New Delhi: The Coronavirus crisis has affected economies across the world in an unprecedented manner, and the situation is considered to be worse than the depression of the 1930s. While the question of restoration of “normal” life is moot, the bigger question is how long it will take to recover to generate meaningful employment. The pandemic has provided an opportunity to the World to upend the status quo and reshape the world order in a more equitable, transparent, and responsible manner.
While the role of China in hiding and spreading the pandemic has posed serious questions over its leadership credentials, developing countries like India which came forward to provide whatever essential drugs it had in its kitty in order to save humanity have earned praise.
India, despite its fragile and overburdened health infrastructure, has also managed to control the spread of the disease, which has caused huge casualties in the developed countries. Indian Prime Minister Narendra Modi, who took charge from the very beginning to battle the pandemic, managed the economic fallout.
In economic terms, the pandemic has posed a number of challenges and also provided opportunities. Its adverse effect, is most visible in terms of loss of job opportunities for the Indian Diaspora, especially in the Middle East. India has nearly 31 million non-resident Indians, of whom an estimated 8.5 million work in Gulf countries.
Indians constitute over 30% of the expatriate workforce in the Gulf States. India is the topmost recipient of remittances from its Diaspora in the world, even ahead of China. The World bank estimated (April 29) that remittances to India will fall from $83 billion in 2019 to $64 billion this year. The situation may change in terms of actual receipts on account of Corona, however; it’s likely to retain its leadership position.
Indian Diaspora forms a large pool of skilled, semi-skilled, and unskilled workers globally. In terms of countries, 82% of the total remittances come from seven countries – UAE, US, Saudi Arabia, Qatar, Kuwait, UK, and Oman. Though the southern states of India dominate in terms of remittances, Kerala accounts for about 19% share of the same.
However, in terms of the workers opting to go to the Gulf States, the figure has shown a consistent decline from 7.81 lakh in 2015 to 3.34 lakh in 2019. The reasons for the shrinking job market are attributable to sluggish oil prices, nationalization policies in many of these countries, and an increase in work permit renewal fees. However, one of the important factors for the reduced job-related migration is the narrowing of wage differentials.
The economic growth in India has opened unprecedented opportunities for the people who are no longer keen to migrate to the Gulf States for jobs particularly in areas that do not provide satisfactory living conditions. In fact, it is a positive sign for the economy of the country to be able to absorb its manpower. Interestingly, despite the reduction in the number of such migrants, remittances accruing from these countries have increased over the period indicating higher income generation for each migrant.
It is known that in all these countries critically important sectors including health and medical facilities are primarily manned by Indians who have become indispensable during the crisis. In this scenario, the loss of jobs for migrants on account of the pandemic may not be as acute.
The second important gain visible is the fall in oil prices. The lack of demand of oil has brought its price to unprecedentedly low levels. India which primarily depends on imports has benefitted immensely and can keep its import bill under control. While the import bill on account of oil was $144.3 billion in 2013-14, it came down to $111.9 billion in 2018-19 and is expected to go down further to $105.6 billion in 2019-20.
The oil price war coupled with the Corona pandemic has provided India an opportunity to replenish its Strategic Petroleum Reserves (SPR). India has around 5.33 million metric ton capacity at present at three locations Vishakhapatnam, Mangaluru, and Padur. It proposes to increase its storage capacity to 15.33 million metric tons.
The Ministry of Petroleum and Natural Gas has also allowed domestic public sector refiners to use Strategic Petroleum Reserves (SPRs) for storing their crude oil purchases as well as to buy for the government. The move allows domestic refiners such as Indian Oil Corporation, Bharat Petroleum Corporation, Hindustan Petroleum Corporation, and Mangalore Refinery and Petrochemicals to fill the storage sites with their surplus purchases so that the quantity already contracted for is not left on the high seas. Additionally, this would also, ensure that the refiners do not default on payments and pay fines for delays in offloading.
In addition, the government may also explore the possibility of providing flexibility to oil PSUs for “buying” the WTI future contract for June, taking delivery, and shipping it to India. For this, the Government may need to authorize them to lock in low prices through forwarding contracts. Since India is a major consumer of oil from Saudi Arabia, Iraq, UAE, Iran, Nigeria, Qatar, Kuwait, and the US, these countries have a long term interest in India.
Moreover, India’s decision to fill its SPR at this time of crisis has not only infused confidence in its ability to turn the crisis into an opportunity but also provided solace to the shrinking sales of the black gold.
The Government may also use the opportunity to attract investment as it will likely be diverted from China. It is a fact that the pandemic started in China and Beijing did not take adequate steps to prevent its spread. It has refused to allow the WHO or other States to conduct an investigation on the origins of the pandemic undermining its credibility.
As a result, many Western companies are considering winding up their operations in China and shifting to other locations. India could emerge as a place of choice for such a business. In this context, the “Make in India” could be juxtaposed against the “Made in China 2025” program. China through the above program wants to play a dominant role in the global export markets, compared to its earlier role as the manufacturing backyard of the developed world. Its ability to reverse engineer and dubious and unethical approach to patents and copyrights, threaten the international intellectual property regime.
The salient features of the “Make in India” program could be highlighted to project India as a favorable destination to lure investment fleeing China.
India has also a taken lead in the manufacturing of vaccines for the pandemic. The Serum Institute of India, one of the biggest facilities for undertaking this job in the world, has joined hands with Oxford University to manufacture a vaccine for Covid-19. On account of low costs, Indian manufacturers provide a ray of hope for equal availability of the vaccine to both rich and poor, at an estimated price of INR 1000; a pittance compared to the cost of one dose of Remdesivir, considered effective in treating Covid patients, at INR 70,000.
India has also taken the lead in the South Asian region and floated the SAARC Covid-19 Emergency Fund with a maximum contribution to support the efforts to fight the Pandemic. Whereas Pakistan has been using the crisis to seek doles from international institutions and donor countries apart from restructuring the debt of developing countries.