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Opinion

India may recover from recession. Here is a plan | Analysis – analysis

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The ~ 20 lakh crore package announced by Prime Minister (PM) Narendra Modi on May 12 will help energize micro, small and medium-sized enterprises (MSMEs) affected by the coronavirus disease pandemic (Covid-19). If the Center and states give them priority, they can become viable, produce goods, and create jobs. Money provided by the government to revive industrial and commercial activity could have a modest multiplier effect. But this does not mean that India can avoid a deep economic recession.

It remains to be seen whether and to what extent the government’s efforts will succeed in attracting foreign companies leaving China to invest here. In China’s Shenzen Group of Special Economic Zones (EEZs), companies were provided with free road, water and electricity infrastructure, and quick access to ports. The government also built accommodation near workplaces for labor brought in from remote areas. The single-window clearances for projects were in 30 days or less. The export tariff was 15% fixed. Maybe we could learn from Hanoi’s success in attracting companies out of China, but now the President of the United States (US) Donald Trump has thrown a key in the works by saying that American companies leaving they must return to the US USA Or face punishment.

The key to pulling the economy out of a deep recession is to increase the multiplier effect: the speed at which money moves. The government must immediately start a large program involving new construction. The construction sector uses a lot of labor and is a central multiplier for other industries such as steel, cement and paint. The demand for goods and services will increase, a major factor in driving economic growth. The infusion of money through massive public works that helped end the recession of the 1930s is the only real parallel to the current crisis.

The government building a new House of Parliament, a large secretariat building, and houses for the Vice President and Prime Minister would be a good start for a new construction program. Add to this, an Indian Arts Center and an iconic building to house a new National Library on the line from the United States Library of Congress. The construction of a large modern port on the east and west coasts will satisfy an important need. The ongoing road construction program could be expanded to include connecting roads to nearby villages. Haryana should have a new capital: Chandigarh was built for Punjab. It is also time to start working on some aspects of the river link plan.

The government should consider creating a dozen or more research and development (R&D) university groups and specialized institutions to promote science and technology in different regions. Each group should comprise an advanced institute of information technology, a telecommunications center in charge of developing Indian 5G, a medical complex for research and development in pharmaceutical products, a training and skills update institute, a business center for the promotion demand and a design and research and development center.

Approximately two thirds of world trade was carried out by multinational corporations (CMNs) through their own resource and component supply chains, in addition to direct entry of the final product into foreign markets. In the post-Covid-19 global marketplace, some of the western-based multinationals will shift their supply chains from China to other countries, or may choose to develop resources and components in their own countries or in neighboring countries. An important example of such a policy has been the European Union Common Market Food Program.

The global market is becoming increasingly competitive as more countries participate in the production and supply of goods and services. Clearly, India has to develop global dominance in certain specialized sectors where our footprint is sustainable. India’s exports are too diverse and lack a sustainable competitive advantage, and we must focus on developing excellence groups to support exports. Leading countries have companies with a sustainable competitive advantage acquired through the development of products appropriate to their culture and knowledge. For example, Germany and automobiles, France and perfumery and wine, Italy and leather shoes. We have to encourage the development of industries that can be updated for world markets, such as gems / jewelry, pharmaceuticals and certain value-added agricultural products. We should make an effort to recover, with improved design and quality, at least part of the textile market.

Some small and medium-sized companies are born global (BG), that is, small and medium-sized companies (SMEs) in western countries that grow worldwide at more than 20% per year. They are founded by entrepreneurs with the vision of globalizing. Some have grown into major companies relatively quickly, such as Red Bull in Austria and Angry Birds in Finland. Many battleship multinationals are looking for companies of this type to use on their networks. Promising Indian startups should be counseled and encouraged to learn from BG.

Many Indian SMEs have a low price strategy. This is fundamentally unsound in the long run as it tends to market your offerings. Advanced countries create brand value for their country and their companies. They treat brands as valuable assets. The consequent benefits of customer loyalty and increased profits strengthen their companies. With overproduction and international competition, a distinguishing factor is design. Customers are looking for better designed products and are willing to pay more for them. Witness the success of brands like Armani, Polo, and Scandinavian / Danish wood furniture. India should establish a training program for BG that combines design, technology, marketing and practices.

The government should allocate 2% of GDP for this (in addition to the committed 10%). This will set us on the path for the economy to emerge from a deep recession.

MK Rasgotra is a former Foreign Secretary and Vishnu Kirpalani is a distinguished professor emeritus,

Marketing and International Business, John Molson School of Business, Montreal

The opinions expressed are personal.

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