The Coronavirus attack is an unpredicted and inimitable crisis that has damaged the entire world severely. COVID has enormously affected the global economy, to overcome financial loss and health crisis, countries are applying various measures to deal with it.
Trade is an important way to improve the economy and provide adequate supplies and medicine to fight coronavirus, both of which require cooperation from countries especially if the country’s goods and services depend largely on exported material. Once the countries have a hold on medical consequences it faces because of pandemic, the focus will shift towards assessing the economic, social, and psychological damage caused by it.
According to the WTO, “the world trade is expected to fall by between 13 to 32 percent in 2020, which is a clear indication of recession in the world economy”. In times of such crisis, India has realized its dependency on exports and neighboring countries in regards to industrial foreign goods. India’s response to the economic crisis is to be seen as an opportunity to develop a better supply chain and limit the import.
On 12th May 2020, PM Narendra Modi talked about Atma Nirbhar Bharat Abhiyan, announcing an economic package of Rs 20 lakh crore specially empowered to make the country independent and standing against the tough competition in the global supply chain. It is aimed at improving its position in international trade by being self-sufficient. This package will be used in empowering the businesses, employers, employees, poor, laborers, migrants who have been adversely affected by COVID.
Atma Nirbhar Bharat Abhiyan
Slogans initiated under ATMA NIRBHAR BHARAT include ‘vocal for local’, ‘local for global’, and ‘make for the world’. Prime Minister Narendra Modi addressed the nation and said the country should overlook the crisis inflicted due to pandemic as an opportunity to achieve economic self-reliance.
Via this program, the importance of promoting “local” products is being embedded in Indian markets. Self-reliance, shall not imply that India will embrace isolationist policies or initiation of protectionist self-reliance movements across the world. It focuses on improving efficiency competing with the world and helping the world while promoting local goods within the country, limiting imports, encouraging new businesses, and going global with local supply chain.
5 Pillars of Atma Nirbhar Bharat
- Vibrant Demography
5 Phases of Atma Nirbhar Bharat Mission
- Phase I: Businesses including MSMEs
- Phase-II: Poor, including migrants and farmers
- Phase- III: Agriculture
- Phase-IV: New Horizons of Growth
- Phase-V: Government Reforms and Enablers
Restrictions and WTO (World Trade Organization)
At the multilateral level, WTO lacks in Transparency. To cope up with the COVID pandemic, transparency should be at par otherwise it becomes quite difficult for economic operators to efficiently adjust their decisions on purchasing power. To have targeted, transparent, just, fair, and transparent trade barriers an agreement was re-affirmed by the release of ‘The G20 Ministerial Statement’ on 30 March 2020 which stressed upon proper follow up of WTO rules so that the global supply chain is not disrupted and was named as emergency measures designed to tackle COVID-19. The agreement talked about “not imposing export restrictions or extraordinary taxes on food and agricultural products purchased for non-commercial humanitarian purposes by the World Food Program (WFP) and other humanitarian agencies”.
India and WTO (World Trade Organization)
The WTO aims to smooth coordination between their intergovernmental organization and acts as a regulator, a facilitator, a negotiator, an adjudicator.
Its primary role is to open trade that benefits all and maintain a liberal economy by keeping fundamental principles of the multilateral trading system alive. Since the formation of WTO, India has been its signatory and part of all three globally recognized trading systems:
- domestic trading
India’s Response to Covid (Atma Nirbhar Bharat Abhiyan) Vis-A-Vis WTO
COVID-19 and the recent trade wars have revealed the vulnerability of a supply chain when exposed to a pandemic, natural disaster, or due to protectionist measures imposed by major trading partners across the globe. This has called for immediate measures to increase the resilience and reconfigurability of such supply chains.
Several Indian MSMEs are highly dependent on imports from China. Other industries include pharmaceuticals, where China supplies 70 percent of Active Product Ingredients (APIs), required for the industry to manufacture generic drugs. About 80 percent of solar panel requirements of India’s renewable energy sector are imported from China. About 30 percent of raw materials and base components needed for automobile, textile, and chemical industries are imported from China.
Due to pandemics, there can be an increase in demand for essential items like food and pharmaceuticals. Therefore, it is possible in the future that there will be a higher demand for agricultural and pharmaceutical exports from India.
46 WTO members and 8 non-WTO members have introduced export prohibitions or restrictions in the reaction of the COVID pandemic to mitigate critical shortages at the national level. Although, most of these have been described as temporary measures. Another benefitting sector is the automobile sector due to the practice of social distancing norms.
Steps Taken by the Government to Revive Economy
Package value of Rs.20 lakh crore or 10 percent of GDP in the financial year 2020 has been made public by the government- This package will be used to form measures that will focus on getting back to work i.e., “enabling employees and employers, businesses, especially Micro Small and Medium Enterprises, to boost production and workers can restart their gainful employment.
- To protect Indian MSMEs government is inducing various measures. First being the e-market linkage to act as a replacement for trade fairs and exhibitions.
- All businesses (including MSMEs) will be provided with collateral-free automatic loans of up to three lakh crore rupees. MSMEs can borrow up to 20% of their entire outstanding credit as of February 29, 2020, from banks and Non-Banking Financial Companies (NBFCs). Borrowers with up to Rs 25 crore outstanding and Rs 100 crore turnover will be eligible for such loans and can avail of the scheme till October 31, 2020. Interest on the loan will be capped and a 100% credit guarantee on principal and interest will be given to banks and NBFCs.
- To protect Indian MSMEs from competition from foreign companies, global tenders of up to Rs 200 crore will not be allowed in government procurement tenders.
- A special scheme will be launched within a month to facilitate easy access to credit for street vendors. Under this scheme, bank credit will be provided to each vendor for initial working capital of up to Rs 10,000. This is estimated to generate liquidity of Rs 5,000 crore.
- “A central law will be formulated to provide:
- Adequate choices to farmers to sell their produce at remunerative prices,
- Barrier-free inter-state trade, and
- A framework for e-trading of agriculture produce.
- Currently, farmers are bound to sell their produce only to the licensees in Agricultural Produce Market Committees (APMCs). The proposed amendments seek to enable the free flow of agricultural produce and establish a smooth supply chain providing options of better price realization to farmers.
- The Essential Commodities Act, 1955 empowers the central and state governments to control the production, supply, and distribution of certain commodities to avoid scarcity in the country. Commodities covered under the Act include edible oil and seeds, pulses, sugarcane, and its products, and rice paddy.
- The Act will be amended to deregulate food items including cereals, edible oils, oilseeds, pulses, onions, and potatoes. This is expected to allow better price realization for farmers by attracting investments and enabling competition in the sector.
The sector of Commercial Mining
The PM wants to focus on turning India to become the number one exporter of coal for which auctions will be conducted for the allocation of coal mines. Any party can bid for a coal block and sell in the open market.
Agriculture and Allied Sectors
- A fund of one lakh crore rupees will be created for the development of agriculture infrastructure projects at farm-gate
- An additional fund of Rs 30,000 crore will be released as emergency working capital for farmers. This fund will be disbursed through NABARD to Rural Cooperative Banks (RCBs) and Regional Rural Banks (RRBs) for meeting their crop loans requirements. This fund is expected to benefit three crores small and marginal, farmers
- The Pradhan Mantri Matsya Sampada Yojana (PMMSY) will be launched for integrated, sustainable, and inclusive development of marine and inland fisheries. Under this scheme, Rs 11,000 crore will be spent on activities in Marine, Inland fisheries, and Aquaculture and Rs 9,000 crore will be spent for developing infrastructure (such as fishing harbors, cold chain, and markets).
Atma Nirbhar Bharat Abhiyan Shortcomings
- The package however failed to boost the confidence and bring optimism among the corporates, as the focus of the package is more on indirect benefits than on direct benefits.
- The government should have designed packages that would provide cash support rather than relying more on loans.
- The collateral-free or unsecured loans announced for MSMEs may lead to higher default by the companies and lead to higher NPAs.
- The banking sectors, especially the PSU, are already reeling under the bad loan issues and with unsecured loans, may see further deterioration in their asset quality.
- The total actual government expenditure that will be incurred through the package is only 1% of India’s GDP growth. As such these measures will not be adequate to boost the demand sentiment in the economy.
Calls for India to Boycott Chinese Products
- It’s practically difficult in the short term for India as India imports $75 billion worth of goods every year from China to the extent that parts of Indian industry are dependent on China.
- Government of China’s customs data showing that Chinese exports to India had fallen by 25% as compared to the same period in 2019.
Unfinished Reforms in the Atma Nirbhar Bharat Agenda Include
- financial reform -sustainably raising credit to GDP ratio from 50 percent to 100 percent
- urban reform -having 100 cities with more than a million people rather than 52
- education reform -our current regulator confuses university buildings with building universities
- skill reform-our apprentice regulations are holding back employers and universities
- Labor reform-our capital is handicapped without labor and labor is handicapped without capital.
The COVID-19 pandemic presents the world with an unprecedented public health challenge. Measures to curb the spread of the disease have shut down large swathes of the world economy.All countries depend on international trade and global value chains to source most of their products. This is challenging in light of ongoing disruptions to international transport, particularly air cargo, which often goes together with passenger travel.
As WTO allows to put restriction and trade barriers during a crisis or pandemic for the domestic country to survive and provide goods and services to its own first, the Indian government has used it as an opportunity to create a self-sufficient India and has put barriers on various goods and services as discussed but also has been exporting medical supplies and other essential goods and services across the border to ensure the continuous flow and its support in helping underprivileged countries.
Recently The government made its prior approval mandatory for direct or indirect foreign investments from countries that share a land border with India to curb “opportunistic takeovers” of domestic firms following the COVID-19 pandemic, a move which will restrict FDI from China and China calls India’s move a violation of WTO’s principle of non-discrimination. Even though the Indian economy has taken a huge hit during Covid-19, it is predicted that the Indian Economy will soon rebound and will grow by 6.7% in the next financial year according to a report by IHS Markit.
The WTO Deputy General said, keeping markets open and predictable, as well as fostering a more generally favorable business environment, will be critical to spur the renewed investment we will need. And if countries work together, we will see a much faster recovery than if each country acts alone. The most secure way of ensuring the best interests of all nations is to unite multilaterally at an international platform i.e., World Trade Organization (the WTO).