Back to Basics is the way ahead
Context – In the wake of Covid crisis there is a need to go back to basics and reconstruct the ‘new deal’ on simple and time-tested economic principles based on Markets and private economic agents that create wealth and prosperity.
Weakness exposed during the COVID-19 crisis.
- Liquidity crunch in NBFC and Mutual Funds due to absence of liquid corporate bond market.
- Non-enforcement of a social security legislations: Magnified the Migrant labour distress and visible State failure and incapacity
Effective coping and response mechanisms during lockdown
- Actions of private actors: online markets fulfilling essential needs of consumers, and farmers selling directly through farmer producer organisations (FPOs) and not through a dysfunctional agricultural produce market committee (APMC)
- Meta-lessons Learnt: Markets and freedom work well in all but four cases of market failure i.e. provision of ‘public goods’, correcting for externalities, solving information asymmetry, and preventing abuse of market power.
Opportunity to reset the balance between state and markets.
- Land Acquisition:
- Encourage voluntary sale and purchase of land for those who want to make in India.
- Market based forces to take its own course to push investment.
- State can become enabler of the market with safeguards for vulnerable sections.
- Social Security:
- Strengthen market-based social security for labour (e.g., national pension system)
- State to co-contribute along with workers and employer especially for low income people.
- Employer-agnostic Scheme: Social security for workers without necessarily linking it with a specific employer
Way Forward
- Post-Covid-19 India needs a better and smarter State in many areas focusing on going back to basics and build stronger public systems in the social sector to protect, empower and support the weak.
