Covid fallout may further weaken democracy in South Asia, says Indian economist Nayyar

FE Report | Sunday, 20 June 2021

The fallout from Covid may further weaken the democracy in South Asian region as the political governments there have been inclined to undermine the democratic practices, Professor Deepak Nayyar, a prominent Indian economist, said on Saturday.

Such trend is persisting not just in South Asia, but also in other parts of the world, Prof Nayyar noted.

"Unlike the governments, civil society and general citizens should raise their voices in favour of regional collective efforts to fight the effects of the pandemic," he told a panel discussion on "COVID-19: Contexts and Recovery South Asian Perspective".

Besides, he suggested taking expansionary macroeconomic policies to recover from the pandemic which, at the same time, has created opportunities for rethinking traditional growth trajectories.

Prof Nayyar, Emeritus Professor of Economics at Jawaharlal Nehru University, was making a presentation on the second day of SANEM International Development Conference (SIDC) 2021.

Presided over by South Asian Network on Economic Modeling (SANEM) Executive Director Dr Selim Raihan, the session was also addressed by eminent economist and Chairman of Centre for Policy Dialogue (CPD) Professor Rehman Sobhan.

Prof Nayyar said that the democracy is at risk not so much by the monarchs or generals as it is used to be, but it is from the political leaders who came to power through elections in an established democratic process and now tend to undermine the very process that brought them to power.

The pandemic will challenge the already fragile political democracy not only in South Asia but also other parts of the world, he said, adding that the authoritarian populist regimes have been gaining pace in South Asian countries, Brazil, Russia, Turkey, and some other countries and regions.

"The virus doesn't get confined within any geographical border. Therefore, the pandemic nationalism unleashed by so many governments and political leaders is making the situation even worse," he said.

Emphasising on the need for international collective action against the pandemic, the economist said: "A political meltdown was occurred in South Asian Association for Regional Cooperation (SAARC) as it doesn't exist as a meaningful collective political organisation anymore."

The governments in South Asia must think about expansionary macroeconomic policies to cash in on the new opportunities created by the pandemic, he suggested.

He added that it is a high time to rethink economic policies, rebuilding health system, building social infrastructure - both education and health - and finding innovative solutions for recovery.

"If the economy is in free fall, massive slippage of government revenue will balloon the fiscal deficit without any hope of recovery," he said.

If the authorities can capture the opportunities, it will give enormous dividend in the medium term to every South Asian countries, he opined.

Stating that the economies in the region will take at least two years to recover or return to pre-pandemic situation, he suggested investing in physical infrastructure particularly in power, roads, transport and ports.

Professor Nayyar said the burden of economic recovery will be largely on poor people and small firms in the region which has become a major challenge in the South Asia's success in reducing poverty in last five years.

Taking part in the discussion, Professor Rehman Sobhan said Bhutan is the best example in the region that a well- coordinated management can contain the spread of the virus.

There has been a visible mismanagement in pandemic response in South Asia in terms of infection rate and fatalities, he said, adding that the impact of the pandemic is significantly lower in Bangladesh in comparison to India and other countries.

In fact, the socio-economic situation was severe during the first phase of the pandemic in Bangladesh while the effect, at least the economic one, was less during the second wave which is now persisting, he said.

In terms of economic shock, he said the export sector took the first hit due to a declined demand in the US and EU markets which have, however, started recovering in 2021.

But the domestic market faced problems as far as the demand and supply are concerned due to increased unemployment mostly in informal sector, he said.

Decreased economic activity, as a consequence, has affected the GDP growth, the CPD Chairman said, adding: "While India experienced 11 per cent decline in GDP, Bangladesh has been claiming a robust growth of 5 to 6 per cent even in the middle of the crisis. Now we are talking about 7 per cent growth rate this fiscal."

"In Bangladesh, you are never really sure about the validity of the statistics," he said, adding: "World Bank halved the estimates, but it was publicly dismissed by the country's finance minister."

"There might be some exaggeration, but our growth would be in plus figure as objectively we know the country had a very good year for agriculture sector," he further said.

In his welcome speech, Dr Raihan said the countries around the world have witnessed three broad crises during the pandemic -- health, economic and social.

However, the questions should be raised on how better the governments in South Asia understood the crises and set priority areas to start working on.

The lessons learnt by the governments in last 18 months should also be evaluated to find out whether the recovery initiatives are effective or not, he added.

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