The last year has seen consolidation of several trends that have impacted the economic and business environment for India.
- Political backlash against globalization and policy of protectionism in advanced countries – presents a unique challenge to development.
- Technology advancements – can disrupt conventional modes of production and consumption.
- Demographic changes with a growing workforce in some economies and contractions in others.
- Rise of new consumers and shifting supply chains.
Above are some of the systemic trends that India has to deal with.
Assessment: Is India well-positioned to capture a leadership position in an uncertain world?
India’s inherent advantages include its –
- expanding workforce and consumer markets,
- rapid urbanisation,
- growing education and skill capabilities,
- stronger technology adaptation, and
- potential for driving exports as a growth driver.
India, the third largest economy in purchasing power parity and the fastest growing large economy of the world, it is home to some of the most thriving markets, from automobiles and aviation to mobile connectivity and renewable energy. It is also the third largest base of startups in the technology sector.
Its vibrant entrepreneurial class is exploring avenues in new technologies and across the world. India is already a leader in several areas.
The country faces numerous challenges that need to be resolved through holistic strategies that incorporate cross-sectoral issues.
- In the immediate term, revival of consumer demand is a challenge despite MGNREGA, the 7th Pay Commission and agricultural growth. Global demand too remains subdued.
- The spike in NPAs of banks at over 11 per cent is hindering new investments.
- The administrative processes for a facilitative business climate continue to be lengthy and complex.
Recent Government policies and measures in this regard:
The Government’s policies and measures are helping to a significant extent.
- Progress on GST, reduction in corporate income taxes for smaller companies, mission mode work on ease of doing business and many sectoral actions together set a sound platform for leadership.
- Infrastructure programmes such as Sagarmala for port-led development, railway modernisation and upgradation, and new roads and highways are driving new connectivities across the country.
- Urban development and power sector too have received attention.
The critical challenge is technology advance which is ushering in a new economy. The fourth industrial revolution of technologies such as 3D printing, automation, robotics, big data, and so on will create new manufacturing processes. Increasing convergence of manufacturing, services and technology results in new products and new markets for a rising ‘shared economy’. (Is India ready for this challenge?)
There is a huge consensus that India can lead and can rapidly emerge as a global leader.
- India’s strengths — a large domestic market, a rich reservoir of human capital, steadfast commitment to reforms — should help the country emerge as an attractive business destination.
- While the country’s capability to deliver on services to the world is without question, this should be extended to improve our manufacturing capabilities as well.
- Manufacturing, renewable energy, electric mobility, railways and aviation present substantial opportunities for global leadership. The States should play a growing role in India’s development in the spirit of cooperative and competitive federalism. Strategic policies can change agricultural and industrial climate of a state.
- Protectionism is not new and India should be able to build its global presence through exports. India must internalise high standards and encourage digitisation and innovation.
- Industry too must step up its R&D engagement. Currently, Indian companies spend just 0.3 per cent of GDP on R&D compared to the global average of 1.5 per cent. This needs to be scaled up five times.
India’s rise in an uncertain world will be the next big development. Identifying India as one of the ‘few bright spots’ in an otherwise gloomier global economy, IMF has also projected that Indian economic growth is set to be higher than China’s.
To realise its growth potential, India needs to expand its industrial base, diversify its energy mix, and upgrade its electricity and urban infrastructure.
Unlocking India’s potential
The ‘Unlocking India’s potential’ report, commissioned by ABB India, said that the government wants to increase the manufacturing output to 25 per cent of GDP by 2022, with the creation of 100 million jobs.
To expand its industrial base, India will need to accelerate and implement reforms to improve conditions for business and attract investment. At the same time, companies will need to engage actively with trends such as high-quality manufacturing, smart manufacturing practices, automation and the Internet of Things (IoT).
With industrialisation, India will need to accelerate the expansion and upgrading of its energy sector. The country already imports 75 per cent of its oil and faces persistent shortfalls in power supply and the challenges will become even greater given that manufacturing is much more energy intensive than the services sector, the report added.
At a time of protectionist trends in the developed world, India can become the leading proponent of globalisation only if the country improves on its manufacturing.
Connecting the dots:
- Is India well-positioned to capture a leadership position in an uncertain world? Critically analyze.
- Can India move away from being a low-cost innovator at the bottom of the pyramid, and instead begin to be known for big-bang, disruptive innovations for the world?
- Technology advancements – such as 3D printing, automation, robotics, big data – can disrupt conventional modes of production and consumption. Is India ready for this challenge? Examine.
- Can India emerge as a global leader in an uncertain global environment? Critically examine.