India began the last decade badly and ended it with more questions than answers. An encore will be a tragedy. India should do whatever it takes to avoid it.”
EconForEverybody 