Eminent economist Arvind Panagariya has said that India must now think long-term to create better paying formal sector jobs by seizing the opportunity presented by multinationals possibly moving out of China to diversify their operations in the wake of the Covid-19 pandemic.

Panagariya, professor of Economics at Columbia University and Director, Raj Center at Columbia's School of International and Public Affairs, emphasised that the one thing the current crisis has revealed is the vulnerability of Indian workers to a shock that forces a near end of economic activity.

The Covid-19 pandemic is a 'time for thinking long-term. It will be a pity to let the crisis go to waste. The current crisis will only last till a vaccine becomes available. We must think beyond that,' Panagariya told PTI.

'After 70 years of development effort, we have still left our workers predominantly employed on tiny farms (70 million of them averaging less than a quarter hectare in size) and in informal or self-employment in tiny enterprises that give them barely subsistence level of income on a daily basis,' he said.

Panagariya stressed that the Covid-19 crisis has made it evident that India needs to create better paid, formal sector jobs and that requires moving workers out of tiny farms and enterprises into more productive and better paying jobs.

That in turn requires a shift of industrial and services activity away from micro enterprises to small, medium and large ones.

Another opportunity that looks to arise from the crisis is that there is bound to be acceleration of the movement of multinationals out of China into other parts of the world.

'Multinationals will be seeking greater diversification of their activities in the wake of Corona. India must not miss this opportunity,' Panagariya said.

He elaborated that one policy measure would be to give a serious thought to the creation of Autonomous Economic Zones in which local authorities are given as much authority to make policy as exists in Chinese cities such as Shenzhen.

The crisis also gives the government the opportunity to introduce reforms in areas of land and labour markets that are harder in 'peace' time, he said adding that the Land Acquisition Act must be reformed.

'Likewise, greater flexibility is necessary in labour markets so that enterprises in labour intensive sectors gain confidence to become larger thereby taking advantage of scale economies,' he said.

Panagariya underscored that the government needs to be creative in lifting the lockdown going forward. He noted that in numerous districts, both rural and urban, where the cases of infection are fewer than ten, full freedom of movement within the district with strict enforcement of social-distancing and use of face masks can be permitted.

'In districts in which infections are concentrated in geographically narrow regions, free movement may be permitted in the remainder of the regions. As this process proceeds, the government must keep all options open. If the corona curve begins to become steep again, it should not hesitate to tighten the restrictions again,' Panagariya added.