Economic Highlights

New Delhi, 25 January 2016

New Entrepreneurship

CHALLENGE TO BIG PVT SECTOR

By Shivaji Sarkar

India is at the cusp of an industrial revolution. This was agreed at the World Economic forum. At the same time, the country has its challenges too. It has to invest in capitals like human, infrastructure, finance and physical. Additionally, it has to allow innovation through freedom from the State, says Union Finance Minister Arun Jaitley.

Yes, India has seen its information technology (IT) sector growing beyond expectations as the State had never anticipated the existence of such an opportunity. Entrepreneurs had a free hand. They innovated to lead the economy ahead.

However, in a volatile world, India is not without its challenges. The global situation has affected its export volumes and forex earnings. The slowdown in China is making imports cheaper and throwing up a big challenge to the ‘Make in India’ manufacturing experiment. India’s factory output has come down and consumer price inflation is going up.

Unfortunately, the oil price fall advantage is not reaching down to prices rather it has hit the rupee and the stock markets. Companies used to high profits are ruing the oil seeking natural level. The era of low-cost, low profit operations has come and the new economy has to adapt to this. Further, the Government cannot claim that the savings from oil are being utilised to invest in roads and other infrastructure. Even if it is true, costs are rising which is harmful for the economy as it creates new vulnerabilities. The Government must note that the final product has to be cheaper.

China is slowing down but it also has the advantage of cheaper yuan which is cutting into robust economies with low prices. This part, Europe and the US too are slowing down. And, this restricts Indian goods’ access to world markets. Add to this the crisis in West Asia -- Saudi Arabia, Iran, ISIS, Syria -- which is not just straining India geopolitically but worsening the security situation.

At the same time, India has started thinking afresh and can have a limited satisfaction that it is growing faster than rest of the world. The country has the advantage of the manufacturing sector growing, and investments pouring in. But steps undertaken are slightly long-term. Various new schemes such as Digital India, Make in India, Skill India would take a bit of time to yield results.

However, it shows that India wants to create the demand within by empowering its people. Though the process is a bit long-standing, it is a definite break from the 1991 globalisation, which now in many ways appears to have been half-hearted and a hesitant opening. Liberalisation then didn’t come with less control.

In many cases, the State’s presence was overwhelming even for creating volatility in the stock market as both the 1992 Central budget and sudden stock market spurt indicated. Sadly, an era of new controls and scams siphoned of trillions of crores of investments from the public domain. The licence-permit raj of 40 years prior to 1991 had taken a new avatar-- India took a step forward but two backwards!

Despite this the country has shown that it can have a higher growth at around 7.5 per cent. The Start-Up India of the NDA government is a step to break from the conventional licence raj. All these years, the Governments have been vacillating on what to do or not and ending up creating constraints. The 1991 break was only partial thanks to the invisible role of the State. Whether it was land or environmental clearances etc efforts were always there to ensure a control of the State.

This fortunately is changing with the State wanting to be a facilitator. It seeks to end the queues at least outside the Industry and Finance Ministries in a step towards giving the entrepreneur eventual freedom from the State and help it grow. It thus comes as no surprise that ‘Star-Up India’, which was launched with both hesitation and hope, has encouraged 1.5 lakh entrepreneurs to put in their applications. This may be a small beginning but it sends a clear signal that people are willing to act and take the risk.

The Mudra scheme launched earlier, intended to target 25 per cent of the low income population, is seeing small enterprises, some 1.73 crore of them, accessing funds through it and getting  free  from the clutches of money lenders. In addition, there is ‘Stand-Up India’ for SC/ST and women category, wherein the banks could help create entrepreneurs from among them --perhaps in the next few years’ almost three lakhs.

India has a large and growing population and the conventional economy cannot absorb it.  Innovation at every level is a must and this cannot be just left to the Government or some individuals. The State has always been conceived as a provider, facilitator and protector and never imagined as an operator. This must be kept in mind.  

At the same time, one must keep in mind that there are nagging problems. Large private sector investment is slow as it has overstretched itself, which has hit the banking system. In the next few months, bankers have to use greater ability to come out of NPA crisis. The Reserve Bank of India has taken stringent steps to such pilfering and the Government is forced to recapitalize the banks for such weird private sector attitude.

It is well-known that India’s private sector has always been too cautious. It has thrived on public money and created wealth for some families. But now it must break away from it. So far despite the government wanting to withdraw or encourage entrepreneurship, growth largely has depended on it. But now future growth cannot depend on it. Its capacity to employ people is coming down. The private sector has to take up the cudgels now and if it doesn’t then the country would have enough resilience and skill to dump it.

Progress and growth involves all. If someone fails, he cannot be given unlimited opportunities. This is the time for large private sector either to come forward or get lost forever. It cannot survive on crutches in all kinds of situations.

Entrepreneurial friendly taxation regime, particularly for start-ups is on the cards. More the sectors become unregulated, more the country can grow with set up that can innovate. India has to be a consumer and a shining star. It will become a manufacturing hub even if the large private sector fails it as the new entrepreneurs are set to take over. ---INFA

(Copyright, India News and Feature Alliance)