According to Pranab Bardhan political economy is the distribution of political and economic power in a given society and how such distribution affects the directions of development and policies that depend on them. Political Economy is the matter of two functions: political power distribution and economic power distribution. In a given society, it connotes the interface between political and economic power impacting the growth and development prospects of that very society. A good connection between political and economic power ends up in a good political economy thereby influencing the growth and development of a country in a positive manner and vice versa. There is a very high correlation between the economic development of the economy and its political economy.
The Covid-19 made a downfall in all economic and political activities in almost every economy (affected ones in particular) and for that matter, every economy must embark upon the journey of undertaking a series of development and welfare activities in order to improve the standard of living and quality of life of its citizens alongside bring positive changes in the economy. The role of the political economy cannot be neglected in the phase of shocks and disturbances such as COVID-19. In addition, we cannot deny its role in as far as growth and development prospects of the Indian economy is concerned. From time to time, in the entire process of growth and development of India, it was the political economy that was all dominant in its functioning. Nevertheless, COVID-19 is beyond what is seen and observed and therefore we argue that the political economy of India is very unstable nowadays because the growth and development activities have stopped and this virus, a pandemic as declared by WHO, put a halt at almost all political and economic functions. In this difficult situation, the benefits accruing from the measures taken by the government such as lockdown activities have not generated the desired outcome. Hence, strategies under COVID-19 have failed to reduce the negative effects of the virus and bring about a positive change in the different aspects of lives of the people in general. It thus puts a big question mark on the role of the state in COVID-19 and accordingly raise the queries and concerns regarding the political economy of the country too.
Everywhere there is panic due to COVID-19 and people are affected in all ways. Health and social relations are impacting political and economic relations too which necessitates political economy to think in terms of power relations too. According to Raju Das (2001) ‘‘Economic processes are everywhere political in that in order to operate they require political considerations.’’ Since Covid-19 is full of economics and politics, therefore, it is not wrong to argue that COVID-19 is also influenced by factors that are political and economic. Also, political processes and decisions are influenced by factors and processes that have their roots in the economics of COVID-19. In the present times, all major processes (political in particular) are driven by COVID-19 implying that all major processes and political action expands as and when COVID-19 expands. It is high time to understand the fact that we can’t separate political processes and economic processes at all times especially during war, disturbance, or calamity. In view of that, need of the hour in COVID-19 is to bring a good political economy (a good mix of political power and economic power) so as to reduce the COVID-19 shocks to the Indian economy. In fact, such shocks are characterized by fast-tracking inflation, unmanageable fiscal deficit, large government regulations, and protectionism (inward-looking trade and investment policies).
Recent history is witness to the fact that growing globalization and international trade yields uneven influence across domestic sectors. Then it means we may approach protectionist policy that somehow maintains our domestic sectors. And under COVID-19, governments are moving towards protectionism but it should be rational. Let us explain it with an example. A country, say X, in which there is rational protectionism should interact with those countries in which there is the same rational protectionism and hence it will get greater benefits. Some countries think that protectionism is not good but we need to think such a policy in terms of its domestic or national importance for it allows the government of a country to boost domestic sectors by imposing tariffs or else limiting foreign goods and services. The economic depression that the world is moving towards questions the trade policy and therefore the economies and the trading participants must take into account rational expectations regarding the benefits of protectionist trade policies. But, then again we have to rely upon the proper distribution of political and economic powers in the world (proper political world economy).
In COVID-19, it is very important to understand and bring into practice the four strategic areas of interconnection between polity (governance) and economy (economic development) as identified by the Asian Development Bank. These areas are accountability, participation, predictability, and transparency. Such understanding is very important for maintaining the political economy of a country under the time of crisis. Any policy to be effective must be accountable, participatory, predictable, and transparent. Our economists and policymakers need to realize that COVID-19 polices demand such characteristics for maintaining the political economy of our country in the long run and taking the economy out of depression.
Binish Qadri ICSSR Doctoral Fellow pursuing Ph.D. in Economics at Department of Economics, Central University of Kashmir.
Aamir Jamal Research Scholar pursuing Ph.D. in Economics at Department of Economics, Central University of Kashmir.