Echoes from the Mahabharata
India’s response to the pandemic stemmed from the principle advocated in the Mahabharata, which says: “Saving a life that is in jeopardy is the origin of dharma”
The response drew on epidemiological and economic research, especially those pertaining to the Spanish Flu, which highlighted that an early, intense lockdown provided a win-win strategy to save lives, and preserve livelihoods through economic recovery in the medium- to long-term
India recognised that while GDP growth will recover from the temporary shock caused by the pandemic, human lives that are lost cannot be brought back
Stringent lockdown at the very onset of the pandemic enabled flattening of the pandemic curve and provided necessary time to ramp up the health and testing infrastructure
A New Index Is Born
The survey examines the progress made in providing access to “the bare necessities” by constructing a Bare Necessities Index (BNI) at the rural, urban and all-India level
The BNI summarises 26 indicators on five dimensions, namely, water, sanitation, housing, micro-environment, and other facilities
The index has been created for all states for 2012 and 2018 using data from two NSO surveys on drinking water, sanitation, hygiene and housing condition in India
Access to bare necessities is the highest in states such as Kerala, Punjab, Haryana, and Gujarat while it’s the lowest in Odisha, Jharkhand, West Bengal, and Tripura
Medicine, Not Diet
The survey compares regulatory forbearance provided during the global financial crisis and Covid-19 crisis
Forbearance provided post global financial crisis continued long after the economic recovery, resulting in unintended and detrimental consequences for banks, firms, and the economy
Forbearance represents emergency medicine that should be discontinued at the first opportunity when the economy starts recovering, not a staple diet that gets continued for years
Given the problem of asymmetric information between the regulator and the banks, which gets accentuated during the forbearance regime, an Asset Quality Review exercise must be conducted immediately after the forbearance is withdrawn
Centre stage At Last
The survey suggests increasing public healthcare spending from 1% to 2.5-3% of GDP
This can decrease the out-of-pocket expenditure from 65% to 35% of overall health care spending
Creation of a health care sector regulator to curb market failures stemming from information asymmetry
Mitigation of information asymmetry will help lower insurance premiums, enable the offering of better products, and increase insurance penetration
When Growth & Inequality Converge
Unlike advanced economies, economic growth and inequality converge in terms of their effects on socio-economic indicators in India
Economic growth has a far greater impact on poverty alleviation than inequality
India must continue to focus on economic growth to lift the poor out of poverty by expanding the overall pie
Managing Debt Sustainability
Interest rate on debt paid by the Indian government has been less than the country’s growth rate by norm, not by exception
A fiscal policy that provides an impetus to growth will lead to lower, not higher, debt-to-GDP ratios
Simulations undertaken till 2030 highlight that given India’s growth potential, debt sustainability is unlikely to be a problem even in the worst scenarios