Realigning India’s economic strategy

Achieving the ambitious goal of becoming a developed nation by 2047 demands a decisive overhaul of current economic policies

The world is undergoing rapid political changes. With these geopolitical changes underway, it becomes imperative to relook at the current strategy for economic development to meet the declared target of achieving a developed nation status by 2047. It becomes necessary to realign and readjust the policy points with the changing circumstances. Countries become rich by producing and selling globally valuable and value-added products. India’s share in global trade has to grow rapidly from the present measly 1.8 per cent in goods exports and 2.8 per cent in goods imports. In the service sector too, India needs to enhance its share of delivered services upwards from the present 6 per cent. How will this happen? We need to take quantum measures and hard steps without caring for internal political expediency. Global political scenario may affect the choice of strategic steps but it can have, at best, limited effect if we as a nation are determined, focused and forthright.

Nothing can come in the way if we act united and our government performs its actions without fear or favour. The government’s backtracking on the Agriculture and Farm Bills of 2019 was an unfortunate incident. Such incidents should not recur. The government buckled under the fake protests by agro market middlemen masquerading as farmers who created a false show of protests to put spokes in the wheel of the Bills and sabotage them. The government, under fear of bourgeoning vandalism by anti-national elements to prevent the promulgation of Bills, backed by foreign enemy countries capitulated and rolled back the Bills. This should not have happened. The country paid a heavy price for this as agriculture is still the mainstay of India’s economy. If only those important Bills had been passed, we would have witnessed an economic growth rate increase of at least 2 per cent over the existing. Let our government bring back those Bills at the earliest appropriate time to provide a vital booster to our economy. The other important area that needs the urgent attention of the government is the MSME sector which continues to lie stagnant. This sector is the prime driver of employment growth and needs steps to facilitate the establishment of new units and expansion of the existing ones. These steps are—bureaucratic reforms to cut red tape and reduce unnecessary regulatory compliances that engender corruption and impede growth. To boost Indigenous manufacturing and increase the share of manufacturing in the national GDP from 16 per cent (almost stagnant since 2015) to upwards of 20 per cent, rebooting the entire Make in India program is needed. The blueprint of this otherwise visionary plan was, alas, not implemented seriously.

Too much dependence on foreign capital and FDI was never forthcoming and efforts should have been made to utilise domestic capital. The central sector and state sector Public Sector Undertakings (PSUs) should have taken the initiative in enhancing domestic manufacturing. Also, Make in India should have emphasised Make by India. Bureaucratic reforms, an increase in domestic manufacturing especially by PSUs by increasing import tariffs and further increasing fiscal concessions are some of the steps needed. Good work has been done in the area of defence and space in this context by encouraging and promoting startups.

This should be extended to other sectors of the economy. Value-added manufacturing in agriculture, food, healthcare and education will go a long way in boosting indigenous manufacturing and even exports. It is quite a pity that in spite of the wonderful success of the BJP government in the cleanup of the Banks, its benefit has not percolated to domestic manufacturing. Why out of the 100 smart cities conceived in 2014, only about 20 have seen the light of the day and that too partially? The establishment of special economic zones and specialised product production zones was blueprinted but its implementation has also got stuck in the legislative and bureaucratic quagmires. Bureaucratic reforms, I reiterate, are an emergent necessity. Large imports from China over the last ten years have indeed prevented the growth of MSMEs in the country. Many pre-existing factories faced closure and many manufacturers turned traders. India’s exports to China in 2023-24 were USD 16.65 billion, while imports stood at USD 101.75 billion, leaving a trade deficit of more than USD 85 billion. Efforts were made by the ruling NDA government to contain Chinese imports. But most of the curtailment took place in lower-end consumer goods and less dent could be made in import of industrial goods. Irrespective of government policy, if our countrymen had decided to boycott Chinese goods that can be produced in India, we would have made a huge dent in Chinese imports and facilitated the growth of the domestic manufacturing industry. But this did not happen.

The land acquisition Amendment Bill was presented in Parliament on 10 March 2015 but could not be passed due to opposition by non-BJP lawmakers in the Rajya Sabha where the ruling NDA lacked a clear majority in numbers. The opposition party MPs called the proposed amendments anti-farmer and anti-poor. The proposed amendments sought to remove requirements for approval from farmers to proceed with land acquisition under five broad categories of projects. Its passage continues to hang fire. It is the foundational base of the Make in India program. When will it be passed? Political expediency has been truly the bane of our country and the main impediment to our fast-track economic progress. 

In the above context, it would be appropriate to mention that strongly nationalistic citizens can collectively create conditions conducive to the growth of the domestic industry. The economic resurgence of Germany and Japan post World War 2 are case in point. Though the USA lent economic support to these countries, their citizens were patriotically driven to establish their domestic manufacturing base and the countries developed into major industrial and economic powers in a period of barely two decades following their defeat and total devastation in 1945, the end year of the war. Both these countries lay stress on manufacturing, innovation and technology development. Their emphasis was on production and value-added exports. A similar strategy is needed. India has been the world’s major economic power for millennia and in keeping with its inherent potential; it is capable of a long-term economic growth rate of 12 per cent.

For this to happen, the aforesaid steps brook no delay. In the destiny of nations, there are some phases when it becomes necessary to take bold steps in line with progressive principles of economic development rather than get bogged down by over-strategising and political expediency. Our revered political and economic scholar Chanakya had stated that Dharma (righteousness) should take precedence over everything else in governance and even strategy should be aligned with universal divine Dharma. We need to proceed further in our economic journey accordingly. 

(The author is a management consultant based in New Delhi; views are personal)