2020 saw India bring pushed down to 6th place among world’s largest economies, due to the unprecedented stress on the economy from the pandemic-induced lockdowns around the country.
But the government led by Prime Minister Narendra Modi seems to be bullish about its chances of not only taking back the position it lost last year, but overtaking other economies ahead of it; this was corroborated by the annual report of Centre for Economics and Business Research, UK.
How is the country looking achieving this mammoth goal it has set? Is there a plan in action to overcome the challenges that India might face in this journey? Here’s what we found out, and are very bullish about India’s chances.
Domestic Manufacturing is going to be the key
Industries that have been major contributors to the Indian economy were dependent on foreign imports of raw materials, valuable parts and machinery. With the global pandemic locking down the borders of the country, imports began to dry up and the production came to a grinding halt in many of these industries, which impacted the economy.
But the micro, small and medium enterprises kept the wheels running. And with the government’s announcement of Production Linked Incentives (PLIs) for 13 identified sectors in the 2021-22 union budget, the domestic sector has the opportunity to revive itself as an important cog in the wheel of the economy.
The industries which got approved for the PIL scheme include
Food Products – Rs 10,900 crore
Pharmaceutical drugs (Rs 15,000 crore)
High-efficiency Solar PV modules – Rs 4,500 crore
Telecom & networking products – Rs 12,195 crore
Electronic or technology products – Rs 5,000 crore (outlay for 5 years)
This is in line with the government’s vision of Atmanirbhar Bharat (Self Sufficient India) to encourage industries in India to utilize and improve its production capacity to fulfil the growing needs of the country.
Coming out of the Chinese shadow
Many emerging economies, including India, have been dependent on China for its manufacturing capacity and cost effectiveness for the longest time. In 2019, over 13% of India’s imports were from China. Major components required for manufacturing electronics and electrical products and raw materials for pharmaceutical drugs are sourced from China.
But the nationalistic sentiment in the country has been on an all-time high since ever since China’s geopolitical aggression and the skirmish with India on the Himalayan borders in 2020, and many industries have taken it upon themselves to tone down, if not completely boycott business with China and look at Indian alternatives to fulfil their requirements for production.
Furthermore, the government has taken strategic steps to reduce its reliance on China by collaborating with Japan and Australia to form and promote the Resilient Supply Chain Initiative in 2021, which aims to shift production away from China.
Making PSUs valuable again
The Public Sector Units have been notorious for the heavy losses it has been incurring for over decades and causing a massive dent to the exchequer and the economy. This, thanks to the years of bureaucracy in the country, is a completely different animal, about which we’ll talk on a later stage. This has resulted in the downgrade in the value of some of the high-profile profile national and state-held PSUs.
But the government has taken the route of divestment to cut the losses, reducing the financial burden on it, improving the public finances and making the PSUs competent. The Department of Investment and Public Asset Management has identified these troubled PSUs and their assets and have invited private players to invest in them.
This year, the government plans to wrap up the strategic divestment of BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans and Neelachal Ispat Nigam Ltd. So far, the government has divested Hindustan Aeronautics, Bharat Dynamics, Mazagon Dock Shipbuilders, RITES, IRCTC and SUUTI.
New generation industries leading the charge
While the traditional sectors have always been the backbone of the Indian economy, the country’s march towards the higher rankings of global economy is being led by the new generation industries.
For instance, India is making its presence in the global gaming industry, which is bigger than music and movie industry combined, especially online interactive gaming and eSports sector. A little known company called Nazara Technologies was in the news when it raised Rs.583 crore in IPO and its revenue has seen a constant uptick, clocking 41.7 growth in the March FY21 quarter.
There are many such companies in non-traditional industries who have been contributing significantly to the economy and have shown great promise for the future.
Indian economy’s future and its targets might be tagged as ambitious and overreaching, but with the steps planned and being taken by the government, it looks achievable. It won’t be wrong to say India might rise a level above on the rankings and give good competition to the bigger economies above it.
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