Shaktikanta Das: Beyond COVID - towards a stronger, inclusive and
sustainable economy
Keynote address by Mr Shaktikanta Das, Governor of the Reserve Bank of India, at the 48th
National Management Convention of the All India Management Association (AIMA), 22 September
2021.
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I wish to thank the President and other office bearers of the All India Management Association
(AIMA) for having invited me to participate in this convention. This is a national management
convention and it is apt that the AIMA is organising it. In normal times and even more in times of
severe stress, it is the quality and capacity of management that makes the critical difference and
enables businesses to not only survive but come out stronger. I am happy to note that the AIMA
is advancing the cause of management profession by collaborating with industry, government,
academia and students.
2. The theme of this convention, "Beyond Recovery: New Rules of the Game" is well timed. After
an eighteen-month long battle, there are signs - and I repeat signs - that the world is emerging
from the shadow of coronavirus. As we emerge from the present crisis and look beyond, this is
the right time to step back a little and plan for an economy which is stronger, more inclusive and
sustainable. I propose to highlight the contours of such an economy in my remarks today.
Envisioning Life Beyond COVID-19
3. COVID-19 is a watershed event of our era. It has caused widespread devastation of life and
livelihood and it is still haunting the global economy in several ways. There are very few parallels
of a shock like COVID-19 in history which left policymakers with no template to navigate through
the crisis. Both health systems and human endeavour to deal with the crisis were stretched to
the limit. The pandemic is likely to leave indelible mark on the way economies and societies
function. When we emerge from the crisis it would most likely be a new dawn, a new normal.
4. The pandemic has induced several structural changes which have significantly altered the way
we work, live and organize businesses. With greater shift to work from home, technology has
gained potential to boost productivity, by saving on travel time, boosting sales on online platforms
and accelerating the pace of automation. As a result, consumption pattern is changing and
companies are resetting their supply chains both globally as well as locally. These changes will
have wider ramifications for the economy.
5. Global supply chain is undergoing significant shifts; companies and various authorities have to
be nimble enough to capitalise on these opportunities. Automation and robotics will threaten
lowskilled workers and those in the contact intensive sectors. The shift to online have also created
new opportunities and challenges for employment-intensive sectors like travel, hotels,
restaurants and recreation. Some of these changes are going to stay beyond the pandemic.
These structural changes need to be kept in mind while formulating strategies for participative
growth process.
6. At another level, the pandemic has affected the poor and vulnerable more, especially in
emerging and developing economies. Daily wage earners, service and informal sector workers
were badly hit. Their employment and income opportunities were curtailed. The lasting damage
inflicted by the pandemic on these segments is of serious concern for inclusive growth. In the
medium to long-run, both efficiency and equity will greatly matter for sustainable growth and
macroeconomic performance.
7. Technology adoption which was earlier limited to core sectors has now permeated to several
other areas, viz. education, health, entertainment, retail trade and offices. The pandemic has also
caused disruptions and induced reallocation of labour and capital within and across sectors. The
firms which were quick to adopt technology and were flexible in working from off-site are
attracting more capital and labour. On the other hand, firms which were not up for the challenge
and competition will have to leave the space for the more dynamic ones. These forces of
'creative destruction' are expected to boost productivity by encouraging greater competition,
dynamism and innovation in several sectors of the economy.
The Indian Scenario
8. Let me now turn to the Indian scenario. In the post-pandemic world, India's prospects are
underpinned by several dynamic sectors. I wish to briefly touch upon some of them.
9. First, information technology (IT) services and information technology-enabled services (ITES)
backed by entrepreneurial capabilities and innovative solutions have emerged as key strength of
the Indian economy over the years. There is a growing league of Unicorns in India reflecting its
potential for technology-led growth. The country has added several unicorns over the last year to
become the third largest start up ecosystem in the world. Underpenetrated Indian markets and
large IT talent pool provide an unprecedented growth opportunity for new age firms. Further, the
COVID pandemic has provided a new impetus to technology-driven companies such as fintech,
edtech and healthtech which are likely to see increased funding activity in the coming years.
10. Second, India's digital momentum is expected to continue with a strong demand in areas
such as cloud computing, customer troubleshooting, data analytics, work place transformation,
supply chain automation, 5G modernisation and cyber security capabilities. India has the natural
advantage to benefit from the emerging trends in these areas. The drive towards full fiberisation
of the economy has to go hand in hand with the establishment of data centres across the nation
for data storage and processing. Ensuring universal, affordable and fast broadband internet
access all through the country can play a critical role in advancing productivity and employment
opportunities. Further, the stronger push to digitalisation and automation can have spillover
effects on ease of doing business. Medical advances and process accelerations can spark a
renaissance in public health innovations and delivery. E-commerce is emerging as another
promising sector for India. It has benefited from growing market, increased internet and
smartphone penetration and COVID-induced shifts in consumer preferences. Various initiatives
taken by the government, namely Digital India, Make in India, Start-up India, Skill India and
Innovation Fund have created a conducive eco-system for faster growth in the digital sector.
11. Third, the pandemic has brought to focus what India can achieve in the area of
manufacturing. In the pharmaceutical sector for the first time in history, vaccines were developed
and administered within a year with India remaining a forerunner and a global leader in vaccine
manufacturing. Investors have shown confidence in the Production Linked Incentive (PLI)
scheme introduced by the government. Following this initiative, India is now home to almost all
the leading global mobile phone manufacturers and during the recent period, India has turned
from being an importer to an exporter of mobile phones. This trend is likely to spill over to other
sectors also. The presence of global players would help in enhancing India's share in Global
Value Chain (GVC) and building up a resilient supply chain network. Greater GVC participation
would also enhance the competitiveness of India's large and Micro, Small and Medium Enterprise
(MSME) supplier base.
12. Fourth, the global push towards green technology, though disruptive, can create new
opportunities in several sectors. For example, the automobile sector is moving towards electric
vehicles. With greater innovation, electric vehicles are slowly converging to internal combustion
engines (ICE) in cost and performance. The biggest Electric Vehicle car maker is not from the
traditional car maker companies. Similar creative disruption is also visible in the two-wheelers
space. With supportive policies, greener technologies can yield economic and environmental
benefits.
13. Fifth, India's energy sector is also witnessing significant churning and technological
transformation. As India grows rapidly, its energy demand is expected to pick up in the near
future. Currently, a large part of the energy demand is met from fossil fuels, with significant
import dependence. India aims to increase the share of non-fossil fuels to 40 per cent (450GW)
of total electricity generation capacity by 2030, as part of the goals set under the Paris agreement
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within the United Nations Framework Convention on Climate Change (UNFCCC). With a view to
give a boost to the agriculture sector and to reduce environmental pollution, the Government had
launched the Ethanol Blended Petrol (EBP) Programme, which would help in cleaner air besides
saving on fuel imports. The percentage of ethanol blending by Oil Marketing Companies has
risen from 1.5 per cent in 2013-14 to 5.0 per cent in 2019-20 and is further expected to rise to
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8.5 per cent in 2021-22, on course to achieve 20 per cent target by 2025. The drive towards
renewable energy is a step in the right direction both for energy security as well as environmental
sustainability, which are critical for our long-term economic growth.
14. Sixth, in the post-pandemic period, global trade will remain vital for faster recovery. Reflecting
congenial policy environment and supportive external demand, India's exports have rebounded,
with a broad-based double-digit growth during the first half of 2021-22. India's exports of
agricultural commodities, including Geographical Indications (GI) certified products to newer
destinations, offer favourable prospects for overall export. Furthermore, exports of engineering
goods - which account for around one-fourth of India's total exports - experienced robust growth
across product categories and newer markets. To further strengthen the export potential, there is
a need to enhance the share of high-tech engineering exports to achieve an ambitious
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engineering export target of US$ 200 billion by 2030 .
15. To achieve our objectives in all the areas which I have outlined so far, we need a big push to
infrastructure particularly in areas of health, education, low carbon and digital economy in
addition to transport and communication. In addition, the warehousing and supply-chain
infrastructure will be critical to bolster value addition and productivity in the agriculture and
horticulture sector. This will create employment opportunities in semi-urban and rural areas and
promote inclusive growth. The demand for warehousing infrastructure has also gone up in tier-2
and tier-3 cities in the wake of steep jump in online trading. Moreover, investment in intangible
capital such as research and development and skill upgradation of human resource has strong
and positive impact on productivity. Some empirical evidence suggests that the impact of
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investment in intangible capital on labour productivity is more than investment in tangible capital.
16. Seventh, a dynamic and resilient financial system is at the root of a stronger economy. India's
financial system has transformed rapidly to support the growing needs of the economy. While
banks have been the primary channels of credit in the economy, recent trends suggest
increasing role of non-bank funding channels. Assets of non-bank financial intermediaries like
NBFCs and mutual funds have been growing; funding through market instruments like corporate
bonds has also been increasing. This is a sign of a steadily maturing financial system - moving
from a bank-dominated financial system to a hybrid one. Substantial progress has been made to
fortify internal defence mechanism of financial institutions to identify, measure and mitigate risks.
This is a continuing process and efforts by all stakeholders have to be sustained.
Towards a more Inclusive and Sustainable Economy
17. History shows that the impact of pandemics, unlike financial and banking crises, could be a
lot more asymmetric by affecting the vulnerable segments more. The COVID-19 pandemic is no
exception. Within countries, contact-intensive service sectors employing large number of
informal, low-skilled and low-wage workers have been hit harder. In several emerging and
developing economies, lack of health care access has disproportionately affected the family
budget of the poor. Even education which was provided online during the pandemic excluded the
low income households due to the lack of requisite skills and resources. Overall, there are
evidences across countries that the pandemic may have severely dented inclusivity.
18. The global recovery has also been uneven across countries and sectors. Advanced
economies have normalized faster on the back of higher pace of vaccination and larger policy
support. Emerging and developing economies are lagging due to slow access to vaccine and
binding constraints on policy support. Multilateralism will lose credibility if it fails to ensure
equitable access to vaccine across countries. If we can secure the health and immunity of the
poor, we would have made a great leap towards inclusive growth. Global co-operation remains
vital for rapid progress on this front.
19. Needless to add that inclusive growth in the post pandemic world will require cooperation and
participation of all stake holders. In India, collaborative effort of various stakeholders is helping
accomplish a seemingly difficult task of accelerating the pace of vaccination. The private sector
is developing and manufacturing the vaccines; the Union Government is centrally procuring and
supplying it; and the state governments are delivering and administering it in every nook and
corner of the country. India is now administering a record of about one crore doses of the
vaccine every day across all segments of the population.
20. A major challenge to inclusiveness in the post pandemic world would come from the fillip to
automation provided by the pandemic itself. Greater automation would lead to overall productivity
gain, but it may also lead to slack in the labour market. Such a scenario calls for significant
skilling/training of our workforce. We also need to guard against any emergence of "digital divide"
as digitisation gains speed after the pandemic. Further, the need for professional human
resources trained in science, technology, engineering and mathematics (STEM) is rising briskly.
Major technology-based firms have expressed their intention to hire many new professionals with
skills in these areas. In the short-term, the supply of such a workforce cannot be increased by
the traditional educational system, and thus there is a need for close involvement of corporates in
the design and implementation of courses suitable to the changing industrial landscape.
21. As we recover, we must deal with the legacies of the crisis and create conditions for strong,
inclusive and sustainable growth. Limiting the damage that the crisis inflicted was just the first
step; our endeavour should be to ensure durable and sustainable growth in the post-pandemic
future. Restoring durability of private consumption, which has remained historically the mainstay
of aggregate demand, will be crucial going forward. More importantly, sustainable growth should
entail building on macro fundamentals via medium term investments, sound financial systems
and structural reforms. Towards this objective, a big push to investment in healthcare, education,
innovation, physical and digital infrastructure will be required. We should also continue with
further reforms in labour and product markets to encourage competition and dynamism and to
benefit from pandemic induced opportunities. The Production Linked Incentive (PLI) scheme
announced by the Government for certain sectors is an important initiative to boost the
manufacturing sector. It is necessary that the sectors and companies which benefit from this
scheme utilise this opportunity to further improve their efficiency and competitiveness. In other
words, the gains from the scheme should be durable and not one off.
22. Again, for growth to be sustainable, a transition towards greener future will remain critical.
The need for clean and efficient energy systems, disaster resilient infrastructure, and
environmental sustainability cannot be overemphasised. Due consideration should be given to
individual country roadmaps keeping in mind country-specific features and their stage of
development while adopting policies towards climate resilience.
Conclusion
23. On the whole, while the pandemic has created enormous challenges, it can also act as an
inflection point to alter the course of development. Enhanced adoption of technology will give
impetus to productivity, growth and income. Leveraging technology in implementing government
schemes, training and skill development programme for the unemployed, promoting women
friendly work atmosphere and supporting education of the poor and marginalized sections would
be areas of focus as we embark on our journey beyond COVID-19. Income and job creation with
digitalisation and innovation can bring about a new age of prosperity for a large number of people.
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24. Many of us have grown up reading Mahatma Gandhi's Talisman in text books - "I will give
you a talisman. Whenever you are in doubt...Recall the face of the poorest and the weakest man
whom you may have seen and ask yourself if the step you contemplate is going to be of any use
to him. Will he gain anything by it? Will it restore him to a control over his own life and destiny?"
As we strive to build a stronger and resilient India, this pearl of wisdom that we learnt long ago
remains as relevant even today.
Thank you. Stay Safe. Namaskar!
1
PIB Press Release "Key Declaration on Climate Change to be signed at the India CEO Forum on Climate
Change" dated 4th November 2020.
2
Roadmap for Ethanol Blending in India 2020-25, Government of India, June 2021.
3
PIB Press Release "EEPC celebrates 50th year of Engineering Exports Awards" dated 10th December 2019.
4
IMF (2021), "Boosting Productivity in the Aftermath of COVID-19", G-20 Background Note, June.
5
Pyarelal, Gandhi, M. (1958). The Last Phase Vol. II. Ahmedabad: Navajiban Publishing House, P. 65