Private sector reviving economy
Recovery could have been much faster if the government has spent more, says an expert.
Hyderabad: Indian economy, which has seen a severe impact in the first half of 2020 has over the consequent quarters recovered considerably well. But the recovery could have been much faster if the government has spent more in the first and second quarters of the current fiscal.
Private sector economy has grown without the government support, but if there was support from the Centre, economic recovery could have been better, says an expert.
The government has a role to play to improve the economy. There is also a necessity for the government to bring in transparency and show where its financial stimulus package has been put to use be it in the MSME sector, agriculture or any other sector.
Institute for Advanced Studies in Complex Choices (IASCC) co-founder Anil K Sood told Telangana Today, “India chose financial stimulus rather than economic or fiscal stimulus. We recovered even with that. But if we would have taken an economic route, recovery in 2021 would have been positive. Bad loans are expected to grow this fiscal. We just delayed the financial stress but did not solve the problem completely. Our ability to grow credit is also hampered.”
RBI also shows the credit enquiry between July and December has been de-growing, which means consumers are not willing to take credit and invest for spending. Consumer confidence surveys show that consumers are not very confident of the future. Credit-led consumer growth may not show up in 2021 and even 2022.
“This means economic growth has to come from earnings only. To make this happen, employment should improve as well as the quality of employment. Our capex cycle in both the public and private sector should start. And manufacturing and services sectors need to grow faster. For the private sector, the challenge will be raising capital through equity and debt in these times. This will need the public sector to start the capex cycle and the private sector to add production capacity,” he added.
Equities market
Equity market is doing well. IPOs will be able to help companies to raise equities. Large companies will be able to raise equity but small companies may struggle in these times. Real estate activity has done well owing to duty concessions and interest rate reduction. Construction cycle and housing need to pick up. Housing sales could be impacted as people are still wary of investments.
He pointed that the financial markets are the least important segments that indicate the right economic scenario of the economy. These markets are just trading markets. Stock market indicators can’t be gauged from the economic perspective. The prime parameters that are important for the economy are employment and production in core sectors and overall productivity.
“What matters most is that – we create adequate permanent and temporary jobs, what is the average wage, at what rate is the wage and productivity growing. If wages grow and productivity doesn’t, then profitability will fall. And if profitability falls, confidence on investments will not be there. If everything goes positive, then financial markets will do well. Employment is crucial as it adds productivity and consumption,” Sood added.
Budget 2021
Employment-intensive sectors such as tourism, hospitality, aviation need to be taken care in the Budget. Several aviation employees had been impacted in 2020. They need a supportive ecosystem. The government should also step-up efforts to help MSMEs, which were ignored for a long time.
Only large corporates in petroleum and pharmaceuticals had been contributing to exports and in the rest of the sectors MSMEs had been the prime export drivers, and they needed support. There has to be a dedicated effort for the MSMEs.
Bilateral ties
India should strengthen its trade relations and investment collaborations with other emerging economies such as Vietnam, Bangladesh and Indonesia to build capacities. Other emerging companies also have created skilled labour.
India can certainly build stronger ties with these nations. Inward focus is not going to help India or any economy. Self-reliance is one thing but collaborations are key to go global.
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