PRIVATE SECTOR MUST WALK THE TALK

http://www.dailypioneer.com/columnists/oped/private-sector-must-walk-the-talk.html

Monday, 25 January 2016 | Shivaji Sarkar | in Oped

The Union Government has been doing its bit to promote entrepreneurship, boost manufacturing and create employment avenues. But the private sector has not risen to the occasion. It must be willing to take risks

As debated in the World Economic Forum, India is indeed on the cusp of a fourth industrial revolution, but there are many challenges. As Union Minister for Finance Arun Jaitley said, “The Indian economy needs some multiple engines of growth, while the focus for the Government now is on reviving private investments.”

Indeed, we have to invest in capitals like human, infrastructure, finance and physical. We have to allow innovation through freedom from the state. Yes, India has seen its information technology sector grow beyond expectations. The state had never anticipated the existence of such an opportunity. Entrepreneurs had a free hand and they innovated to lead the economy ahead.

India is not without its challenges in a volatile world. It has affected its export volumes and forex earnings. The slowdown of the Chinese economy is making imports cheaper and has thrown up challenge to the Make in India manufacturing experiment. India’s factory output has come down. Consumer price inflation is going up.

The oil price fall advantage is not coming to prices; rather it has hit the rupee and the stock markets. Companies used to high profits are ruing the oil seeking its natural level. The era of low cost, low profit operations have come. The new economy has to adopt to it. The Government cannot say that savings from oil are being used to invest in roads and other infrastructure. Even if this is true, it is raising the costs. It is harmful for the economy and also creates new vulnerabilities. The final product has to be cheaper.

India has started thinking afresh. The country can take limited satisfaction in that it is growing faster than the rest of the world. The country has the advantage of manufacturing sector growing and investment pouring in. The steps are slightly long-term. New schemes like Digital India, Make in India and Skill India, would take a bit of time to show results.

But it’s true shows that India wants to create the demand within by empowering its people. The process is a bit long-term but a definite break from the 1991 globalisation style, which in many ways now appears a half-hearted and hesitant opening. Liberalisation did not come with less control. In many cases, the state’s presence was overwhelming even for creating volatility in the stock market, as the 1992 Union Budget and the sudden stock market spurt indicated. An era of new controls and scams siphoned of trillions of crores of rupees of investment from the public domain.

The licence-permit raj of the 40 years prior to 1991 took a new avatar. India has been taking a step forward and two steps backward. Despite this, it has shown that it can have a higher growth at around 7.5 per cent. The Start-Up, Stand Up India of the NDA Government is a step to break from the conventional mould. Governments all these years had been deciding on what to do or not and create constraints. The 1991 break was partial because of the invisible role of the state on land, environmental clearances.

This is changing to the state being a facilitator or existing only at policy level. It is ending the queues in the industrial sector and at the Finance Ministry as the step towards eventual freedom from the state in terms of programmes and unleashing of Indian entrepreneur is taking place in this over-populated country.

It is a surprise for everybody that Start-Up India, which was launched with much hope but also hesitation, encouraged 1.5 lakh entrepreneurs to put in their applications. It may look a small beginning but it is a testimony that people are willing to act and take necessary risks.

The Mudra scheme is intended to target 25 per cent of the bottom of the population. The small enterprises are seeing an opportunity as 1.73 crore of them are accessing funds through it and get freedom from money lenders. There is now also a Stand Up India for SC/ST and women category. The banks would spot them and create entrepreneurs from among them. Almost three lakh entrepreneurs would be launched in the next few years.

There are still problems. Large private sector investment is slow. The private sector has over-stretched itself and this has hit the banking system. In the next few months, bankers have to use greater ability to come out of the non-performing assets crisis. The Reserve Bank of India has taken stringent steps and the Government has been forced to recapitalise banks for such weird private sector attitude.

The private sector is always too cautious. It has thrived on public money and created wealth for some families. It has to break from it. So far, despite the Government wanting to encourage private entrepreneurship, the growth largely depends on the Government.

Future growth cannot depend on the Government. Its capacity to employ people is coming down. The private sector must take up the challenge now. If it does not, the country has enough resilience and skill to dump the non-performers.