One area that remains unattended is labour reform. To accelerate growth to eight per cent and more, strategic moves towards increasing trade and investment in the product sector/country matrix are essential
The Narendra Modi Government can today boast of achieving the following milestones:
i) Bringing more ease of living for citizens by keeping inflation in check, waging war on corruption through demonetisation, Direct Benefit Transfer, rendering Government services online, Ujjwala Yojana, improving ease of doing business etc. All these reduce the cost of transaction.
ii) Successfully introducing Jan Dhan Yojana and Swachh Bharat Mission.
iii) Institutional innovations like Niti Aayog.
iv) Successful implementation of structural reforms like goods and services tax (GST), insolvency and Bankruptcy Code (IBC), deregulation of petrol and diesel prices and enhanced focus on digitisation.
However, one major area that remains unattended is labour reform. This is unlikely to happen now due to pre-lok Sabha poll political compulsions. The Indian economy is poised to grow at 7.5 per cent this year and 7.6 per cent next year. But to accelerate this to eight per cent and more, there needs to be some strategic moves towards increasing trade and investment in the product sector/ country matrix.
One area of opportunity is economies centred around the Bay of Bengal and South-East Asia. A Federation of In-dian Chambers of Commerce and Industry sponsored report has made far-reaching recommendations for the ‘rejuvenation’ of the 20-year-old Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) that comprises of Bangladesh, India, Sri lanka, Thailand, Myanmar, Bhutan and Nepal — and develop it as a “bridge between So-uth Asia and South-East Asia” by strengthening infrastructure and connectivity linkages between them. This could be integrated with the look East policy.
It is the deepening of regional transport connectivity, facilitating cross-border trade, investment and tourism, protecting the environment and promoting the sustainable use of shared natural resources in the areas envisaged in BIMSTEC, said the report by a core group of experts. Africa could be another area. The International Monetary Fund (IMF) determined that the value of India’s exports (now largely high-end consumer goods) to Africa has increased by over 100 per cent between 2008 and 2013 — meaning that India has now forged ahead of the US in African markets. However, although we have benefited from Africa’s robust economic growth, India’s gains do not quite compare to China’s astronomical increase in exports to Africa.
The value of India’s imports from Africa also grew dramatically from 2008 to 2013 — by over 80 per cent — compared to the sharp decline in the value of imports from sub-Saharan Africa to the US. Sector-wise, services and tourism need emphasis.
Services sector: Sebastian Vergara, the United Nations Economic Affairs Officer said that India’s service sector exports — which includes back office operations software and technology services — are not vulnerable to the protectionist trends in the medium term. “For India, despite the short-term tensions, the prospects in the medium term for the export of services are excellent, so India needs to take advantage of that competitiveness,” he said.
The contribution of the services sector is not only a prominent factor in the growth of India’s GDP, but has also attracted significant foreign investment, contributing significantly to exports as well as providing large-scale employment. The share of services sector in Gross Value Added is expected to be at 53.7 per cent in 2016-17 (as per the second advance estimates) while the share of manufacturing is expected to be at 16.6 per cent, according to the provisional data from the Central Statistics Office. The services sector covers a wide variety of activities such as trade, hotels and restaurants, transport, storage and communication, financing, insurance, real estate, business services, community, social and personal services, and services associated with construction.
In fact, services like IT/ITEs, logistics services, retail (including e-commerce and transport services), financial services, utilities (telecommunications and professional services, engineering services, architectural services, accounting and legal services) are a critical component for the growth of the manufacturing sector.
The Government rightly follows a multi-pronged strategy of negotiating meaningful market access through multilateral and bilateral trade agreements, trade promotion through participation in international fairs/exhibitions and focused strategies for specific markets and sectors. The Government also provides some fiscal incentives through Services Exports from India Scheme for some identified sectors. The services sector is also one of the identified sectors selected for branding under the sectoral brand strategy followed by the Indian Brand Equity Foundation. With a positive intent from the industry backed by Government support, the services industry is expected to clock strong growth numbers in the coming years, both in the domestic market and exports.
Tourism sector: According to a 2018 economic impact report by the World Travel & Tourism Council (WTTC), in the next 10 years, India is likely to become the third largest tourism-based economy. It also says that the country would add nearly 10 million jobs in the tourism sector by 2028. The total number of jobs depending directly or indirectly on the travel and tourism industry will increase from 42.9 million in 2018 to 52.3 million in 2028. India, which is currently the seventh largest travel and tourism-based economy in the world, should work on improving infrastructure, said WTTC president Gloria Guevara.
India has already been working in that direction and the result is that while the world tourist growth was four per cent in 2016, India saw a high 9.7 per cent growth in foreign tourist arrival.
(The writer is an author and a senior commentator)
