Background:

• The COVID-19 pandemic has disrupted the global economy and India is no different.
• The significant reduction in domestic demand caused by the nationwide lockdown has pushed the economy towards contraction in the first quarter of 2020-21, and the impact is likely to be felt in subsequent months as well.
• The revised stimulus package can help revive businesses, which are finding it difficult to operate without adequate availability of credit.
• This is especially true for India’s 60,000-odd startups, which are facing an acute liquidity crunch. The situation presents an opportunity to take bold action to promote investments, protect existing jobs and create new jobs.
• A lot more needs to be done, however, to resuscitate the country’s growth engine.

 

Suggestions:

 

1. Big business houses should be supported by the government to reopen their operations by way of tax incentives or ease of procurement of raw materials or other goods and services on credit as this will energies consumer demand and boost the functioning of vendor or ancillary industry in the MSME sector (which has huge potential for job creation).

 

2. The RBI should consider a Single One Time Window for restructuring business loans, as required, by all banks. There is a high probability that non-performing assets are likely to rise once the prevailing moratorium is lifted by RBI. The government and RBI also urgently need to assure banks that their business decisions will not be questioned, to encourage credit flows.
3. The Centre can prepare a five-year plan on getting at least 60 percent of those companies, desiring to move manufacturing out of China to India.

 

4. Making India a global trading hub – devise an incentive regime for companies setting up global trading operations from India.

 

5. The States should think of establishing self-contained “industrial cities” that earmark space for manufacturing, commercial, educational, residential and social infrastructure.

 

6. The 10 sectors identified by the government fit into the Make in India campaign — electrical, pharmaceuticals, medical devices, automotive, mining, electronics, heavy engineering, renewable energy, food processing, chemicals and textiles. Japan, the U.S. and South Korea have already shown interest.

 

7. It should also encourage sunrise sectors as part of re-imagining Indian economy such as battery manufacturing (storage systems)/ solar panel manufacturing. The government can also consider giving impetus to “Deep Tech”-leveraged businesses — blockchain, robotics, AI, machine learning, augmented reality, big data analytics, cyber security, etc.

 

8. India is amongst the top start-up ecosystems globally. Several of them are in pre-Angel or Angel-Funding stages and are under significant pressure to stay afloat in view of a lack of adequate liquidity. Start-ups not only help drive innovation, but also create jobs, which will be very important going forward. The government needs to provide significant support to the start-up ecosystem.

 

9. The auto industry, which contributes significantly to GDP (nearly 9%), deserves special treatment. In addition to reducing GST rate, old vehicle scrap policy with tax incentives for creating a demand for new vehicles may be formulated. There is need to recognise Auto Sales Industry channel partners as MSMEs

 

10. Plug-and-Play model: Maharashtra has created a turnkey ‘plug-and-play’ model for foreign investors. Similarly, other States must become organized, be it on land acquisition, labour laws and providing social, environment and other infrastructure. Land should be made available for projects with all necessary pre-clearances — at Centre’s level (including Environmental), State and Municipal dispensations.

 

11. Reforms in labour laws do not only mean permission to hire and fire. Leeway should be given to strictly enforce discipline within the factory premises and demand higher productivity. The moves by U.P., M.P. and Gujarat are welcome signals. The government should provide health insurance for migrant laborers as experimented by certain States.

 

12. Investments of NRIs and OCIs in India should be treated on par with those of Resident Indians as regards interest and dividend repatriation and management control of Indian companies. It may be mentioned that the Chinese government had called on rich overseas Chinese to invest in China with minimum government control, and massive investments followed. This has contributed to China’s prosperity and economic rise.

 

13. An Off-Shore investment centre like Singapore can be opened in Mumbai where Indian domestic laws and taxation will not be applicable. MNCs may route their investments into India through the Off-Shore Centre in Mumbai. Foreign legal firms and banks along with domestic institutions can be invited to have a presence in the Off-Shore Centre.

 

Reference:

https://www.thehindu.com/business/Economy/comment-re-imagining-and-reinventing-the-indian-economy/article32376209.ece