To revive economy, India needs massive investments in multiple sectors

It has been reported that all over the world, recession has set in after the COVID 19 disaster

N S Venkataraman Apr 01, 2020

It has been reported that all over the world, recession has set in after the COVID 19 disaster. At this stage, no one is clear how COVID 19 would end and how soon that would happen. After the G 20 summit, it appears that there are no strategic and well- coordinated global action plans to overcome the recessionary trends post COVID19, except some vague suggestions about USD 5 trillion being pumped into the global economy and China suggesting that duty tariffs should be reduced.

While rich nations would somehow manage to recover, due to their technology and economic strength built, a highly populated and developing country like India, with around 25% of the population below poverty line, is likely to face extremely difficult times.

Given the  “free for all” situation now prevailing in India, every action that Prime Minister Narendra Modi takes to retrieve the situation would be criticized by one  group or the other. In such circumstances,  it is extremely important that Modi  should focus on the tasks ahead and act with courage of conviction to move on, given the mandate that he has received from the  people to govern India till 2024.

The major challenges would be the lack of investment by the private sector, increasing joblessness due to the slowdown  in the economy and the government  having to spend most of its resources on welfare measures, with little money left for investment in setting up manufacturing units or facilities in the services sector.

It is important to constitute think tanks for several core areas to discuss and work out strategies, that should be submitted to the Modi government by the end of May, for consideration and appropriate action. Let not these think tanks only be a gathering of bureaucrats and economists, who often lack first-hand information of ground realities. The Niti Aayog’s functioning has given the impression that it is a jack of all trades and master of none.

A total of 20  think tanks should be constituted, with ten members each, with one think tank for each core sector segment to finalise strategies:

1.   Agriculture / plantations

2.   Steel and metallurgy

3.   Chemicals and petrochemicals / fertilisers / pesticides

4.   Power / energy

5.   Mining / Minerals

6.   Automobiles

7.   Pharmaceuticals

8.   Textiles

9.   Sugar

10. Paper

11. Cement

12. Information technology

13. Transportation

14. Food processing

15. Dyestuffs

16. Paint & coatings

17. Electronics & Instrumentation

18. Research & development

19. Herbal & traditional medicine

20. Miscellaneous  (other than the above)

While bureaucrats, economists and planners could be members of a think tank, people with hands-on experience in management and shop-floor practices and workers’ representatives should also be part of the think tanks. Politicians should be kept out of it.

There are many people in India who are not part of the bureaucracy or in leadership positions in industrial associations who have enormous levels of experience and understanding and can provide original suggestions. The think tanks should encourage them to send their views and suggestions. There should be a firm timeline of eight weeks for submission of ideas and suggestions, after which the think tanks should be disbanded.

Since this is a national patriotic endeavour, no remuneration should be provided but only travel and stay expenses should be reimbursed to members. 

India needs massive investments in multiple sectors in the next five years to boost economic growth, generate employment and reduce poverty levels. If one carefully analyses the scenario in the last six years, it is apparent that investment in the private sector have not been adequate and the government has been spending its resources in building infrastructure facilities.

Obviously, there is a mindset problem amongst a large section of Indian entrepreneurs. The efforts in technology upgradation front are poor, making the Indian industries and services sector almost entirely dependent on multinational companies for setting up projects in India, even in some medium and small scale sectors.

It is not as if Indian companies do not have enough investment capability. Many have surplus investible resources and have the option of availing bank loans and sourcing money from the public by way of equity. But most are unwilling to commit their resources in setting up projects and look for easy options for investment. Large manufacturing units have stopped production and started importing the same product for trading in India, claiming that they make more money by trading rather than manufacturing!
It is strange to see manufacturing companies in the chemicals and other sectors, with more than Rs.1000 crore annual turnover and good profits, diversifying into real estate or construction of five star hotels, mutual fund businesses, communications, etc. instead of investing in setting up manufacturing outfits.

A few decades ago, China was in the same position as India is today. Then, the Chinese government took the pragmatic decision to open up their economy and encourage multinational companies and overseas organizations to invest in establishing projects in China with their updated technologies.

Attracted by China’s huge market potential and with the compulsive need to expand operations, many multinational companies from rich regions like USA, Europe and Japan rushed to China with investment plans. To the credit of China’s government, it should be said that it prepared the proper climate and framed appropriate regulations for the entry and smooth operations of multinational companies there.

In the process, China gained significantly in acquiring technology and in making a big leap forward in industrial and economic growth. Now, China is in a position to dominate the world, not only in the supply of goods and services but also on technology.

After the US-China trade war, the Chinese economy slowed down and many overseas companies in China decided to shift their manufacturing base out of China. Unfortunately, India was not their favoured destination. Vietnam and Thailand gained the most due to the Chinese slowdown.

India has to examine as to why this has happened. It is the task of the think tanks to carefully study the scenario and undo the mistakes and constraints in getting the investments and technology from abroad.

It is true that in recent months, Modi has considerably liberalized regulations for overseas investments in India and he has toured abroad frequently to invite global entrepreneurs to invest in India. But the results are not coming as required. 

A strong leadership at the centre and state levels, with adequate credibility, is the need of the day. They should study the issues in proper perspective and take decisions in the national interest. It remains to be seen whether the central and state governments can manage such situations in the “free for all democracy” we have in India.

State governments need quality leadership. Corruption is still prevailing in India mostly at state government levels, that are blocking the progress of Indian economy in several ways. People and investors get frustrated.

The question is whether Indian investors, entrepreneurs and those who understand the importance of massive investments in India, in multiple sectors, can raise their voices effectively to protect the economics and industrial interests of the country.

COVID 19 also clearly indicates that India’s population is almost at an unmanageable level now. It should not be allowed to increase further. Modi should immediately announce a population policy, where families with more than two children will be dis-incentivized in the coming years. There is also a strong case for banning the practice of polygamy and making it punishable by law.

(The writer is a Trustee with NGO Nandini Voice for the Deprived, Chennai) 

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