India is at the cusp of an industrial revolution. This is agreed at the World Economic forum. It has its challenges too. It has to invest in capitals like human, infrastructure, finance and physical.
It also has to allow innovation through freedom from the state, says finance minister Arun Jaitley. Yes, India has seen its information technology (IT) sector growing beyond expectations as the state had never anticipated the existence of such an opportunity. Entrepreneurs had a free hand. They innovated to lead the economy ahead.
India is not without its challenges in a volatile world. It has affected its export volumes and forex earnings. The slowdown in China is making imports cheaper and throwing up challenge to the Make-in-India manufacturing experiment. India’s factory output has come down. Consumer price inflation is going up.
Oil price fall advantage is not coming to prices rather it has hit the rupee and stock markets. Companies used to high profits are ruing the oil its seeking natural level. The era of low-cost, low profit operations have come. New economy has to adopt that.
The government cannot say that savings from oil is being used to invest in roads and other infrastructure. Even if it is true it is raising the costs. It is harmful for the economy and creates new vulnerabilities. Final product has to be cheaper.
China is slowing down but it also has the advantage of cheaper yuan and cut it into the robust economies with low prices.
Europe and the US are also slowing down. It restricts Indian goods’ access to world markets. The West Asia – Saudi, Iran, ISIS, Syria – crisis is straining India geopolitically and worsening security situations.
India has started thinking afresh. The country can take a limited satisfaction that it is growing faster than rest of the world. The country has advantage of manufacturing sector growing, and investment pouring in. The steps are slightly long-term. Various new schemes like Digital India, Make-in India, Skill India would take a bit of time.
But it shows that India wants to create the demand within through empowering its people. The process is a bit long-term but a definite break from the 1991 globalisation, which in many ways now appears half-hearted hesitant opening. Liberalisation did not come with less control. In many cases state’s presence was overwhelming even for creating volatility in the stock market as the 1992 central budget and sudden stock market spurt indicated. An era of new controls and scams siphoned of trillions of crores of investments from the public domain.
The licence-permit raj of 40 years prior to 1991 took a new avatar. India has been taking a step forward and two backwards.
Despite that India has shown that it can have a higher growth at around 7.5 percent. The Start-Up India of NDA government is a step to break from the conventional licence. The government all these years have been deciding on what to do or not and create constraints. The 1991 break was only partial because of the invisible role of the state on land, environmental clearances and efforts to create a control of the state.
It is changing to the state being a facilitator or at policy level. It is ending the queues at industry and finance ministry as the step towards eventual freedom from the state in terms of programmes and unleashing of Indian entrepreneur is taking place in an over-populated country.
It is a surprise for everybody that Star-Up India which was launched with much hope but also hesitation encouraged 1.5 lakh entrepreneurs to put in their application. It may look a small beginning but is also a testimony that people are willing to act and take the risks.
The Mudra scheme is intended to target 25 percent of the bottom of the population. The small enterprises are seeing an opportunity as 1.73 crore of them are accessing funds through it and get freedom from money lenders. There is now also a Stand-Up India for SC/ST and women category. The banks would spot them and create entrepreneurs from among them. Almost 3 lakh entrepreneurs would be created in the next few years.
The country cannot live in a situation of eternal crisis more so if it is a creation of the state through blockades of unimaginable proportions. The state is taking steps now to break these as well.
India has large and growing population. The conventional economy cannot absorb them. Innovation at every level is must. It just cannot be left to the government or some individuals. The state was always conceived as provider, facilitator and protector. It was never imagined as the operator as well. The state controls lead to massive rent-seeking and the collapse of Soviet Union is a testimony of the impracticality.
There are still problems. Large private sector investment is slow. The private sector has overstretched itself and it has hit the banking system. In the next few months, bankers have to use greater ability to come out of NPA crisis. The Reserve Bank has taken stringent steps to such pilfering and the government is forced to recapitalize the banks for such weird private sector attitude.
India’s private sector is always too cautious. It has thrived on public money and created wealth for some families. It has to break from it. So far despite government wanting to withdraw and encourage entrepreneurship, the growth largely depends on the government.
The future growth cannot depend on the government. Its capacity to employ people is coming down. It is virtually the last opportunity for the private sector take up the cudgel now. If they do not, the country has enough resilience and skill to dump them.
Progress and growth involves all. If someone fails, he cannot be given unlimited opportunities. This is the time for large private sector either to come forward or get lost forever. It cannot survive on crutches in all kinds of situations.
Entrepreneurial friendly taxation regime particularly for start-ups is on the cards. More the sectors become unregulated more the country can grow with set up that can innovate.
India has to be a consumer and a shining star. It will become a manufacturing hub even if large private sector fails. The new entrepreneurs are set to take over.