Reimagine and rediscover a self-reliant India
– Getting growth back to Indian economy
By, Sanjeev Kumar Sanju
If 21st century belongs to India, and if we have to grow to become as a 5 trillion USD economy by 2025, we are at a threshold of transformation bringing about radical reforms to take a decisive step towards a massive restructuring of our think-tank, bureaucracy, policy reforms and implementation plan, in order to realize a dream of a billion plus population to live a richer and better quality of life.
World economy is in shambles again just as there were some occasional green shoots becoming visible in some sectors in the last quarter of 2019. The economy had been gradually sliding into contraction and recession since the last quarter of 2018 itself, so it’s a double whammy of sorts for the global economy as it has to withstand the terrible repercussions of Covid19 pandemic. India is in the midst of an incessant spread of this deadly virus which has already taken lives of more than 30000 people in the country and over 650,000 people globally.
The economy has been gradually opening up amidst gloom and uncertainty because there is no option left before the government and the businesses. Distancing is a ‘new normal’ that we all will have to live with for a few years to come. It seems so, at least. The nature of this highly contagious disease has been seen across the world and the only learning and takeaway is to maintain high degree of hygiene and sanitation, and to keep building up body immunity levels. While the former is easier and painful, the latter is a time-taking option. Medical healthcare fraternity and researchers have been working overtime for past 6 months to find either a cure or a vaccine to ensure the world gets rid of this disease at the earliest. India’s pharmaceutical research organizations have also been in this race and one of them is in early stages of human trials.
While the 2 months of complete lockdown broke the back of the already fledgling industrial and service economy, and the next 2 months showed increased new infections even in tier-2 and tier-3 towns, the government and district authorities all over the country have been at a loss of ideas and options to contain and mitigate the spread of the infection. The pandemic has expedited some of the policy reform measures that were already being discussed about behind the closed doors of finance ministry, RBI, and the bureaucracy. The real action though is yet to be seen which is to do with the execution and implementation of these reforms keeping all shareholders’ interests in mind. India is a large country with diverse cultural and behavioral mindset which makes the reforms a very tough task as satisfying every state is always a challenging proposition given the fact that each state has its own set of strengths and weaknesses, so one rule doesn’t apply to all. This process is on and much of India’s future economic scenario is dependent on the successful implementation of these policy measures and on the centre-state coordination on finalizing investment budgets for the ongoing fiscal.
A decent, by any yardstick, financial stimulus of INR 20 Lakh Crore (approx. 300 billion USD) has been announced by the Finance Minister which aims at supporting MSME (Micro, Small, and Medium enterprises) to start their factories or service units to induce the much needed cash flow and to generate supplies to the large scale industries. Alongside this, direct cash transfers benefit has been provided to the daily wage workers and to those at the bottom of the pyramid to weather this crisis, and to save their lives and livelihoods. To create further demand at a bigger magnitude, infrastructure projects have been restarted with unlocking of supply chain so that the benefits of economic value chain start reaching all at the consumption end, whether its individual consumer or manufacturing and service units. Definition of MSME has also been modified to include companies with larger turnover (up to INR 200 crores) in the fold so that they get the benefit of participating in government projects without having to compete with foreign players. This is another policy reform measure that would benefit Indian MSME firms to keep their order books healthy, as no global tenders would be invited for procurement size up to 200 crores (2 billion Indian Rupees).
Some of the key policy measures being implemented are land & labor reforms, extended tax holidays for start-up firms and entrepreneurs in strategic manufacturing sectors, and privatization of some PSUs (Public sector undertakings).
Another major announcement which is a repeat one over the past many years irrespective of any government at the centre is of becoming self-reliant in some select sectors to reduce our imports, especially from China, and to gradually become an exporting nation. In this context, I believe we can plan our investments keeping in mind immediate to short term goals, medium term goals, and medium to long term goals, in order to justify and balance the expenditure towards creating necessary and desired infrastructure and skilled resources.
We need to change our mindset if we wish to become a net exporter country. And it’s a journey not a destination, because the trade and commerce depends on several factors some of which are not entirely in our control. It starts not from having a policy or plan to attract FDI, but right from school and college levels, and thereafter at the level of research institutions across sectors. Our school curriculum needs an overhaul to be in tune with the demand of the current and future world, keeping a balance between our traditional and cultural strengths and adopting good things from other culture, to ensure we benefit from our great heritage of Ayurveda, art & crafts, mathematical, and design techniques. Our industrial training institutes (ITIs) are in very bad shape, and the graduates and diploma holders are hardly employable. In a nutshell, our education should prepare our students to succeed not just in India but across the world.
Our research and development initiative need greater financial impetus if we have to become self-reliant, be it in the area of agriculture or renewable energy. Very few institutions such as IITs or IISc or ISRO have been able to create their brand at global stage, and sadly they too lack financial support. A time should come when students should consciously opt for a career in research, rather than being forced to undertake because of absence of other lucrative and attractive careers. This requires grass-root changes and cannot be achieved overnight, but there is no better time than today to kick-start the process.
Today we realize that a population of 1.30 billion plus is actually a burden rather than a perceived huge consumer base for foreign and domestic firms alike, because our domestic manufacturing and IT companies have not been able to take any great advantage of this so-called consumer base, and the foreign companies have not arrived here in as many numbers as expected, because of our age-old land and labour laws and inconsistent tax policy. Exports from China have grown in sectors such as plastic and battery-operated toys, gift items, art & craft, kitchen utensils and cookware, which are such high consumption items that Indian companies should have easily taken advantage of this huge market if government had supported with technology import and tax incentives. These are not strategic areas but are areas that have potential to create huge employment for our skilled, semi-skilled, and un-skilled labour force.
The ongoing pandemic has clearly exposed what I have painfully mentioned earlier that our population has become a burden because we have failed to take care of the vast worker community either monetarily or through secured employment, insurance, and adequate healthcare. There are not enough beds in hospitals in cities such as Mumbai and Delhi to accommodate patients. Healthcare should be a state subject and it requires fully equipped hospitals with specialist doctors and trained nurses in every major districts of every state to ensure patients do not have to travel thousands of kilometers to get treated.
Good healthcare, good education, and low cost housing are basic needs and should be unstated basic rights of even the poor who cannot afford them because they are an indispensable part of our economy and their contribution in building the country cannot be ignored for long. We all hope that our lethargic bureaucracy and lawmakers realize the situation keeping a long term view of India’s economic progress. If the government ensures these three basic needs of the vast working class population, we will be able to ensure that their children, part of the next generation, do not remain poor and under-privileged. This will be a great achievement for India as a progressive nation. Even if the GDP contracts by another percentage point, we must not deviate from these three fundamental needs and continue to invest considering the rich dividends the country could garner in a decade’s time span.
Talking about the priority areas to become self-reliant and to reduce import dependency, I think the focus should be on products that are consumed by masses and which require investments both in technological research as well as in equipment and machinery.
Two key areas that the currently trending subjects, Covid19 crisis and China imports, have thrown open are-
1. manufacturing of pharmaceutical products, including active pharma ingredients (API), and,
2. Design, manufacturing, and assembly of Micro-electronic and semi-conductor technology-based products.
These two areas alone could help us reduce imports by USD 200 billion over next 5 years, and we could become net exporter in electronics and electronic components as well. We are a net exporter today in Pharma products as India is the largest manufacturer of generic drugs. But to cater to vast population and considering our edge in pharmaceutical research, we need not have to import anything if we expand our research laboratories in pharmaceutical segment.
Apart from these two areas, another area where we should ideally hold a leadership position is textile production, and what I also mean is investment into high-end textiles and production of garments for the world. For a country of 1.3 billion plus people, we should be the factory of the world as far as garments are concerned. We were once a leading supplier of garments to the leading fashion houses in Italy, France, and USA because of our low cost, but we have lost this position to Bangladesh, China, Vietnam, and Philippines who have taken away bulk of orders that could have come to us over the last one decade.
Investment in agricultural research to increase our exports of food products, spices, tea, and coffee should be looked into. Our spices are renowned world over and we can even export our vast variety of cuisines as our art of cooking and cuisines are considered most delicious in the world. Cultural export is a key to branding and country’s image building, and we should make full use of our vast diaspora in propagating our traditional cooking technique.
Last but not least, we should invest in developing and building machinery used in Steel plants, power plants, textile mills, plastic industry, sugar & rice mills, paper mills, and heavy engineering including earth moving equipment. We have vast skilled and semi-skilled technicians and skilled engineers who can propel us to becoming a major exporting nation for high end machineries in a span of 10 years. What this needs from government is long term financial support, and incentivizing the manufacturers who build quality and generate export revenue.
If we focus on these areas and build our force of skilled technicians and engineers, coupled with management graduates, bankers, and doctors, we can build our reputation as a progressive nation and earn respect of the quality demanding European countries, USA, developed Asian economies of Japan and South Korea, and most importantly, we shall become a fertile ground for nurturing our own new generation of students, craftsmen, and engineers. We may then probably be able to reverse the brain drain in true sense, and shall probably not have to see NRI (Non-resident Indians) doctors and scientists on the prime-time television as expert guests counseling us on Covid19 and vaccine trials etc. Just to clarify here, I do not intend to tone down the contributions of our NRI brothers and sisters in developed countries because they have actually been in truest sense our global ambassadors, but would rather be happier to see Indian professionals leading the development and intellectual growth strategies in other developing nations in Asia, Africa, and Latin American countries.
Banking sector needs better governance and reforms. Our bureaucracy is said to be one of the greatest hindrances in our own growth. With the slew of measures I have highlighted, government must consistently try to eradicate corruption and support the entrepreneurs and business persons who take great risks and invest in businesses to nurture their dream of a wealthy and self-reliant India.
Consistent efforts in these directions will lead India to become a Vishwa Guru (global intellectual leadership) in next two decades.
