Then came the covid outbreak that made 2020 a year like no other. India has done well in managing this worldwide crisis, even compared to richer countries. As the focus shifts to making changes to restore normalcy, it can be hard to feel optimistic.
But unprecedented times call for unprecedented solutions. As a new year gets underway, India must begin to make a transformative shift, from pursuing stability in the previous decade to transforming the economy over the next by formulating a strategy for what’s to come. Most of the background work has been done in providing better and transparent government services and basic facilities to India’s masses. Budget 2021-22 can showcase the government’s strategic choices and provide support in areas that can propel India’s economy forward in the 2020s.
The advent of the fourth industrial revolution can help India leapfrog traditional phases of development and accelerate its transition to a developed nation by transforming entire systems of production, distribution and consumption. Therefore, the 2021 budget must start to conceptualize how the inexorable integration of technology could enhance India’s potential.
India must also look outwards and foster strong global partnerships, including with the World Trade Organization and individual countries. Free trade agreements with Europe, Japan, Australia and America will help India cement its place as a strategic replacement for China.
A grand plan to set up large coastal economic export zones (of at least 200sq km each) in seaboard states, with each zone endowed with its own ports, airstrip, etc, will help consolidate India’s place in global supply chains. These export zones should have relaxed labour and administrative laws and single-window clearance facilities to boost manufacturing and exports. These clusters should have model laws and should be managed by professional managers. It is imperative to develop self-sufficient mega parks and manufacturing clusters in labour intensive sectors, with dedicated administrative authorities empowered to provide single-window clearances. This would help lower costs and meet global productivity standards.
To add value to its export basket, the country should boost its ability to serve global markets for biotech, med-tech and pharmaceuticals, and information technology and electronics, among other product groups. A framework to promote the adoption of latest technology, by producing components that form part of next-generation technologies, could add value of over $500 billion per year. Special emphasis could be laid on semiconductor wafer fabrication and chip manufacturing.
Infrastructure spending will have a multiplier effect on India’s economic growth. In this context, it is vital to build resilient infrastructure with a focus on sustainability. The National Infrastructure Pipeline (NIP), planned over a period of five years with an initial sanctioned amount of ₹102 trillion, is a good starting point, but needs to be expanded in scale and scope. The country needs a north-south and east-west greenfield 20-lane multimodal highway, a high-speed rail corridor connecting major urban centres, a doubling of the scale of planned urban metro systems, and 450 gigawatts of renewable energy by 2025 (instead of 2030). All this calls for significant investments. Project contracts should be awarded with time-bound implementation clauses, and with all approvals readily in place.
Increasing expenditure on health infrastructure is vital for Atmanirbhar Bharat. The production of medical equipment and ancillary consumables should be fast-tracked, as also research and development with foreign participation. Similarly, 60-65 million new jobs could be created through the use of productivity-boosting digital applications and the creation of specialized training programmes to address a shortage of technically-equipped human resources. A nationwide online marketplace for informal jobs could add $20-50 billion of economic value.
Covid-induced work-from-home programmes and the e-enablement of services have been implemented smoothly by many businesses, regulators and governments, despite minor hiccups. Using this as a base, the Union government should aim to rationalize the number of business compliance requirements and further simplify labour laws. Simplification of regulatory filings, transparency in processes, the digitization of records and the creation of a repository for existing central and state laws (and rules and regulations), besides the repeal of redundant laws, can boost gross domestic product substantially and create a large number of jobs.
For a transition to the next stage of growth, the country should appoint a nodal agency for the development and adoption of next-generation technologies, and promote the setting up of centres of excellence for artificial intelligence, internet-of-things, robotics and so on. A recent incentive scheme has succeeded in fostering technology adoption in various manufacturing industries. This can be applied to many more areas.
India needs $1 trillion of new investments over the next five years just for infrastructure. Funding this is possible if part of the economy’s savings are channelled into projects. The issuance of bonds with 20-30-year tenures can partly fund development at a reasonable interest rate. Special purpose vehicles can be created for each sector that use a sovereign guarantee to borrow money and attract other countries’ sovereign wealth funds. Also, global capital markets can be tapped to raise long-term debt at low interest rates. Further, engaging pension funds and endowments can get investments with 20-30-year horizons.
The unforeseen covid crisis has offered us an opportunity to revisit how we conceive, design, build, operate and regulate projects and businesses. The pandemic has shown that India’s pharmaceutical industry is an asset not just for India, but for the entire world. A well-coordinated effort to attract investment as the world transitions to a new industrial order would serve the country well. A bold vision in the budget will show the world that India means business.
Ashishkumar Chauhan is managing director and chief executive officer, Bombay Stock Exchange