The Covid-19 pandemic is a black swan event occurring once in seven generations. It has exposed new risks and vulnerabilities and heightened uncertainties about the revival process. Covid has not been kind to the marginalized, as it has further sharpened existing divides. The prospect of transformational socioeconomic change existed even before Covid. However, the extent of today’s globalization has amplified it. The world is interconnected as never before, trends in digitalization and inequality are accelerating, and addressing global warming and climate change is now a key policy priority.
Navigating the Covid crisis is the acid test of policymaking. The topmost priority is to save lives and livelihoods and then extricate the economy from the morass into which it has sunk. This involves confronting uncomfortable questions to which there are no straightforward answers. For example, how should policies be framed to maintain adequate support for those at the bottom of the pyramid while simultaneously ensuring macroeconomic stability and sustained growth? How should the government respond when facing diminishing policy space for manoeuvring because fiscal and monetary tools have already been extensively used?How can asynchronous and divergent socioeconomic recoveries in urban and rural parts of the country be managed so that those still grappling with Covid avoid falling even further behind?
Adapting to a new socioeconomic landscape is not going to be easy. There is going to be no one-fits-it-all Policy advice will need to better assess a range of possible outcomes through well-conducted counterfactual experimentation. This will help prepare for worse-than-expected scenarios, while maximizing all the positive surpluses and opportunities that could arise along the way. This will necessitate an improved understanding of risk-reward trade-offs, supported by contingency planning and developing the ability for decision making under risk and uncertainty.
The initial policy choice of lives over livelihoods succeeded by lives as well as livelihoods is finally showing positive results. Despite the pandemic’s carnage, India still has one of the world’s lowest Covid-related per-capita deaths compared to most major economies. Our policy may not have been perfect, but it has still delivered results. We need to realize that economic stability over time is necessary – but not sufficient – to achieve economic sustainability, which has to be our long-term goal. Given its socioeconomic diversity, India is almost a continent in itself and its success will spur many other developing countries to follow in its wake.
Covid has heightened the extent of global interconnectedness. Events in one country can have unpredictable effects across diverse geographies. Asynchronous recoveries complicate the effects of policy standardization. Healthcare, climate change, and digitalization are three areas to watch out for in the unfolding landscape, as they are going to shape the future of humankind. It will be critical to identify and assess economic and policy overlaps, and to provide expert advice on how to deal with them. Finally, international economic cooperation can benefit substantially from a healthier dialogue between all stakeholders. We need to adapt to the new realities.