While the central government has taken several steps to revive the economy, these initiatives addresses the supply side of the issue, more needs to be done to address the demand side of the problems
After a total lockdown in most parts of the country, the government has started opening up the industries in a calibrated manner in almost all the states in India. The last three months saw a contraction of almost 15 percent in terms of growth figures.
The central government has drawn a road map to achieve its ambitious goal of #atmanirbharbharat by promoting #vocalforlocal campaign. Curbing heavy imports and making the economic environment conducive for self-manufacturing & production is a drive to ramp-up domestic consumption and explore the further scope of exports. However, there are several important factors that shall work in India’s favour in the coming financial year.
Firstly, India’s agriculture sector even in such testing times has fared exponentially well with a 3- 4 percent growth expected this year. It is not only good agricultural states like Punjab and Haryana, but even smaller states have managed to do well. The fiscal stimulus announced by the union finance minister objectifies to advance Agri and the agro-processing industry; this is expected to give a further push to the sector in the coming years.
Secondly, the economic stimulus package announced by the central government is an all comprehensive one that aims to target most of the sectors of the economy. The Rs 20 lakh crore financial packages which are almost to the tune of 10 percent of India’s GDP coupled with a slew of measures by the Reserve Bank of India is aimed at infusing liquidity in the economy and helping the business tide over the pandemic. These measures should help India in achieving a sharper growth trajectory in the next financial year and a growth rate forecast to at least 6 percent. However, the government needs to ensure that the schemes announced are percolated down to the smallest of the business units and that the banks pass on the benefits doled out by the central government to its ultimate customer.
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The government in the last six years has initiated several programs like the Make in India, Skilling India and Digital India. All these campaigns are showing results now. If during the lockdown, most companies have managed to operate their business with their employees in remote access conditions and yet achieved 70-80 percent efficiency, the credit surely goes to Digital India technology. This paradigm shift clearly signifies evolution times.
India has also gradually scaled up to 63rd position on the ease of doing business ranking globally. Many state governments too have started taking steps to attract foreign companies who are planning to shift their base to countries that are fundamentally stronger. They are offering land and tax incentives, customized solutions and create a conducive business environment to entice foreign companies’ relocation.
However, many sectors draw immediate attention from the government to resurrect their business continuity. The lockdown has exposed and led bare India’s healthcare system. There is an immediate need to increase healthcare spending and revamp the existing healthcare and wellness infrastructure to cater to the healthcare needs of the economy.
At present, India spends less than 1.5 percent of its gross domestic product for healthcare as against the global average spending of 6 percent. While the government has kept a target of increasing it’s spending to 3 percent of the GDP by the year 2022, it would still be half of the average global spending. If the country aims to achieve its sustainable development goal that is healthcare for everyone, it is important that the government increases its funding to the healthcare sector.
Another sector that has impacted the most is the Real estate and construction sector. There is a pressing need to revisit the goals set by the government in the housing and infrastructure sector. Indian economy is a consumption-driven economy and resumption of purchase of houses will rekindle the real estate. The rippling effect will in turn reboot about 300 allied industries with its positive effect and lead to generation of more than five crore jobs across the country. It needs a fine blend of cautious optimism with pragmatic concerns to handle this sector which is the second-largest employment generator and directly contributes to the GDP of the nation nearly 10 percent.
Currently, the sector is facing an acute paucity of almost 10 lakh workers at any given point of time. It has the potential to absorb excess labour force from the agriculture sector on a continual basis and get them productively employed; however, it won’t be possible without the government taking aggressive steps to revive the same.
India also needs reforms in its labour laws to make it compliance-friendly to attract more industries. There should be uniformity in the power tariffs. In some states, the power charges are exponentially higher than the other, which results in industries migrating in other states to reduce their operating costs.
Government has worked on offering production linked incentives to five sectors to boost domestic manufacturing. The vocal for local emphasis is laid for ample job creation and augment local manufacturing as a bolstering effort to attract new investments in the coronavirus-stricken economy.
While the government of India has taken an honest step to revive the economy, the steps partially address the supply side of the problem rather than taking care of the demand side. The government should take steps like reducing the goods and service tax (GST) by at least 50 percent over the period of the next 6 months to one year to revive demand. This would encourage spending and help create demand for goods and services in the economy. As an unabated rise in coronavirus cases further dims the economic outlook, India Inc is hopeful of the further announcement of government measures on Independence Day to revive growth.The author is the national president of the apex industry body, ASSOCHAM