'One size fits all' economic solutions like globalisation not viable: S Gurumurthy
May 11, 2020
New Delhi [India], May 11 : The Editor of Thughlak magazine Swaminathan Gurumurthy on Monday said that the COVID-19 crisis has confirmed that economically "one size fits all" models like globalisation will not offer solutions for the changing real-world situations.
"The functional model is Swadeshi. Accidents like COVID bring about such a total change in perception. For instance, the assassination of an Austrian couple brought about the first World War and that brought about the second World War. The cause had nothing to do with the outcome," Gurumurthy said at a webinar organised by Bharat Prakashan Delhi Limited in collaboration with various national media houses on 'Rebuilding Indian Economy: Challenges and Opportunities'.
"I have deduced a few propositions from the COVID accident. Firstly, the global one size fits all model for the world is over. Secondly, paradigms like colonialism, socialism, capitalism and globalisation are all fallible. It has now been confirmed that globalisation is not going to be a solution for the world," he added.
The Thuglak Editor further said that despite laying down the foundation of NITI Aayog which advocated the riddance of one size fits all model, there are economic institutions in India which are carbon copies of western institutions.
"In the post-COVID world, there is going to be a global political-economic order which we have not seen earlier. The NITI Aayog's founding document also said that the one size fits all model will not work in India. The bureaucrats, economic institutions, etc are still photocopies of the western institutions which is unfortunate," he said.
"Keynesian economics started creating problems like unemployment and inflation. It is necessary to understand that if we are applying an existing theory to a new situation, it creates problems. In our country, the unlisted corporates and the MSME sector derive their funds from the banks and not the market. But the banks follow the Basel norms. In 1995, 8 per cent of the loans were term loans but today more than 50 per cent loans are term loans. This model won't work for the situation in India," he added.
He further said that three financial institutions in 2016 said that the one size fit all model of Non-Performing Asset (NPA) will not work.
"The prudential norms should be decided by the government of India. The government and RBI should sit together and offer a one-time restructuring option to all those companies which are declared as NPA, provided their business is viable," he said.
"We need to have a re-look on the economic model. The philosophy of the NITI Aayog model has to be actualised. The COVID shock has made us realise that we have to monetise our deficits," he added.
Lastly, Gurumurthy said that the COVID-19 spread is under control in India as the infection rate is around 3-4 per cent.
"How is the spread of COVID-19 is to be decided by how many tests are conducted and how many infections are there. The NPR report in the USA says that if the tests yield less than 10 per cent infections then the situation is under control. In India the infection rate is only 3 to 4 per cent as compared to more than 10 per cent in many developed economies," he said.
