By virtue of being a democracy, the Indian economy is a market economy. A market economy engages with the world wherein the business is driven mostly by supply, demand and competitiveness of either factors. In this article (Part 1 of 2 articles) we shall stride through the most critical factors which shall shape the Indian economy in the next business cycle, a typical 3-4 years.
Healthcare sector
We cannot forget COVID-19. But we can prepare to strengthen the healthcare system with better physical infrastructure. As per the list of constitutional powers shared between the state and the center, health is a state concern. However, the pandemic did prove that the states lacked the institutional, technical and infrastructural strength to undertake healthcare measures of a severe scale. The recent directive by the Center to establish public health laboratories at block levels will help the state government to have a better scientific outreach.
Finance & Technology sector
Remember GIFT city? Gujarat International Finance-Tech City. The recent havoc in Hongkong, the simplification in business compliances in India, delegation of financial authority to the GIFT SEZ make it an attractive potential to attract private investments. What makes cities like GIFT and Hongkong unique is the city-based clearance to a private investment.
Let’s suppose a business entity intends to invest in a part of India. Previously the entity would need clearance from the center and the local governing unit and their respective departments to enable the investment. However, cities like GIFT and Hongkong bring all the authorizing elements or the powers down to the same physical location. Also, such cities are well connected to enable all modes of transportation and cargo movement at par with global standards. Further, the Department of Industrial Policy and Promotion has initiated the working for five such Investment hubs spread along the coastline of India.
What makes GIFT different from existing SEZs?
Existing SEZ concepts in India 370 total in number are politically established without considering business viability for such SEZs. These typical SEZs can only provide tax relief and subsidized operational benefits. However, we shall note that out of 370 SEZs, only 273 are operational with all SEZs operational only in the states of Chhattisgarh, Odisha, Punjab and Chandigarh. Remaining states reflect non-operational SEZs at 25-50 %, highest being Telangana with 50% unoccupied SEZs.
Manufacturing Sector
The Ministry of Finance and Ministry of Information and Broadcast did announce on the Production Linked Incentive Scheme for 10 sectors to encourage manufacturing of items which are a stronghold for the Indian domestic economy and can also act as an export enabler.
Production linked scheme is to incentivize the increased manufacturing capacity observe on a year to year basis/ or on a fixed interval as found suitable by the applying entity.
Agriculture Sector
The recent formation of three critical Acts have significantly opened the agriculture sector towards an open market and has gave the sector a reason to re-orient and re-organize itself to be a commercial entity.
A. Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020
B. Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020
C. Essential Commodities (Amendment) Act, 2020
Act A empowers the farmer to sell his produce beyond the physical limits defined as per the Agricultural Produce Market Committee defined in every region. Therefore, the farmer is eligible to sell his produce anywhere within India as well as in MSP rates in the APMC mandis.
Act B authorizes the farmer and the market to form a binding commercial agreement which legally entitles the farmers for receipt of a pre-agreed amount in the manner of payment as per the signed Contract.
Act C denounces the cereals, potato and onion from the list of essential commodities. Therefore, these commodities can be sold in a dynamic way and farmers can realize a true appreciation of the produce.
These three acts in combinations benefit in ways which were much required albeit given a credible risk and lapse of that sense of security which was there for farming community.
As an illustration, a farmers’ cooperative/ individual farmer who produce maize, observe a market opportunity and interested buyer/ food processor willing to quote INR 2130/ quintal for the maize. Since the MSP defined for maize is INR 1830/ quintal and is already available at allotted APMC, the cooperative/ farmer can choose to form an agreement with the buyer and trade the maize at a price of INR 2130/ quintal.
This exercise saves the money otherwise incurred by the Center and benefits the farmer. it shall also restrict the food processors/ retailers as their margins will shrink and the market competitiveness wont allow the prices to go up.
However, such enactment has also reduced the income of the state governments wherein they could collect APMC tax from the APMCs and also the income of the middlemen. As an illustration, income loss of Punjab government is estimated at INR 7500 Crores based on past collections.
The benefits of these above reforms are among those many which do look promising on the way Indian economy should run. The true benefit can only reflect when the farmer may realize the benefits after 2 seasonal harvests, when any further infectious outbreak is detected and contained within the cluster of blocks, when the commercial movement is visible in the still dormant GIFT City and when manufacturing capabilities reflect in the balance sheet by the end of their respective business cycles. We are already seeing positive movements in the above lists of reforms. We can only aspire to fight harder to raise and punch way above the calamity that we face. In the next article we shall focus on the labour reforms, defense sector and the most affected, tourism sector.
Thanks for reading!
Happy Hunting!
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