In this challenging environment of weak economic growth, concerns over employment generation and global trade tensions, India seems to be treading the growth path- a bright spot on cloudy global horizon and claims to be the fastest-growing major economies of the world today. The Indian government has set the ball rolling by keeping the ambitious goal of reaching $5 Trillion GDP by 2024. Banking on the foundation of keeping the economic framework at the right place, the target looks arduous but achievable.
Investments in general and foreign investments in particular are key to economic growth. Despite the fact that the cost of capital in India has increased over last few years, there is no dearth of global capital that is flowing to other parts of the world. The key task is to attract this capital by incentivizing and putting the right framework in place. Also, the capital formation in our country stands at around 30%, which is much lower than that of China, where their capital formation was increased from 30% to 45% over the last 15 years which in turn resulted in a consistent double-digit growth during the period.
Furthermore, Infrastructure is going to leave a conspicuous mark in the Indian growth story. The government predicts an investment of INR 100,000 Cr in this sector by the end of 2024. Infrastructure caters to a large number of unskilled or low skilled labour but at the same time characterized by high employment elasticity., The sector however is also struggling with a massive unsold inventory of around 1 Mn units. Hence, the plan should rather be to chalk out a detailed milestone-based roadmap to attain the investment in addition to defined roles and responsibilities of all entities and stakeholders.
India’s domestic market can be considered as a good source of growth but is insufficient to fuel a growth rate of 8+% consistently to reach $5Trillion. The growth rate can be achieved only if the manufacturing sectors contribution increases to 25% from 18% at present. A comparison with China clearly places our domestic market to be one fifth to one-tenth of theirs in any domain (aerospace, automotive, electronics manufacturing etc). Contribution of exports will play a key role in the growth of India since both investments and exports are intertwined. Investments drives productivity, productivity increases competitiveness thereby establishing the country as a preferred choice of manufacturing globally.
It should be noted that MSME (Micro, Small and Medium enterprises) have been a backbone of our economy contributing around 30% of GDP. More than 3Cr MSMEs in India are either directly dealing with manufacturing or trading of manufactured products. This sector however is known for low capital investment, low skill and low productivity which might result into lower cost on manufacturing but also at a (perceived) lower quality. Nonetheless, these MSMEs will have to play a major role in the growth by increasing their size thereby improving productivity, efficiency and output.
India contributes less than 3% of global market cap and only seven organizations make it to Fortune 500 list. Therefore we need to aim at a minimum of 100 companies to be featured in Fortune 500 list by 2024. This is only possible when the medium scale enterprises transform into large scale followed by Micro & small enterprises expanding even more so.. Besides Large firms contribute around 70% to the GDP in China whereas it is only 40% in India.
On the other hand, as per the budget of 2019, relaxation of FDI norms and other policy measures are expected in Aviation, Media and insurance sector this year. The aim is to increase investments along with employment generation. These jobs (particularly in aviation) would necessitate high skills wherein our country is lacking. The challenge indeed would be skilling of human resources and increase the employability quotient to make the most out of this opportunity.
Moreover, focus on sunrise sectors like electric mobility, renewable energy and electronics manufacturing can bring long term growth sustenance. The past few years has evidenced a creation of strong communication channels and trust between industry, government & society in addition to creating a foundation for growth acceleration. Subsequently continuous monitoring of the initiatives set by the government and flexibility to adapt feedback are positive signs for our economy. Both the nation and top leadership are upbeat about our future economic scenario; the need of the hour is to identify and focus on our roles and responsibilities for making this $5 Trillion dream come true.
SolutionBuggy is an online platform that intends to support MSME sector to overpower these challenges by offering knowledge services through the 6k+ experts associated with them. More than 60k+ MSMEs in the manufacturing sector have been benefited from this initiative in the last two years. The initiative has been acknowledged and appreciated by various organizations nationally.