Opportunity in Adversity – Can India lead the next wave of global growth?
Amidst all the challenges and gloom the COVID pandemic is spreading around the world, there lie some golden opportunities for India to seize. Couple of years back India announced its bold ambition to enter the USD 5 trillion GDP club by 2024. The pandemic now makes it look like a distant dream, the country was already battling an economic slowdown since 2019. The sudden and extended lockdown dealt a body blow to a number of key sectors with experts predicting from a 1% to 5% shrinkage in the economy. Will India be able to rise above these challenges and claim its seat amongst the fastest growing economies? What will it take from the Government, the Industry and the Society at large to get there?
As Rahm Emanuel, Obama’s chief of staff, said “Never Waste a Crisis”! The COVID crisis presents us an opportunity to revisit and change a number of principles in our economy. While we plan for the support and healthcare needed in coming months, it is also time for Structural Reforms 2.0 to put growth back on the agenda. The Atmanirbhar Bharat call for self-reliance should mark a fundamental shift in core policies our outlook towards various industries. Manufacturing sectors hold the key to bring that turnaround in the nation’s fortunes. If we have get back to >5% growth starting FY 22 a number of enablers and incentives need to be offered to domestic and global manufacturers. Here are our top picks of key enablers which will boost the economic revival:
- MSMEs and Impetus on local manufacturing (VocalForLocal)
At 110 Mn, MSMEs are the largest employers outside of agriculture. Boosting local production will lead to further employment generation and a whole support ecosystem which serves these manufacturing enterprises. It will also create a competitive pricing scenario not only for raw materials but also for finished products. This will allow the country to reduce reliance on imports and grow its export thereby improving its current ratios.
- Land and linked infrastructure
If India has to aim for serious FDI investments and access to latest technology, the Central and state governments will have to align on policies and ensure availability of land along with resources like power and water in abundance, along with easy access to rail, road, logistics. Dedicated manufacturing zones across specific industries paired with freight corridors offering suitable ecosystem will certainly woo more investments. Pharma, Chemicals, Food & Agri, Textile & Fashion, Manufacturing and Plastics are some of the leading sectors which will benefit from such zones.
- Skilled labour pool
Availability of skilled labour and manufacturing talent will be key to setup the manufacturing hubs. The current migrant worker crisis is a big eye-opener to our over reliance on labour pools sourced from select poorer states. Infact, it is time to provide employment opportunities to workers closer to their homes, which will also reduce the over-burned on few urban locations. This will need the wholehearted support of the industry and society at large.
- Access to Capital
India has increasingly relied on two key capital sources – the domestic lending ecosystem and FDI. 2019 saw FDI growing a good 13% to an all-time high of $49.97 billion. Interestingly FDI also brings in access to advanced technologies. This flow will resume as India gets back to growth. However, for domestic capital to flow back it is time for a shift to flow-based lending which democratizes access to credit for MSMEs and offers a better risk-reward ratio to the financiers
- Digital India
Indians is realizing the fruits of rapid digitalization in recent years, the pandemic has further accelerated digital adoption.
- Policy certainty
India has historically been plagued by an uncertain policy & taxation regime, with several cases of retrospective cases coming up every now and then. To invite large global manufacturers and conglomerates to invest in local capacities, we will have to ensure a uniform taxation structure and application of policies.
- The Chinese conundrum
There will now be a concerted effort globally to derisk the supply chain dependence on India is in a sweet spot given its advantageous location, skilled talent pool and a neutral political stand. For the country to reap rewards the centre and the state governments have to collaborate on the ground level and create industrial hubs in tier II cities too.
In conclusion, it is not the duty of the central government alone to ensure that the economy gets back on the path to the $5 trillion mark. India needs a conducive environment with thriving collaboration between the government with the private sector, supported by a solid work-ethic from the society. While the 2024 timeline seems pushed back by a couple of years, the above measures will be certainly needed to ensure we get there by 2026, thus making India one of the brightest spots and a beacon of hope in a shrinking world. We at Vayana are committed to do our bit towards building an Incredible India .. an idea who’s time has come!