Indian economy at crossroads: Dr Vikas Singh
Government often solves the wrong problem, says expert
Hyderabad: Indian economy has rebounded and is on the path to revival. However, there are several challenges. The rebound must not make the country complacent and there is a need to quickly address the issue of consumption. I hope that the quick revival doesn’t encourage the government to levy additional taxes for the middle class. Crux Management Services president and economist Dr Vikas Singh tells Y V Phani Raj the path India should take to navigate through the current situation, Excerpts of the interview:
Thrust on MSMEs
Economies around the world have grown on the back of the ‘middle’ sector ie the MSMEs who grow big enough to add value to the larger players as efficient suppliers and service providers. The fragile structure (cheap labour and 40 per cent employed on the farm) of the economy brought in a quick rebound. Our ecosystem has in spite of the best intentions affected the growth of the MSMEs and over 95 per cent don’t grow big enough to ‘add’ value to the economy. The government often ‘solves the wrong problem’. Lopsided economic hierarchy has resulted in economic stagnation, wiping off the ‘middle’ that links to larger economic activities. Over 70 per cent corporate profit comes from the top 20 companies and is rising.
Holistic policies
The policymakers are indifferent to the needs of the economy and most lack the capacity to create holistic solutions. For instance- everyone in the system knows that there is government interference in the running of the public sector banks. Instead of ensuring governance, they want merger, which is deflective. In the infrastructure sector, financial institutions would not want to lend when they see project implementation failures or delays. So we need to fix that, and work on creating an enabling ecosystem and encouraging policy framework.
Focus on productivity
The country needs to transition from resource-driven growth (featured by low-cost labour and capital) to productivity-driven growth. Inequality and vulnerability is worse than poverty. The Human Development Index is in the bottom 70 percentile. We tax middle income and not uber-rich farmers. Admittedly, most of these problems have been inherited by the Centre. But the government must act now so as not to bequeath it to the next. Similarly we need to rethink and redesign our welfare programmes and more importantly implement them better. India needs to reweave and resize its social security net.
Tapping the skill base
The growth paradigm seeks another kind of fuel i.e., knowledge and skilled professionals. As we aim to become a 5 trillion dollar economy, this is an opportunity for India. We need to enhance capacity, develop a holistic delivery model to address ‘remote’ services. Our IT service business model is recognised and even respected for its efficient delivery. Similarly, the opportunity is no less in the medical, tourism, educational and leisure sectors. We can create a 300 billion dollar industry and create 35 million related and tributary jobs, if the government could create the enabling ecosystem. Our demography, talent and track record of effective and low-cost service delivery are positioned well to capitalise on this opportunity. This can raise our GDP by a couple of percentage. The multiplier effect could be much more.
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