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Opinion | How India's economy can gain from opportunities thrown up after covid
5 min read.Updated: 31 May 2020, 11:06 PM ISTSumant Sinha
A call for Atmanirbhar Bharat is just the right impetus for local manufacturing in a world overly dependent on China
It is time to move to a direct benefit transfer model instead of the appeasement tool of farm loan waivers
Given our population density and modest health infrastructure, the government had no option but to order a complete lockdown when coronavirus reached India’s shores. As the country stayed indoors, the economy was dealt a crushing blow. While both the central government and the Reserve Bank of India (RBI) have announced mega stimulus packages to revitalize the economy, we still don’t know how effective they will be. However, what we do know is that the world will not be the same post covid-19 and even on the economic front there will be a “new normal". Like every crisis, this will also create opportunities and open new horizons, which if leveraged can help strengthen our economy.
1. The Prime Minister’s call for Atmanirbhar Bharat (self-reliant India), can be just the right impetus for our domestic manufacturing. The world including India is currently overly dependent on China for raw materials and now is the right time to challenge this hegemony, as companies look for alternative manufacturing hubs in their bid to de-risk. India could be their destination of choice, provided we offer a conducive environment. A conducive business climate with better infrastructure and logistics, simplified land and labour laws and single window clearances can enable India to develop a robust manufacturing ecosystem. This will help attract foreign capital, latest technology, create jobs and boost our exports. We must also focus on Skill and Scale to be both quality and cost competitive and serve a global customer base. Huge scope exists in sectors such as pharma, electronics, automobiles and defence machinery, not only to be self-reliant but also capture a decent slice of the global supply chain
2. Sweeping reforms announced like amendments to the Essential Commodities Act which had outlived its purpose bode well for the economy. We should also consider phasing out fertilizer and power subsidies that distort the market. It is time to move to a direct benefit transfer model instead of the appeasement tool of farm loan waivers that breeds inefficiency and exerts undue pressure on lenders. We should utilize this momentum to shift to a regime of empowerment rather than the politically motivated instrument of entitlement, as this will bring about a fundamental change for the better.
3. With the financial sector reeling under a spate of bad loans, it is time to introduce new digitized lending models using artificial intelligence (AI). It should disburse credit basis business flows such as invoices of Goods and Services Tax (GST) and not assets. This will be a boon for many startups and small enterprises who would otherwise be denied funding due to lack of collaterals. This is a good way to use the abundant data that is getting captured. Technology will also enable a more accurate determination of credit risk leading to more realistic pricing of loans, for our banks.
4. The current crisis underlines the tremendous utility of social security programmes such as Jan Dhan accounts, Ayushman Bharat and Pradhan Mantri Suraksha Jeevan Jyoti Beema Yojana in a country like ours where migrant labourers, daily wage earners and other vulnerable sections form a significant chunk of the population. The Jan Dhan scheme in particular enables them to get cash directly from the Govt. bypassing any middlemen or red tape. This has tremendous potential to empower the marginalized and bring them under a safety net, especially women and senior citizens. The government must scale up the Jan Dhan programme by shifting focus from an account for every household to an account for every adult. Merely opening accounts won’t help. To help holders derive maximum benefit, we need financial literacy drives, introduction to mobile and digital banking, account linked insurance, custom financial products and finally a seamless integration with Aadhar.
5. This pandemic has highlighted the pressing need to expand our healthcare infrastructure, so we are better equipped to handle emergencies. We need improved coordination between the Centre and different states, strong disease surveillance systems, a ready stock of critical lifesaving drugs and medical equipment, more diagnostic labs and modern hospitals in every district and also fast tracking of telemedicine/e-consultations. This is one sector where the private sector needs to step up and partner with the Government more actively so that basic healthcare is accessible and affordable for all and the Government’s decision to provide Viability Gap Funding will hopefully facilitate their entry.
6. Covid-19 will also induce some long term changes in consumption patterns that will help spur expansion and diversification of various digital business channels. The need to practice social distancing for a considerable time period will force people to stay at home and avoid public places. This can be a boon for e-retailers who can ensure contactless delivery of essentials at the consumers’ doorsteps. Companies that provide software facilitating online education and other remote working tools should see increased subscriptions. Remote working will increase demand for home broadband and virtual private network (VPN) services benefitting telcos. Entertainment will also go digital -- we are already seeing a spike in virtual concerts and movies releasing digitally, thus creating opportunities for over-the-top (OTT) players. As the economy reboots, several new business ideas will abound and we may see the emergence of a new generation of entrepreneurs. This is also the time for the economy to go cash light as digital payments may become the norm, creating a boom for fintech payment companies.
7. Finally, we may also see some softer benefits. As work from home gains currency, it is an excellent opportunity for us to narrow down the economic gender gap. As India Inc. settles down to remote working and flexible schedules, it can now welcome more women and mothers planning to resume their careers. Similarly, as video conferences and virtual meetings replace physical events and seminars, we will see previously jet setting executives cutting down on travel. This can only mean less burning of fuel and reduced carbon footprint. More “home-offices" will lead to lesser public commute and huge energy savings and hence less emissions. This could be just the push our businesses needed to advance the sustainability agenda.
Winston Churchill famously said after World War II, “Never let a good crisis go to waste". The current pandemic will test the resilience and agility of the Indian economy for sure. However, it will also throw up some new opportunities – it is up to us to capitalize on them and emerge stronger on the other side of this pandemic.
Sumant Sinha is the founder chairman and managing director of solar and wind power producer ReNew Power. The views expressed here are his own.