India Needs Surgical Strike On Economy Too
| Sanjana Mohan - Editor in Chief, CEO & Thought Leader - 11 Feb 2020

By Sanjana Mohan

The dream of having a $5 trillion economy seems a distant dream today, especially given the health of the current Indian economy. Before the pulse rate drops, we should detect all the problems which our economy is facing. Other than consuming pills or antibiotics, we should go for high-dose shots needed to control the situation before it is too late.

Expansion and expenditure are the need of the hour and every action of the Government and policy announcement are critical in the FY2020. We just can’t look for marginal growth, if we need long-lasting results and visible growth. We have to play the hardball if the economy has to take a double-digit path.

The first quarter of FY2019-20 registered 5 percent growth, the slowest since the fourth quarter of FY2012-13. Private consumption, which is one of the main contributors to growth, fell to an 18-quarter low of 3.1 percent in Q1 FY2019-20, pointing to fragile consumer sentiments and purchasing ability. Private Investment, which is another important contributor, grew 4 percent -- marginally up from 3.6 percent in the previous quarter. Exports, which play a major role, grew 5.7 percent and have remained volatile owing to global uncertainties around trade and investment and geopolitical tensions.

Last but not least, the Government consumption and Investment is running out of steam because of the limited elbow room the government has for counter-cyclical spending as the Budget deficit remains under pressure.

All the four growth engines -- private consumption, private investment, exports, and Government consumption and investment -- have slowed down significantly owing to bad health conditions.

To improve every parameter we need to understand the problems and concerns faced by different industries and sectors. There is low demand and also not sufficient supply, so both sides need to be pumped up. A number of sectors are in deep water. We can turn around the entire segment of industries. GST too has played its part, though the Government has been responsive to public opinion nd has made certain changes.

There is a huge need for private sectors to participate which will lead to job creation. The taxation should also be evenly distributed among all sectors, not the way it is in the current scenario – 42 percent in one sector and 25 percent in another.

Small-medium enterprises, small exporters, LLP, sole-proprietors and partnership firms do need to have 25 percent tax implication, as it is for big players; this will lead to increase in contribution towards exports. Also, there is a need to structure and simplify taxation methods, especially for SMEs, which are affected the most because of complex GST procedures. 

There is a need for financial restructuring; merger of public banks would lead to capital infusion into banks that will increase liquidity, encourage credit lending and improve NPAs.

Access capital is required from the larger pool of funds, already Rs 20,000 crore is infused for stalled affordable housing projects which is likely to benefit 3.5 lakh homeowners but that is not enough to revive the housing sector. To boost the demand for housing, the sentiments of the buyers also need to be revived. There is a lot of struck capital in financial institutions that need to be released. 

There is a huge need to redefine business strategies and the Government should take bold decisions to address the structural changes. There are several measures that have been taken to curb black money and corruption, but not enough measures have been taken to stimulate the white economy.

To run the system, liquidity plays a crucial role, so there is a need for unclogging all the credit channels and creates more avenues. The flow of credit can also correct the sentiments of people which is becoming the major concern, as multinational companies -- looking for alternative manufacturing destinations to diversify their supply chain and reduce cost -- can present India an opportunity to be the next emerging manufacturing hub. There is no doubt that global investors look towards India as an investment opportunity.

At the same time, it is evident that India is a tough nut to crack as foreign access to the domestic market is notoriously difficult. Persistent Volatility and lack of transparency discourage many investors to invest in India. As the third-largest Asian economy, India remains an attractive investment destination due to the sheer size of its consumer market. India must take advantage of these positives and aggressive market itself as a market-friendly economy.

Politically, Prime Minister Narendra Modi’s Article 370 move was a bold step. The country awaits with bated breath a similar move vis-à-vis economy. India awaits a surgical strike on the economy too. The sooner it is done, the earlier the dream of the $5 trillion economy will come true.

(Writer Sanjana Mohan is an innovative, multifaceted, dedicated and solutions-focused International Consultant with a 19+ year career demonstrating visionary leadership and outstanding performance in business innovations, new businesses, and market strategies. She was Editor-In-Chief for 3 business magazines during her tenure in journalism. )

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