With the outbreak of COVID-19 pandemic, we have witnessed social and economic life coming to a standstill. There has been significant impact on various sectors, such as the aviation sector, travel & tourism, retail, capital markets, micro and small scale industries, and also, oil. International flights have been banned and domestic mobility is extremely restricted, and the revenues generated by travel and tourism, which contributes to about 7% of the GDP, has already taken a major toll on the growth rate of gross domestic product of India. Taking a view of the aggregate revenue of aviation in India, it came down by 85 per cent from Rs 25,517 crore in June quarter of last year to Rs 3,651 crore during April-June 2020. On the investment front, the Foreign Portfolio Investors (FPIs) have withdrawn huge amounts from India. Even if the international crude prices have reduced, the state taxes have succeeded in keeping the petrol prices rocket touching with an aim of adding to the revenues of the government and reducing the purchasing power of the people. The value of Rupee is continuously depreciating.
As the population currently stands at 137 crore(approximately) and increasing every year at 1.1%, India witnesses a median age of 30 years. With its large population, India faces many challenges, including creating more jobs for the increasing unemployed labour force, coping with COVID-19 health crisis, price stability, managing the dynamic macroeconomic environment shocks and reducing climate change. Population can be a liability or an asset. Similarly, India also has an hidden asset: its young demographic profile. There is a huge opportunity window for India. The data suggests that there has been a shift of workforce away from agriculture. The enrolment in educational institutions have been increasing causing a change in the labour force. However, the potential supply of labour in industry is much higher than the demand. China followed “One Child Policy” which led to reduction in its birth rates and led to faster growth between 1980-1990. That was China’s demographic window of opportunity. India is also a huge market, it is important that the policymakers focus on reducing the surplus unemployed by creating opportunities for industrial set up and creating jobs in the secondary sector as the agriculture sector is plagued with the problem of disguised unemployment.
India has the potential to attain a high trajectory of growth, much faster than the growth of both China and the US. There are different possible ways through which the demographic profile should increase growth. Firstly, by expanding the labour force as its population in the first category (1-14 years of age) reach the working age. Secondly, diverting the resources from spending on children to investing in physical and human infrastructure. The element of human capital is said to be the driving force towards growth by various economic models. Thirdly, by fostering a rise in women’s participation in the workforce that may naturally lead to a fall in the birth rate of the country. Fourth, as the working ages also happen to be the prime years for savings, which will ultimately lead to the accumulation of capital and technological innovation. And the fifth is to initiate measures to expand the savings rate of the economy. The boost to savings is also critical as the incentive to save for longer periods of retirement increases with greater longevity. As India transitions from stage 2 to Stage 3 of demography, a clear focus on the policy environment will help to minimise the chance of capturing the benefits.
The pandemic is said to be even more devastating, much worse than the Depression of the 1930s. With an increasing worrisome situation regarding the loss of jobs, wage cuts, daily ration, and absence of social security, India needs to reconsider and rethink the development paradigm and work towards making it more inclusive. On the other hand, COVID 19 has also provided some unique opportunities to India. There exists an opportunity to participate, on an extensive mode, in global supply chains as China loses its credibility amongst the multinationals. To conclude, social churning is certainly necessary and there needs to be a shift in the direction of economic policy in order to ‘Make in India’, and some reforms are the need of the hour, labour reforms being one of them. Whether it be COVID–19 or a different public health crisis in the future, a social justice approach is necessary for successfully dealing with the problem in a way that prioritises and protects individuals of all races, ethnicities, and classes. COVID-19 is definitely seen more as a social crisis and a justice challenge which can be supported with a clear and more inclusive economic policy.
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