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Getting Growth Back: Opportunities Amidst Challenges

The economic landscape has been definitively altered this year in the aftermath of the Coronavirus pandemic. With no cure or vaccine in sight, businesses will have to learn to survive in this changed world, at least for the next 12-18 months which is when a vaccine is expected. That said, a befitting policy response is expected to ameliorate the pain and have far-reaching bearing on the economy, both in the short and long-term. The big-bang reforms underlined in the package are expected to bring about transformational changes in the industrial backdrop and help bring growth back to the economy. For 125 years, the Confederation of Indian Industry (CII) has been working on shaping India’s development journey and, this year, more than ever before, it will continue to proactively transform Indian industry’s engagement in national development.

India’s economic growth was already moderating, before the pandemic hit us, and now with the economic activity having come to a standstill due to the prolonged period of lockdowns necessitated to control the spread of the contagion, it is expected to contract this fiscal. The incoming high-frequency data which is trickling in has started to show the stress on the macros.

Under this backdrop, the Rs 20 lakh crore economic stimulus package is not only expected to help overcome the deep distress in the economy inflicted by the pandemic, but also lay a strong foundation for building a competitive economic landscape over the next decade. The reform measures underlined in the package will ensure that we don’t lose sight and hope of achieving the target of USS$5 trillion economy by 2025.

In order to bring growth back to the economy, apart from the measures underscored in the stimulus package, an additional multi-pronged strategy in diverse areas will be required, with active participation from all stakeholders, including industry. The plight of the migrant labourers, bulk of whom work in the casual sector, has not been lost on anyone.  Hence, one of the important dimensions of rebuilding India will be to mitigate the enormous human cost of COVID-19, by protecting jobs and livelihoods. This will have to be complimented by policy action in the rural economy which is the largest employer.

The outbreak and rapid transmission of COVID-19 has severely crippled economic growth across the global economy. The adverse impact of the pandemic started with disruptions in the global supply-chains, which later precipitated into an ominous compression in demand. As a result, multilateral organizations across the board have cut their global growth forecasts, with the International Monetary Fund (IMF) now expecting the global economy to contract sharply by 3.0 per cent in the current year. In order to alleviate the stress which ensued the strict lockdowns implemented to arrest the spread of the contagion, governments across the globe including India have undertaken measures to tackle the impact of the pandemic.

Further, in order to help India recoup its growth potential, the focus should be on spurring the three critical pillars of consumption, investment and exports. Private consumption has been the main driver of India's growth, contributing about 60% to GDP. Since consumption expenditure is directly linked to income, especially for the lower- and middle-income groups that form the bulk of the population of India, the imperative is to improve their livelihood and job opportunities, creating a more inclusive approach to higher growth. In addition, lower interest rates and higher penetration of consumer finance would spur demand and enable higher purchasing power.

Investment remains the bedrock of the economy. A large public works programme is required to spur economic activity. Investment in infrastructure, which has a strong multiplier effect on the economy, would be critical for accelerating the growth momentum. The suggested areas of investment include, roads, railways, ports and industrial parks, through a focused approach that would include public-private partnerships. This could lead to a quantum jump in demand and an opportunity for the industry to partner in nation-building. In the same vein, it is also critical to remove the impediments plaguing infrastructure creation currently by ensuring speedy decision-making process, environment clearance and timely land acquisition.

A concerted push to exports is also required to bolster growth.  A weak global scenario even before the pandemic hit the economy, had dented exports growth. Now with the double-whammy of the pandemic induced deep contractions expected in India’s key export partners, the overall picture on the exports front is not too rosy. However, amidst this gloom and doom, lies the opportunity for India to increase its share of global exports as companies look to diversify their import partners. Specifically, the space vacated by China in sectors such as Pharmaceutical APIs, Auto Components, Electronics, Textiles & Apparels, can be an opportunity for India if we are able to produce at higher scale and lower cost.

With this backdrop, the focus of the Indian industry in the current year, when the domestic growth is expected to contract for the first time in 40 years, will be on bringing growth back to the economy. The Confederation of Indian Industry (CII) remains committed to partner with the government in re-building India from the abyss it currently finds itself in and leverage the opportunity arising out of the pandemic outbreak.

In its 125th Year of service to nation, CII, to elicit strategic responses to a changing India amidst the call for being ‘Atmanirbhar’ within a complex global environment, is organizing its Annual Session 2020, a flagship event with the theme “Getting Growth Back”, on 2 June 2020. The Annual Session will see participation of global thought leaders, strategists, policy-makers, industry leaders and media to discuss and deliberate on the strategic options ahead for the Indian economy.