[ad_1]
File photo of Prime Minister Narendra Modi. (GDP / PTI Photo)
Is this the long-awaited takeoff moment for the Indian economy? Has the Prime Minister guessed the magical balance between social justice and the liberation of aspiring Indian entrepreneurial genius?
- Last update: May 14, 2020, 9:09 PM IST
“… the 21st century (belongs to) India … this vision (strengthens) … our resolution of self-sufficient India … the meaning of self-sufficiency has changed … India does not advocate self-centered arrangements … India’s progress (is) … comprehensive for (the) world … imperative for us to move forward with bold reforms to create a self-sufficient India … (to handle) stiff competition in the global supply chain … (the economic package) will increase the efficiency of all sectors … (we need) to play an important role in the global supply chain, “Prime Minister Narendra Modi stated (extracted) in his speech on May 12. A self-sufficient India “will integrate, will not isolate itself,” the finance minister reiterated on May 13)
Is this the long-awaited takeoff moment for the Indian economy? Has the Prime Minister guessed the magical balance between social justice and the liberation of aspiring Indian entrepreneurial genius? Prima facie the emphasis on self-sufficiency and the quest to be part of the regional / global supply chain are as compatible as fire and water. But this is not the case in PM Modi’s scheme of things.
He is well aware that, for historical reasons, India has developed a protectionist attitude. Even large industrialists prefer a regulated environment and postulate otherwise. The huge domestic market has quenched its appetite to search for export destinations.
The government is so alive to the imperative to sweep away industrial reforms and the establishment of large companies, to take advantage of the benefits of technology and economies of scale. However, there is also caution about giving control to opposition parties and critics, to call it pro-rich. Therefore, the finance minister endeavored to underline the robust steps already taken to expand the social safety net. Furthermore, measures to boost the MSMEs sector have been loaded in advance, in the Rs 20 lakh crore stimulus package that is being progressively developed.
Our disadvantage in losing the industrial revolution has been compounded by the nation’s inability to deliberately expand its manufacturing base. Guided by Mahatma Gandhi and Pandit Jawaharlal Nehru, India rightly emphasized the development of the labor-intensive MSME sector. In the process, he also instilled suspicion of a large industry and ended up creating a rent-seeking license. Over the decades, the vice grip of this nouveau raj has weakened but has not been removed.
A heavy elephant, India beats itself in times of crisis. There was a time when India led a “ship-to-mouth existence”, dealing with famines and critically depending on America’s wheat supplies. Then, thanks to Dr. MS Swaminathan, India ushered in the famous Green Revolution in the 1960s, producing more than enough food for its needs and also for exports.
In 1991, our foreign exchange reserves (FE) plummeted to $ 2 billion, forcing us to pawn gold. Waking up from a long sleep, India introduced the first wave of economic reforms under the leadership of Prime Minister Narasimha Rao. Today, our FE reserves exceed $ 470 billion.
During the past six years of NDA rule, India has had tremendous success in improving its global ranking on the ‘ease of doing business’ index from 142 in 2015 to 63 in 2019. India received a record FDI of $ 64.37k million in 2018-19. In any case, bottlenecks in land, work, liquidity, legal, infrastructure and taxes remain. Second, despite the attraction of the large Indian market, the reality is that we still have to compete with 62 other countries to attract the investment dollar.
It is true that investors from many countries, including Japan, South Korea, and the US. In the USA, they are exploring the possibilities of transferring investments to India. However, they are also evaluating other destinations. According to a report by Nomura Securities (October 2019): Out of 56 companies that moved production out of China between April 2018 and August 2019, only 3 moved to India. Most of it went to Vietnam (26), Taiwan (11) and Thailand (8).
Until now, why have investors gravitated towards China? It was due to the conducive ecosystem that was established. Chinese provinces and cities compete with each other to attract FDI. They chase investors, throw sweeteners to close the deal, and extend comprehensive assistance to quick clearances. Indian leaders and bureaucrats have little choice but to change their mindsets to become more facilitators and less regulators.
The full picture will emerge once all sections of the reform package are made public. One reason for the phased approach could be that the government wants to keep a finger on the public pulse and, if necessary, adjust some of the measures appropriately. Still, for reforms to be meaningful, the government must (and likely will) do everything. Small touch-ups at the edges will not suffice.
Given the current political-economic dynamics, there is likely to be a split between industry and center economists / media outlets who will welcome reforms and opposition parties, as well as critics, who will oppose them. . It is disappointing that even in these times of crisis, our political system remains fragmented. That said, the political leadership seems determined to turn the crisis into an opportunity and propel India on the path of rapid economic development.
(The author is a former diplomat. The opinions expressed are personal)
.
[ad_2]
