This is a time when, as
the authorities deal with a lockdown, there needs to be an equal
emphasis on providing for large numbers of people without the money for
food and necessities, while the rest of us wait it out. Hard as it is,
an MIT scholar writes that after the Spanish flu in 1918, cities that
restricted public gatherings sooner and longer had fewer fatalities, and
emerged with stronger economic growth.
1 It
is likely that costs and benefits vary with economic and social
capacity, and we may have a harder time with it here. Going forward,
government action to help provide relief, rehabilitate people and deal
with loss needs to be well planned, including targeting aid to the urban
and displaced poor.
2
As important now as to
ensure the lockdown continues is to plan on how to revive productive
activity and the economy, and restore public confidence. A systematic
approach will likely yield better results.
A major element of the
recovery plan is steps such as liberal credit and amortisation terms,
perhaps much more than the three-month extension the Reserve Bank of
India (RBI) has announced. A primary purpose is the re-initiation of
large-scale activities such as construction, of which there are
reportedly about 200,000 large projects around the country. These have
to be nursed back to being going concerns. The RBI may need to consider
doing more, including lowering rates.
An ominous development
that has grown as the economy slowed is financial stress that could
swell non-performing assets (NPAs). At the half-year ending September
2019, about half of non-financial large corporations in India, excluding
telecom, showed financial stress (see table).
Source: Krishna Kant: "Coronavirus shutdown puts Rs 15-trillion debt at risk, to impact finances", BS, March 30, 2020:
These include some of
India’s largest companies, producing power, steel, and chemicals. The
201 companies have total debt of nearly Rs 15 trillion, more than half
of all borrowings. There is also the debt overhang of the National
Highways Authority of India, and of the telecom companies. Ironically,
the telecom companies are our lifeline now, despite having nearly
collapsed under debt because of ill-advised policies in the past, which
have still not changed. Perhaps our obvious dependence telecom services
now will spark well conceived, convergent policies for this sector, so that we can function effectively.
A start with immediate
changes in administrative rules for 60GHz, 70-80GHz, and 500-700MHz
wireless use, modelled on the US FCC regulations as was done for the
5GHz Wi-Fi in October 2018, could change the game. It will provide the
opportunity in India for the innovation of devices, their production,
and use, possibly unleashing this sector. This can help offset our
reliance on imported technology and equipment. However, such changes in
policies and purchasing support have eluded us thus far. Now, the only
way our high-technology manufacturers can thrive is to succeed
internationally, in order to be able to sell to the domestic market.
Imagine how hard that might be, and you begin to get an inkling of why
we have few domestic product champions, struggling against odds in areas
such as optical switches, networking equipment, and wireless devices.
For order-of-magnitude change, however, structural changes need to be
worked out in consultation with operators in the organisation of
services through shared infrastructure.
For the longer term, a fundamental
reconsideration for allocating resources is needed through coherent,
orchestrated policy planning and support. What the government can do as a
primary responsibility, besides ensuring law and order and security, is
to develop our inadequate and unreliable infrastructure, including
facilities and services that enable efficient production clusters, their
integrated functioning, and skilling. For instance, Apple’s recent
decision against moving iPhone production
from China to India was reportedly because similar large facilities
(factories of 250,000) are not feasible here, and second, our logistics
are inadequate. Such considerations should be factored into our
planning, although Apple may well have to revisit the very
sustainability of the concept of outsize facilities that require the
sort of repressive conditions prevailing in China. However, we need not
aim for building unsustainable mega-factories. Instead, a more practical
approach may be to plan for building agglomerations of smaller,
sustainable units, that can aggregate their activity and output
effectively and efficiently. Such developments could form the basis of
numerous viable clusters, and where possible, capitalise on existing
incipient clusters of activities. Such infrastructure needs to be
extended to the countryside for agriculture and allied activities as
well, so that productivity increases with a change from rain-fed,
extensive cultivation to intensive practices, with more controlled
conditions.
The automotive industry,
the largest employer in manufacturing, provides an example for other
sectors. It was a success story like telecom until recently, but is now
floundering, partly because of inappropriate policies, despite its
systematic efforts at incorporating collaborative planning and working
with the government. It has achieved the remarkable transformation of
moving from BS-IV to BS-VI emission regulations in just three years,
upgrading by two levels with an investment of Rs 70,000 crore, whereas
European companies have taken five to six years to upgrade by one level.
This has meant that there was no time for local sourcing, and therefore
heavy reliance on global suppliers, including China. While the
collaborative planning model adopted by the industry provides a model
for other sectors, the question here is, what now. In a sense, it was
not just the radical change in market demand with the advent of
ridesharing and e-vehicles, but also the government’s approach to
policies and taxation that aggravated its difficulties.
Going forward, policies
that are more congruent in terms of societal goals, including employment
that support the development of large manufacturing opportunities, need
to be thought through from a perspective of aligning and integrating
objectives (in this case, transportation). Areas such as automotive and
other industries for the manufacture of road and rail transport vehicles
need to be considered from the perspective of reconfiguring the
purpose, flow, and value-added, to achieve both low-cost, accessible
mass transport, and vehicles for private use that complement
transportation objectives as also employment and welfare.
Systematic and convergent planning and implementation across sectors could help achieve a better revival.
Shyam (no space) Ponappa at gmail dot com
