As the Finance Minister rises to deliver her speech on Budget day, I will invoke the goddess Lakshmi, the bestower of wealth, prosperity and abundance to give something to everyone and shower her blessings in people’s lives. There couldn’t be a better time than now to make a real difference as all of us straddle our paths in an economy battered by the pandemic that has left many people without jobs and businesses struggling, some to survive and some for growth.
What can be done to fix the damage of gargantuan proportions, one that is immediate and also have a positive effect on the economy over the longer term? For that, it is only fair to draw up the various constituents that move the wheels of the economy- the demographic health and economic well-being, enterprise and business, markets and financial institutions, global trade and sustainability.
Demographic Health and Economic Well-being
The immediate ask is money in the hands of people. With nearly 140 crore people and about 58 percent involved in agriculture as their primary source of livelihood, this constituency is a big buyer and a large consumption market. While the farm sector was the only one to post growth in the June quarter when all other sectors were in the red and continues to perform well, it lacks the heft to pull the other sectors and the optimism may be premature as it does not address the issue of productivity and falling prices. On the other hand, India will need to create 90 million jobs from now till 2030 to absorb 30 million who could move from farm to non-farm sector. It would be prudent to then infuse money in bolstering infrastructure, skill development and manufacturing, all of which is expected to create jobs. Distribution of cash is a much-needed, albeit temporary, solution to those who have been affected most but not a panacea for long term economic prosperity.
Decades ago, Winston Churchill had said: ‘Healthy citizens are the greatest asset any country can have’. As I salute the efforts of our healthcare workers and administration, we have to admit that the pandemic has uncovered the cracks in our stressed healthcare system. Over 1.5 lakh people have lost their lives to the deadly virus as several new strains emerge and India begins its vaccination drive. Shortage of beds, ventilators, and medical personnel often made headlines. The budget will need to widely focus on improving the country’s healthcare system, especially in rural areas – making affordable healthcare, accessible too. Experts have also sought greater expenditure towards public health, pharma research and disease surveillance in the wake of the pandemic. Moreover, it would be prudent to look at ways of exploring public-private partnerships in this area, to help lessen the burden on governments.
Enterprise and Business
Prosperous nations have few common elements - a thriving industry is one among them. As we move to a highly connected, ‘borderless world’, there is an immediate need for a national corporate identity. America is known for large industry, innovation, startups; Sweden and Norway for defence, Japan and Korea for electronics, automobiles; India for IT and IT Services and Pharmaceuticals; China for being the global hub for low-cost manufacturing and even small countries like Vietnam and Bangladesh are hubs for apparel manufacturing. Our national skill development mission addresses upskilling of labour and we have some industry-friendly policies too, however, implementation is an area that we need to address.
Let us take the example of the pharmaceutical sector, an industry in focus presently. India is the largest provider of generic drugs globally, ranks 3rd globally in volumes and 14th by value. A few years ago, when the government launched the Pharma Parks initiative it was lauded by the industry, however, the big question is how soon India will be able to substitute import of API, a whopping 60 percent of which is imported from China. When manufacturers get down to brass tacks, there are many hurdles such as land, power, labour, technology, supply chain, support infrastructure, taxation to name a few. Various reports have pegged the opportunity size at $50-70 billion and we have seen how our pharma companies have risen to the occasion. What more could be an apt example of being Aatmanirbhar than this? Can we now replicate this for few other industries?
Markets and Financial Institutions
In the midst of an economic downtrend, the Indian stock markets continue to be at record highs, aided by foreign investors who have infused a staggering Rs 1 lakh crore into the Indian stock markets since November. The government needs to take advantage of this rally and divest its stake in public sector units. The corpus raised can be used to reduce our fiscal deficit in addition to funding infrastructure development, and towards projects in the National Infrastructure Pipeline.
It is also anticipated that the upcoming budget will unveil a large development financial institution that could further address issues of capital. The DFI will be a catalyst to bolster job creation efforts as it infuses life through investments in the infrastructure sector.
It is well known that economic growth and trade have a correlation: countries with higher GDP growth rates usually have a higher rate of growth in trade as a percentage share of economic output. India is well poised to gain from China's partial loss of supply chains in the post-COVID era. The Make in India campaign, Aatmanirbhar Bharat, Vocal for Local are playing out well to counter China’s growing influence on business and industry.
There is an immediate need to augment our supply chain, strengthen our manufacturing capabilities and be cost-competitive to cater to global demand and become a trusted partner for giants in manufacturing. For example, in the electronics industry alone, the government expects close to $150 billion worth of manufactured goods over the next five years, which could create about one million direct and indirect jobs.
The aftermath of the year bygone has brought greater focus to Sustainability world-over. It is evident that “business as usual”, will need to give way to “business in the new world order”. Businesses, investors and the government thus have a huge role to play in transforming legacy systems that address these challenges – especially of climate emergency, increasing social inequality, and disruption of ecosystems. For one, the government can accelerate transformation through economic stimulus packages in favour of industries that enable a sustainable economy.
Take, for example, India’s energy demand, which is expected to grow exponentially in the next 20 years. Powering this growth through renewable energy can boost India’s competitiveness and make clean electricity available to millions of households. Adding to this, India still faces significant issues related to clean water, clean fuel, nutrient-rich food, education and basic healthcare, all of which remain urgent priorities for the government. Thus, finding sustainable solutions to these issues is foremost. I sincerely hope the Budget brings in a policy to encourage and reward companies by tax incentives that produce goods that reduces, reuses and recycles input material across industry type.
Humanity has taken great strides to innovate but the damage to the environment has been colossal. A cleaner, safer planet is what we must all be committed to. In the Eastern culture, the Lotus, the seat of goddess Lakshmi holds a great symbolic value for every night it submerges into dirty water but re-blooms sparklingly clean the next morning. I am hoping that come February 1, our Finance Minister will chart a new path that promises economic recovery that is sustainable because unlike the Lotus that can re-bloom, humanity will be living on borrowed time in an environmental time bomb. The time to reboot is now.