‘May you live in interesting times’ is an ancient Chinese curse. The elegance and subtlety of that particular curse are very evident this week as the world slips into interesting times. The Coronavirus and the Russian and Saudi actions on drastically cutting the price of oil while increasing production has delivered twin shocks to the global economy. The twin shocks though are likely to benefit India partly. This is because reduced oil price shrinks the current account. However, oil companies are expected to incur basis losses. This is because some oil purchases are tied through forward-contracts. Therefore irrespective of the oil price fall India would still have to pay those high contracted prices on physical delivery. But to the global economy, this may, on the whole, be a cost since import demand from West Asia is most likely to fall. These developments at a time when the global economy was already stressed by the trade war, make for interesting times. The global economic system, however, is headed for a change as the age of hydrocarbons slowly draws to an end. This will have an immense impact on the global economic order that was dependent on the price of hydrocarbons and faith in fiat currencies pegged to the USD.
The global economic system, however, is headed for a change as the age of hydrocarbons slowly draws to an end.
What is of particular import to India other than the obvious contingencies to contain the Covid-19 infections, is to protect its nascent innovation economy. The innovation economy is highly dependent on the global VC funds which have more or less frozen all new funding post the twin shocks. This can bankrupt the entire sector, further accentuating the deteriorating employment figures. This is something India can ill afford in the middle of transitioning from a leftist economic legacy to a capitalist economy. The largest youth bulge in history is another critical factor wherein any disruption in the employment market can be disastrous for India. With technology, especially in the ICT sector, a vital driver of the economy and strategic heft, this is a disaster that India can ill afford. What is needed is enlightened government intervention.
The Indian economy in INR is a 200 lakh crore GDP, with a 30 per cent saving rate.
Government intervention can be in the form of, declaration of telecommunications as a strategic field, accelerated implementation of the preferential market access for Indian ICT products and passing of the long-pending data protection bill. The data protection bill needs to mandate data localisation and indigenous technology for monitoring and to protect this data in the Critical Information Infrastructure. Another aspect that needs to be looked into is the creation of a strategic VC fund. The Indian economy in INR is a 200 lakh crore GDP, with a 30 per cent saving rate. This can be used to build a very dynamic domestic VC ecosystem. These actions will give a fillip to Make in India and Startup India and ensure the Indian ICT startups get a much-needed fillip. India awaits bold and decisive action from the national leadership. History many a time gives little opportunity for leadership to demonstrate decisive action, the Modi government has multiple times showed an appetite for bold measures. India needs bold and decisive leadership at this juncture. Too little too late might not be enough to stave off disaster.