Shehriar Rafi
“May you live in interesting times,” is a phrase often attributed to an ancient Chinese curse. This feels strangely apt within the current global environment we find ourselves hostage to South Asia in particular finds itself at a curious juncture.
A rapidly changing world, far from the relative stability of the distant 2 decade long ‘Pax Americana’; was already in flux, with populist strongman leadership on the rise, a superpower that abruptly forsake the global ‘rules-based’ system that the USA itself had setup (with all that entails) and disruptions to the established order caused by a rising China. The World did not need a global pandemic to make 2020 anymore “interesting” but when it rains it pours and here we are.
After the Coronavirus hit Pakistan in February, like most people, who were getting their news from epidemiologists such as Dr. Anthony Fauci in the West and following statistical models from institutions like Imperial College I expected a complete catastrophe. If the mighty USA, with cities like New York; that alone had a health budget an order of magnitude greater than Pakistan’s was brought to its knees, what chance did we have, or so the conventional wisdom went.
And yet, mercifully, the Cataclysm did not come; whether it was Imran Khan’s patented “Smart Lockdowns” (phased, hotspot control), diversity of genetics, prevalence of vaccinations, the hot and humid weather or Divine Intervention (everyone has their own reasoning); the coronavirus had a much smaller impact than anticipated in the most optimistic of projections, but really no one has a clue as to why.
It is September, in Pakistan, life has returned to normal, more or less. As we await the “second wave”, Pakistan is upbeat, the stock market has become the best performer in Asia, Real Estate (and its associated industries) is witnessing a vibrant revival under Prime Minister Imran Khan’s generous construction package, interest rates are down, consumer spending is returning to normal and large infrastructure investments are incoming as CPEC Phase II is readying to take off. Imran Khan and his team should get the political credit they deserve, mocked for placing livelihoods over lives, in the end they saved both; he was right and the intelligentsia was wrong. For the skeptics, let’s call it a miracle and leave it at that.
Last Week, after becoming the second most coronavirus infected country, India’s Ministry of Statistics and Programme Implementation dropped a bombshell, The Indian GDP had contracted by an enormous 24% in the formal sector during the first financial quarter of 2020; according to economist Pranab Sen the actual contraction could be as worse as 32%.
Additionally, private consumption had fallen by 27% with unemployment rising to 23%; the official figures far outpaced the most pessimistic of expectations and has caused alarm across the country as well as with foreign investors abroad. Declared “An Act of God” by the ruling Bharatiya Junta Party (BJP) Government;
Putting things into perspective, this is the worst economic performance of any major world economy and the Indian economy itself since the 1918 Spanish Flu. So what exactly happened?
Indian economic growth has been in steady decline since 2016. That year, PM Modi’s ill thought out and poorly executed signature policy of ‘Demonetization’ (also jeeringly termed “An Act of God” by West Bengal Finance Minister, Amit Mitra) decimated the informal sector, taking the air out of the economy’s tires.
Former Chief Economic Adviser to the government of India, Dr. Arvind Subramanian had been warning since 2019 about inaction on structural reforms and fudged economic data causing impending economic challenges he termed “India’s Great Slowdown”.
What about the courts? I hear you ask, if the legal gymnastics in the Supreme Court verdict on Ayodhya wasnt enough for you; take the recent example of prominent lawyer Prashant Bhushan, who suffered a serious contempt of court case on fickle grounds regarding his opinion in a tweet. Prashant has also been criticising the judiciary about its total lack of interest in hearing any Public Interest legislation against the government’s heavy handedness. Ironically,
In this tinderbox, entered the coronavirus pandemic; on a recent TV programme former Chief Economist at the World Bank Kaushik Basu observed that the impact on an economy was directly related to the severity of the lockdown it endured. In sharp contrast to Imran Khan, on the 21st of March, Modi reacted with what was perhaps the strictest nationwide lockdown in the world. The strategy had one critical flaw; the lockdown did not cater to poor daily laborers who suddenly found themselves without employment, shelter or transport. These destitute abandoned masses walked hundreds of miles cross country, in their millions, with their children on their backs and a few belongings in tow, trudging towards their respective villages. In Mr. Basu’s opinion, Modi froze the economy and spread the germs. As a result of this haphazard planning more than half of the daily 80,000 new coronavirus cases are now in India’s wide-spread rural areas.
It will take at least 3 years for the economy to recover and Modi’s promise of a $5 trillion economy by 2024 is dead. Modi’s massive $250 billion stimulus package dubbed ‘Atmanirbhar Bharat’ (self-reliant India) which experts believe has to be executed perfectly to have anything close to the desired effect is yet to bear fruit. Tragically, the poorest and most vulnerable have likely exhausted all savings on survival and even when income does pick up, it will go towards replenishing savings or debt finance and hence will not contribute to demand.
Tragic as all this is, amongst all the chaos perhaps lies an opportunity; a humbled and overwhelmed India might be willing to seek a working relationship with Pakistan in order to lessen the immense pressure it is feeling at this moment. Some form of economic, diplomatic and trade normalization would benefit the only thing that should matter for both: the lives and livelihoods of the people of the subcontinent.
(The Writer is CEO of Rafi Group, President Jinnah Rafi Foundation & holds an MBA from EDHEC Business School)
