For the past few weeks, I have been reading about how Covid-19 has impacted different countries, with more emphasis on India. In this blog, I will present my thoughts regarding India’s current position and also critically analyze the steps taken by the Indian Government.
Humanitarian:
a. Migrant workers: Right to food security and the right to work are 2 statutory rights provided by NFSA(National Food Security Act) and MGNREGA(Mahatma Gandhi National Rural Employment Guarantee Act) and is supposed to be an integral part of the right to life, a Fundamental Right provided to each citizen by Article 21 of the Indian Constitution. Over the past couple of months, India witnessed a major humanitarian crisis — the case of the migrant workers. These are the daily wage workers who come from the village areas of UP, Bihar, Jharkhand, West Bengal, etc. These workers move to areas like Delhi, Maharashtra, Gujrat, and Karnataka to find work. Due to the pandemic, these workers lost their jobs and at the same time, they were stranded in a foreign state. The hastily implemented lockdown didn’t give these workers enough time to evacuate and go back to their villages, and neither did the government(both the Union and state govt) had any plans on how to safely transport these workers. The result? Lakhs of workers left without work, food or a place to stay.
b. Women, children, and non-citizen residents: Under the NFSA, the NDA government had started the MDM(mid-day meals) and Anganwadi schemes. Nutritious meals were provided to poor children at schools, and also to women from poor households in Anganwadi centers. Due to disruption in the food supply chain and closing of schools during the pandemic, these food sources have dried up leaving millions of women and children high and dry. Moreover, the plot of illegal immigrants and other non-citizen residents is extremely sad. With almost no access to public healthcare and also no Aadhar or ration cards, these people can’t access the ration being distributed through the PDS(Public Distribution Systems).
The Central Government has allotted Rs 1.7 lakh crores to the PMGKY (Pradhan Mantry Gareeb Kalyan Yojana) to provide relief to the poor households. They have also started providing employment to women and unemployed workers in villages through the MGNREGA scheme. They have started a special train service — the Shramik Special and has covered 85% of the ticket charges and has requested the states to cover the rest. The FCI(Food Corporation of India) has started providing free ration to ration cardholders. UP and Bihar was recently brought under the “One Nation One Ration Card” scheme so that stranded migrant workers can get ration even while staying in a different state. However, there have been multiple issues here. Many states have still not covered the remaining 15% of the ticket fees, leaving the already distressed migrant workers to bear the brunt. Moreover, as the FCI uses primarily railways to distribute food, most remote areas have still not received any aid. Add pilfering, corruption, and poor PDS to that, and you have the perfect logistical disaster. Also, there have been claims that very few people have benefitted from the MGNREGA scheme after lockdown.
Economy:
a. Banking Sector: Even before the pandemic started, India’s banking sector was badly hit, which had also adversely affected the Manufacturing(Car Manufacturing sector was primarily affected due to India’s shift from BS4 to BS6 engines) and Critical Infrastructure sectors — 2 of the 8 core sectors of India. The banks were burdened by a huge number of NPAs(Non-Performing Assets), which affected their capital flow. Even after strict RBI surveillance, regulations, and multiple repo rate cuts, cooperative as well as scheduled banks like PMC, Yes Bank, Dhanlakshmi Bank were in a state of collapse. Even though a lot of these NPAs were due to loans given during the UPA govt(i.e. before 2014), still NPAs kept on increasing even during the BJP period. The situation of NBFCs(Non-Banking Financial Companies) was no better. RBI had liquidated Rs. 50,000 crores for corporate banks to provide loans to the NBFCs, but existing NPAs had already made the banks apprehensive, and they were not willing to lend to the NBFCs as these companies work with poorly rated bonds and assets. Due to the COVID-19 pandemic, mutual funds have come under immense liquidity pressure. A company as big as Franklyn Templeton had to close 6 debt funds. Even this time the RBI has taken a similar step as it did with NBFC, but this has faced some criticism as the banks are even more apprehensive now due to the pandemic.
b. State Revenues: Due to the pandemic, the state treasury has come under immense pressure. As per the 14th Finance Commission, states are supposed to receive 47.5% of its revenues from the Central Govt, and 50% of their revenue is generated through taxes. Nearly 90% of a State’s taxes come from the sale of alcohol, petroleum and petrochemical products, stamps, and registry of cars and houses. Due to the lockdown, the sale of these items was at a minimum, resulting in very less revenue flow for the States. Most of the remaining funds have already been spent in providing relief packages to MSMEs and also in the fight against COVID-19. The states have demanded the RBI to change the WMA limit to allow more borrowing and the Centre has already relaxed the payment of GST by states. But even that will not be enough. The reopening of alcohol outlets has been widely criticized due to the violation of social distancing measures seen at these shops, but as this is a major revenue source for States, we should also try to understand their plight.
c. Core Industries: The ICI(Index of Core Industries) is an index that indicates the growth of India’s 8 core sectors like Oil, Electricity, Manufacturing, Construction(Critical Infra), etc. The ICI has seen the steepest fall of 6.5% in the month of April(the index indicates the growth from the previous month), even though the lockdown was there only in the last week of March. The index is supposed to fall further for the month of April as the country was under lockdown for the entire month. Corporate Electricity demands are almost nil, and no cars have been sold by major outlets in April. Moreover with the global oil crisis, and the crisis of migrant laborers in India, the Oil, and Critical Infrastructure sector is also expected to be hit badly.
To handle the crisis and to restart the economy, the Central government has offered stimulus packages for the MSME sector. Moreover, the government has provided a staggered exit plan and has focused on restarting the core sectors. India has borrowed 15 billion dollars from the Asian development bank to fund it’s initial response to the pandemic. It has also integrated the MPLADS fund with the Central funds to fight against this disaster. A matter of concern here has been the PM CARES fund. With no records of the donations made to this fund or how the money is being spent, it can possibly be a matter of concern. With only the PM and a handful of cabinet ministers handling the fund, there’s almost no transparency. However, it is expected that the Union Government will soon put it under CAG Audit to take care of this issue.
Geopolitical:
a. The failing West and China: The US under the leadership of President Trump has grossly failed to contain the spread of the coronavirus, so much so that as of 7th May, the US is the worst-hit country with 1.2 million cases and nearly 75,000 deaths. With elections nearby, increasing unemployment, and decreasing public approval ratings, President Trump has become more and more delusional and whimsical. Be it wildly accusing China to take up the full blame(which even I support), cutting off funds and imposing sanctions, or be it threatening India for HCQ or following the PMO on Twitter or suggesting usage of disinfectants to kill the virus, we can easily see that he is an ineffective leader. Even though they are trying their best to maintain their superpower image, the COVID-19 pandemic could as well lead to a fall of the US from the superpower status. China meanwhile has been utilizing this opportunity to strengthen its position. Not only did the authoritarian government successfully curb the pandemic, but it has also utilized its manufacturing infrastructure to provide medical aid, test kits, and masks to weaker economies in Asia, Europe, and Africa. Moreover, it has been playing it’s famous “Debt Trap Diplomacy” and providing loans to badly hit countries like Sri Lanka. It has strengthened its grip on Hong Kong and has started militarizing the South China Sea. It even violated the CTBT(Comprehensive Test Ban Treaty) and recently tested nuclear weapons at the Lop Nur site. It has released a digital currency to counter the Dollar in international markets and it recently successfully tested the Long Rocket which was crucial for their space program. It has also blocked some funds meant for India from the Asian Development Bank(India has a 6.3% stake, while China has a 6.5% stake at the ADB). All of this spells out major security issues for India.
a. Pakistan, and Kashmir: Pakistan is trying it’s level best to disrupt India’s influence in Asia. Pakistan has literally become a puppet of China and has now undertaken a new project — the China-Pakistan Economic Corridor. This is supposedly a trade corridor between China and Pakistan and will be very close to the Northern Frontier of Indian Border. Allegedly, it might even go through the illegally occupied Gilgit -Baltistan province(part of PoK). This will be a major security issue for India as already the Gilgit-Baltistan province is a hotbed of terrorist activities due to the upcoming polls there. Taking advantage of the unrest created by repealing Art 370, CAA, and also the pandemic, Pakistan’s ISI has set up a new terrorist frontier — The Resistance Front(TRF). Recently, Indian soldiers and CRPF jawans were killed in 2 encounters with TRF. Indian intelligence agencies have found that TRF has connections with JeM(Jaish-e-Mohammed), HM(Hizbul Mohammed), and LeT(Lashkar-e-Taiba). These terror outfits have connections with the ISI, a fact that was established thanks to RAW and IB, and that caused Pakistan to be placed in greylist of FATF(Financial Action Task Force). To avoid getting placed in the blacklist of the FATF, the ISI has established this new terrorist organization(TRF). Moreover, Pakistan has also set up another terrorist organization — the ISKP(Islamic State of Khorasan Province) in Afghanistan to edge out India’s influence in Afghanistan after it was left out of the US-Taliban trade deal by the US(which again brings to question, how good is India’s relations with the US?). The ISKP carried out bombings on the Indian embassy and a Gurudwara in Kabul.
Due to these rising security issues, and the unreliable relationship with the US, India needs to ramp up its security efforts. India is already the 3rd largest military spender as per SIPRI(Stockholm International Peace Research Institution) spending 72 billion dollars(nearly 2.5% of GDP) on the military. It should also utilize its influence in the NDB(New Development Bank) setup by BRICS nations to fund its projects instead of taking help from ADB, in which Japan, China, and the US have much larger capital stakes. The MEA has already issued warnings to Pakistan against the CPEC and TRF. India should take the help of FATF to put Pakistan in the blacklist and take up major steps towards counter-insurgency and counter-terrorism. It should also try to bring political stability in J&K and also get into talks with Russia, Afghanistan, and the US to improve its position in Afghanistan.
