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Infeeniti 2020
FOREWORD I am happy to present before you the winter edition of InFINeeti launched along with our Business Summit Vivaan. This edition has been placed before you at a very critical juncture. The COVID-19 pandemic has disrupted lives, livelihoods, communities and businesses worldwide. The world’s large economies are taking unprecedented fiscal and monetary actions to fight off a coronavirus induced downfall. Supply chain disruptions and the dependence of economies on one another has brought the importance of self reliance to the forefront. The pandemic has compelled countries to look within to resolve challenges that are unique to every economy out there. Economies have been chalking out detailed plans to revive the economy and usher in this new normal. In order to rescue the economy from a recession, it’s important to have a dragonfly –eye view to various issues and threats induced by the pandemic. Going forward, various initiatives like Atma Nirbhar Bharat and business acquisitions and consolidations have to be pondered upon to seize the opportunity and come out on top in the post COVID era. Each edition of this magazine has helped raise the bar even higher and has been of great service to the student fraternity and has helped bring diverse viewpoints to the fore. This edition of InFINeeti is trying to analyze some of these questions and provide interesting insights. I hope you enjoy reading this edition. Wishing all students a glorious year ahead!
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Dr. K Rangarajan Centre Head IIFT Kolkata Dr. K Rangarajan Center Head IIFT Kolkata Prof. K. Rangarajan is an Accredited Management Teacher (AMT conferred by AIMA) and is a member of several professional bodies including AIMM (Australia). He is also amongst the Board of Directors of The State Trading Corporation of India Limited (STC). His expertise includes Business Strategy and Strategic Planning
Fr o m t h e E d i t o r ’s d e s k
Dear Reader, Welcome to this edition of INFineeti, We want to take this opportunity to welcome you to our community of Finance and Business savvy readers. In this edition, we have tried to bring in perspectives on various topics ranging from the Atma Nirbhar Abhiyan and the future prospects for a new normal to the state of the financial markets and the economic impacts post Covid-19. Every article has brought in a new idea and a richer understanding on the subject. We hope that they enlighten you readers too.
Happy Reading!
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MEET THE TEAM Always high on dance, fun lover; love to read. Drop by in case any kind of advice is needed
A Ravenclaw turned Hufflepuff but with my loyalties still strongly with Ravenclaw, I often lose myself in the world of books and movies
Chartered Accountant, sports enthusiast and a foodie at heart. Love to visit new places and experience different cultures
Have a keen interest in data science, sports, music and pets. Huge fan of Tom Brady, Rafael Nadal and Rahul Dravid
Strong interest in finance, investment banking, stock market and money management
Mumbaikar to the gut. Knows stocks in and out, and can help you trade Infeeniti 2020
MEET THE TEAM
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CFA candidate and an avid finance, literature and music enthusiast! A Charlotte BrontĂŤ fan
Sports buff and a stock market enthusiast who enjoys the thrill of playing poker and chess
Chartered Accountant, sports buff and a musician. Always high on music
Love playing cricket and reading books. Stock market buff and Formula 1 enthusiast
CFA Level III cleared, a finance enthusiast who loves to trek and explore cultures and food!
Avid gamer, knows a thing or two about computers and an ardent Lionel Messi fan
TABLE OF CONTENTS
An Escape from the COVID-Economic Labyrinth Atma Nirbhar Abhiyan – Is it the only way forward? i.
ARTICLE 1
ii. ARTICLE 2 iii. ARTICLE 3 iv. ARTICLE4 v. ARTICLE 5
Do financial markets reflect the true state of the economy during
uncertain times like COVID? i. ARTICLE1 ii. ARTICLE2
Business Acquisitions and Consolidations – The way forward i. ARTICLE1
ii. ARTICLE2
Financial Sustainability during COVID times
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An Escape from the COVID-Economic Labyrinth Alistair S.H. Toppo Indian Institute of Management Indore An abysmal economic emergency has been floated across nations ever since WWII and independence of 3rd world countries. The corona pandemic has slayed the world economy within fraction of days. The top developed and developing countries are undergoing unfaltering commitments to keep their respective countries net GDP in a positive value. Talking about the global financial crisis of the last decade, the situation was more fluid as compared to the incumbent one because unlike this time people used to go to work and all the sectors were contributing in the country’s GDP. The financial system was sound and government finances were healthy. But after analyzing and overviewing the precautionary steps taken by the government, the conditions are improving significantly and so as the economy. Taking the worst-case scenario, we should start thinking about the economy even if the lockdown continues or it allows only those states where the percentage of infection is low. Scraping the lockdown in one go can be beneficial as well as obnoxious. It could be profitable as all the manufacturing sector would be back on pace and the overall GDP will start to rise again whereas it can an absurd decision if proper precautions aren’t supervised across the nation resulting in hike of number of cases
It is advisable to release only those areas where the virus count is less and even after opening, proper safety gears and precautions should be taken. The challenging section would be to repatriate the factory workers back to the workshops after a lockdown of 90+ days. It had been a difficult task because as headlined by apex news channels about the controversial stances witnessed w.r.t daily wage workers and how they’d paved/struggled way back home, they needed a concrete and convincing reason to rejoin those factories. Direct transfers of financial aid might be a scope but not for all. The frequency of transfer seems inadequate to see a household through a month. The governing authority should come with some public and NGO provision along with private participation and allow direct benefit transfers to the needy in order to facilitate in the coming days. We’ve already witnessed the penultimate shebang of not doing so and if still not continued, something egregious awaits us.
Access to limited fiscal resources can be a boon and utilizing it in an optimal methodology is the apt solution a nation can procced with. At the same time budget constraints should be tallied across as it could hamper any individual’s salary this very year. Unlike other developed countries which can spend 10 to 20 percentage more of their GDP and reach till negative, we’re already in a negative fiscal point and measuring the scenario, this value is going to sink down soon. A down scaled GDP can lower the chances of investors investing money in any sector or to withhold the newly assigned packages of undergrad or post graduate pass We’ve to prioritize accordingly keeping in mind the necessary deliverables and budget constraint. The government should ensure the investors and its commitment to fiscal rectitude and holding up the independent fiscal council and assign a minimum term debt target. Not only the MNCs but the small firms have also faced detrimental consequences after the pandemic and the situation is so abysmal that it may not be possible for them to stand again.
(Picture Courtesy: Economic Times)
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(Picture Courtesy: Rabobank)
Optimal alternatives should be considered especially the ones which dominates over the labor and production sector. The government wants to support all the firms at a common rate but due to the crisis, the credit isn’t sufficient to revive anyone completely. Firms which are well established till date and have the capability to fund these startups can also be an optimal way to revive the country’s GDP. Insurance companies, banks and mutual funds should be encouraged to invest on newer grade bond insurances and their grade ease by the RBI lending to these high-quality bond portfolios through repo transactions. However, the RBI act has to be changed in order to enable these solutions to functionable. The government will be requiring myriads of agencies and PSUs to pay their bills so that all the private players gets
(Picture Courtesy: Economic Times)
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The difficulty faced in household and rural sectors will be reflected upon the economic downfall. The banks had flooded the liquidity and it needs to go beyond it. Mathematically, a greater number of liquidities won’t help in absorb loan losses. The concept of bringing back people who’ve already served the nation is an outreached idea and would benefit in the coming days. In this situation, driving help from the opposition party would also be helpful who’d experienced same crisis before. A major sector which has been neglected at a greater extent is the agricultural sector. Usually the crops are slashed and collected in the month of marchApril. However, due to the lockdown it isn’t possible to send out laborers for the work. If this act fails, a new factor will be added in the pandemic chapter. The economic status was falling before the pandemic and the socio-political environment is slouching down. The procedure of borrowing by central or state is conducted by the security of consolidated funds of central government and states respectively. The impact of tax collection by the central government had fluctuated alongside the pandemic while the paramount parameters to chart out the procedure was discussed with the Economic Advisory Council (EAC) the previous month. Crafting out a prolific projectile with regards to base year of the commission in a tenure of 5 years were some of the listed issues debated in the meeting.
(Picture Courtesy: Economic Times.com)
However, dismay can be screened while setting up the base year for FY21 as the overall economy has been plummeted. A maneuver choice would be either to consider year 2021-22 as the base year or recapitulate the witnessed growth rate of the past 20 years i.e. 6-6.5% every year for an immaculate proceeding. The balance sheet recession is a dismay which is enlarging and in order to maintain a subtle equilibrium, one amongst the government, households or firms either saves the most or spends the most to compact the net economic domain. Policymakers on collaboration with myriads of banks and related agents showcased an adroit step by aiding financial support to the households and firms. Many private stakeholders had cajoled to recover the debt first and then stimulate the new investments even though the graph for economy is stretching out. In order to eradicate the plummeting market in the upcoming days, the private players have to initiate investing strategically in order to capitulate consumer base and bolster the firm’s stances .As per a vehement statement made by the International Monetary Fund (IMF) with respect to country’s GDP downfall due to the COVID pandemic, it is expected to contract by 4.5% as marked from March 2020.
However, the thoughts of Indian officials regarding the shattered economy are isolated and continued to prescribe the incumbent dogmas, making a trenchant statement. A negative shebang is been highlighted as myriads of participants from the working community have experienced pay-cut of more than 35% thereby pushing lakhs of employers into an amalgamation of poverty and pusillanimous. The reputed vision of the Indian economybuilt post 1990s have come into a halt. The existing government finances are exhausted and tax revenues are to about to crash leading to a rapid hike in the debt-GDP ratio in the upcoming days. In the advent of the global pandemic and India being the fourth highest country to witness, a huge number of protestors demurred the opening up of lockdown as the graph for number of cases are shooting. However, the dystopian scenario had to be face in the coming days aptly in order to eradicate issues like economy dip, jobs crisis etc. Statisticians have come with prolific analysis of the country’s growth/downfall rate taking the pre-pandemic month into the calculation as well . As analysed, the growth rate before the virus outbreak was 4.2% and the overall percentage rate dropped from 7% to 3% as marked recently. However, the stats have started to rise again with a major contribution by the exports domain, as stated by Piyush Goyal, Minster of Commerce and industry. According to World Bank, one of the major reasons for the Infeeniti 2020
Picture Courtesy: financialexpress.com)
economic status shrinkage of India relies in its lack of investment. This is the first time in two decades that its investment rate has shrunk to 3% for the annual year 2019-20. Earlier, there have been significant increase of 10% in the previous year. As per reports, government spending was almost double than the private spending and as the result the fiscal deficit was 4.6% more since past 5 odd years. The leading policymakers are sanguine towards the incumbent scenario as their plans are expected to be conducive for the country’s economic revival and it shall detach itself from the labyrinth corner. An anecdote by lifting the gates of lockdown can be premiered in the rural areas, where the sales of tractors, two-wheelers and fertilizers had significantly contributed towards the country’s overall economy, said Citi Inc’s Chief India economist, Samiran Chakraborty. The cumbersome steps taken by Government of India to strengthen the rural section of the society by launching related schemes and awareness have finally showered favourable results. A grand investment of 500 billion have been postulated by the government of India across 6 states where the migrant workers repatriated
The investment has been allotted for the next 5 months; however, the source of the very investment is still unfettered. As per Citi, the rural unemployment rate has fallen from 26% to 7.3% last month, showcasing better stances as compared to the urban unemployment rate which is 11.2%. It is also estimated to state that, by the end of the year, rural sector would be more stabilized than urban sector.
(Picture Courtesy: thehindubusinessline.com)
Atma Nirbhar Abhiyan – Is it the only way forward? Fayaz Ahamad Shaik and Sai Sashank Garimella Indian Institute of Foreign Trade, Kolkata It’s been exactly four months, at the time of writing this, since the Prime Minister of India, Mr. Narendra Modi, while announcing the stimulus package to fight the COVID-19 pandemic made an interesting appeal to Indians. He said that Indians must become ‘Vocal for local’. In other words, he asked people to buy products that are manufactured in India and also be a bit aggressive about it. The rationale behind this was pretty simple: At times like this, when nations across the world are reeling under economic contraction, buying local goods would put money in the pockets of local manufacturers which in turn would help in reviving the economy And since then, coupled with tensions on borders with China, the usage of the phrase has been intensified to such an extent that it is worth analyzing what it to means to an individual and the nation as a whole. To understand how we got here, it makes sense to go back a little in time- to the preindependence era. So, with an increasing quest to become more and more dominant, few countries in the west have started increasing their footprint, by making more and more countries as their colonies. The idea behind this was: a) either to exploit the natural resources or b) use the colonies for trading goods Infeeniti 2020
manufactured in their country. The second reason stated here is more important. When industrialization started in the 1800s, it was restricted only to a few countries in the west. And the colonies that were being acquired one after the other had little to no clue of what was happening on the other side of the planet. India was no different. Being under colonial rule for over 200 years and being exploited in all the possible ways, many people, including those at the forefront of the freedom struggle believed that foreign trade was the prime reason for this exploitation. And that is why, once we’ve attained independence, we did not open our borders immediately. The idea was to stay selfsufficient by encouraging local production by selectively allowing the flow of goods In fact, this is not the first time that a Prime Minister has appealed to buy local goods. Somewhere around 1970, the then Prime Minister, Mrs. Indira Gandhi, made a similar call. The phrase then was: Be Indian, buy Indian. Until 1990, it seemed like it was all working fine until it all came crashing down. In 1991, India was forced to open borders by the IMF, owing to the balance of payments crisis Even then, many feared that liberalization would hurt the domestic producers so much that they thought the damage would be irreparable
IMF brought out a report stating that for India, it will take 153 years to halve the gap in per capita income difference in comparison with the developed countries. But it didn’t quite pan out that way. The lesson for the last couple of decades shows that there is no need to wait for 153 years. Many benefits that we are reaping right now, and the future generations would continue to, wouldn’t have been possible had it not been for that bold decision. Soon after that, India had joined WTO and by 1999, India had to remove tariff quotas on many products, after it lost a case at WTO. The World Bank data shows that the percentage contribution of Manufacturing to the GDP was highest (17.86%) in 1995 and it has been on the decline ever since (Shown in the Graph)
Graph 1: Percentage Contribution of Manufacturing to India’s GDP for the past 59 years
Source: https://data.worldbank.org/
And starting from 2000, India started improving on the services front as shown from the graph 2 plotted using World Bank Data. So much that by 2010, a World Bank report stated that India has jumped directly from agriculture to services, skipping manufacturing altogether. And the World Bank in the same report also said that this is a sustainable model and countries can thrive by focusing on services as well, and not just manufacturing.
Graph 2: Percentage Contribution of Services to India’s GDP for the past 59 years
And COVID-19 couldn’t have come at a worse time Yes, the kind of havoc that it’s creating is humongous. There’s no doubt about it. The kind of disruption it’s causing is huge but the kind of opportunities it would open up is going to be high as well. So, the immediate question that pops up is: Do we have enough things that are going our way in our journey to become selfreliant? First, let’s talk about the things that are not going our way. One, from 2015, the import tariffs have been up by close to 14%. You cannot try to integrate and also put up virtual borders at the same time. Two, the discretionary spending in India is quite low and India’s GDP is just 3 Trillion USD. Compare that with global GDP of 90 trillion and you get a sense of the kind of opportunities that we’re missing out on.
Four, the number of clearances that one has to get are so many that it is easy to get a gun than to start a business. Five, an almost similar call was made by the Prime Minister almost 6 years ago. The initiatives ‘Make in India’ & ‘Startup India, Stand up India’ did not yield the desired results and have been re-branded in a way with the recent call. A recent report by IBM Institute for Business Value and Oxford Economics found that 90 percent of Indian startups fail within the first five years and lack of innovation being the primary reason behind failure. Finally, the big one. India has pulled out of RCEP in November 2019. A lot of Op-eds have been written since then,
Source: https://data.worldbank.org/
Fast forward to this day. Just a decade on, looking at how every country is trying to woo companies to set up the manufacturing bases in their home-land, we understand that the same-old model that was boasted to be quite successful may not be that effective anymore We are currently at an interesting juncture in human history. The world has never been more integrated and disintegrated at the same time. On one side, we have trade wars and rising protectionism, and on the other side, we have countries increasingly entering FTAs to boost trade. Infeeniti 2020
Graph 3: Country wise contribution to Global GDP
stating various reasons, on whether the decision was right Source: International Monetary Fund Data or not. But there was one reafor 2019 son on which there was a conThree, the raw materials that are sensus: That India was not being imported have higher tariffs ready. People who were in favor than the finished products. That of joining RCEP said that the means the local manufacturers cost of not joining would be too who are heavily reliant on foreign huge for India. People who were raw materials are at a disad- not in favor also had the same vantage when compared to for- opinion- the cost is quite huge eign manufacturers for Indian manufacturers to take
India had a chance to open itself up and force the local industries to become more innovative and competitive. While being complacent is their mistake, it’s not entirely their fault. The government while introducing various policies over the years, has left the informal sector behind. Also, the huge infrastructure costs and tight regulations made sure that they didn’t look beyond our shores
OPINION: The Prime Minister last year announced an ambitious plan of doubling India’s GDP to 5 trillion by 2025. For that to happen, you need a double-digit export growth every single year. And looking at how things have panned out in the last 5-6 years, it is very hard to believe that the target can be achieved- unless there are major policy changes. In the last three decades, whenever there was a crisis, India saw an opportunity to bring about major policy changes. COVID-19 is a once-in-a-century shock. What will India make out of this crisis? Can India become Atmanirbhar in the foreseeable future? Only time will tell.
Now that we have looked at what’s not going our way, let’s also talk about what can be done about it. First, India doesn’t have an FTA signed with the US and the EU and few sectors where we have an But, is it the only way forward? advantage are losing out be- Definitely NOT. cause of that. Second, it's better to provide export subsidies rather than raising import tariffs. That would incentivize manufacturers to export and also address the root cause of the problem. Third and the final one, it’s time that we stop boasting about the improvement in Ease of doing business rankings and start addressing the issues at the grass-root level.
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Atma Nirbhar Abhiyan – Is it the only way forward? Deepak Balayan Symbiosis Institute of Management Studies, Pune With the virus rate still exploding exponentially and number of new cases being recorded daily setting a new high, the Corona virus have surely devastated the entire Indian economic in general. IMF have predicted a contraction of 5.9% and 5.5% for the World and India respectively While the WTO have predicted a contraction of between 13-32% in the overall trade volumes across globe. With the disruption in the supply chain and the restricted movement across hotspots or the red zones the business activities are really being hit hardly by this unknown enemy. And the whole economy came to a standstill and the result is pretty much evident from the latest quarterly GDP figures of a contraction of 23.9% which is lowest among other G20 peers The clarion call of being Atma Nirbhar Bharat by our respected PM Narendra Modi during the unrevealing of the 20 crore Fiscal Support Package, have rightly hit the sentiment across the nation for being more prosperous and moving towards a 5 trillion economy. It resonates with what Mahatma Gandhi once wrote in the Ideology of Charkha in 1951, ‘when dependence becomes necessary to keep society in good order it is no longer dependent, but cooperation’.In the speech he clearly mentioned 5 pillars for being self-reliant:
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1) Economy – Quantum jumps, not incremental changes 2) Infrastructure – Modern India 3) System – Technology Driven 4) Demographic – Vibrant demography
5) Demand – Utilisation of power Atma Nirbhar Abhiyan is not about being isolated and working in silos by ignoring the various MNC’s that have made their foot after the historic 1990’s liberation, privatisation and globalisation amendment. But it is becoming self-reliant and self-sustaining in terms of the various requirement that were earlier met by the means of exports. With the largest population in the working age group it is the right movement to take the opportunity and to shift the manufacturing and supply chain centre away from our neighbours. Over the years the trade balance of India has always been in the negative side and it has hit forex reserves, due to the fluctuations in the exchange rate over years
A simple example of this can be taken from the fact before pandemic India didn’t produced even a single mask but now as to fill in the gap of the supply it has the capacity to produce 1.5 billion three layers masks. Atma Nirmbhar Abhiyan is not the only factor that will take the India forward but it is definitely one of the critical factors in forward direction. Now let us look at the various sectors that have taken a positive step in this direction and have seen a positive impact on the economy.
Electronic goods
By becoming self-reliant India doesn’t further needs to be dependant on other countries for the parts or components to be manufactured
Presently, India contribute to about 3.3% to global electronic market which is equivalent to USD 70 billion. India’s electronic goods exports can grow tremendously to USD 180 billion in 2025 from present value of USD 11.28 billion in 2020.
Also as being the one of promising developing economy and a bright spot for the various electronic items most of which were imported are now being shifting their manufacturing plants to India under the PLI (Production Linked Incentives) scheme will not only solve the problem of the unemployment but will also contribute to the GDP of nation.
automobile industry is been imported from other countries and hence the supply chain was hampered during the stringent lockdown across source locations. But now they are also shifting the base as government have taken various steps to make the business viable and bring the cost and efforts down by performing better in the The PLI scheme was worth USD Ease of doing business globally. 6.65 billion to attract the major electronic giants like Samsung, Dixon, Foxconn, Wistron to India in order to make the latest handset manufacture and assemble in India and to be exported to major global countries.
Another important factor that can make India’s imprint on the global map for manufacturing is being vocal for local and to make the home-grown brands large enough to be counted in the leading brands. Over the years India have taken lead in making this possible with the well- known brands across sectors like Bajaj in the automobile, JSW industries in Steel, Amul in the FMCG and many more. According to a recent survey by one of the leading research firm around 60% of the parts in the Infeeniti 2020
Pharma sector Another major industry is the Pharmaceutical industry in which India is considered the global manufacturing unit as it has strong hold in the generic medicines. But the API (Active pharmaceutical Ingredient) and KI (Key Ingredient) that are used for the manufacturing is mainly outsourced and imported in India.
Also, to central pivot of pharma industries various pharma parks are constructed in the SEZ to make their dependency on the other countries almost negligible. This sector has also been taken care of in the package and various pharma cities are planned for increase in these ingredients and lowering the imports. Also, at the same time they can be major contributor to the exports to various other countries in future
Energy Sector
While the Indian economy is shifting from being a coalbased production to gas-based economy a major chunk of the natural resources such as coal, petroleum products are being presently exported from other countries which ultimately make the burden on the forex reserves and hence contributing to the further trade deficit. According to Ministry of coal “The commercial coal mining auctions are completely different from earlier regime of restricted sectors, use and price. Now there are no such restrictions at all. The proposed auctions have terms and conditions which are very liberal allowing new companies to participate in the bidding process, reduced upfront amount, adjustment of upfront amount against royalty, liberal efficiency parameters to encourage flexibility to operationalize the coal mines, transparent bidding process, 100% FDI through automatic route allowed and reasonable financial terms and revenue sharing model based on National Coal Index. The successful bidders also will have flexibility in coal production unlike past and have provision for incentives for early production and coal gasification�. This step will definitely give a boost to the employment and the lower cost availability of the natural resources.
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All these major steps will definitely boost the dream of becoming 5 trillion economy. The major objective of being Atma Nirbhar is first being self sufficient in terms of requirement and then thinking of being the major contributor to the world. Other major steps taken are like the introduction of AIF (Agriculture Infrastructure Fund) which will make India the central hub for food chain mechanism and also to fully exploit the full potential by introduction of various amendment to also make the farmers more financially stable and being atma nirbhar in true terms. Hence, I would like to conclude by reiterating on the point of that Atma Nirbhar Abhiyan is one step taken to be more dependent and to the base of a stronger economy and GDP, and it is not the only step for the forward but will further reinforce India in the global supply chain after the Make in India and Digital India program that have also contributed in the same mission.
Atma Nirbhar Abhiyan – Is it the only way forward? Sanjana Kumar DoMS, IIT Madras “If you want a thing done well, do it yourself.” Napoleon Bonaparte Introduction: The Covid-19 induced global pandemic and the subsequent precautionary lockdown ever since the early months of the year has claimed every iota of normalcy from the world. The global economy has been flung at the face of multi-pronged challenges and India is coping poorly with challenges: shared and unique. On 12th May, a stimulus package worth Rs. 20 lakh crores (estimated to amount to 10% of the nation’s GDP) was announced that would support the economy at the face of this plethora of ill-timed attacks, broadly in the forms of A dwindling growth rate not even touching 3 percent 500,000 and increasing cases of individuals affected with coronavirus
affect the economy’s spending at large, front-lined by the massive unemployment surge (1.8 crore layoffs as of July), and inflationary vices (retail inflation stood at 6.93% in July – compare that to the 4% RBI medium-term target). A lack of direct fiscal stimulus undergirds the demand deficiency in the economy that further accelerates all the other vices. The fundamental question here boils down to what tactics can help drive up consumption demand and spending. Standing at the time-frame when the pandemic had just set in, and the ball had just been set to roll all downhill, an answer to this question forms the background for a resonating cry from the country’s Prime Minister urging the nation towards self-reliance: ‘Atma Nirbhar Bharat Abhiyan’. A distress could be turned to an opportunity that could serve the dual purpose of lesser foreign dependence for goods and services, and simultaneously revive the indigenous industries – two notions that plainly go hand-in-hand.
Protecting the Indian borders against China’s growing incursion along Ladakh and Line of Geo-political rifts, again, have only Actual Control been exacerbating the glum. To hold up an anecdote, the trade disBackground: pute between Australia and China India officially adopted nation- is a glaring one. China’s retaliation wide lockdown impositions from to Australia for advocating an inde25th March and since then the pendent investigation to the origin economy has been set in a grad- of Covid-19 by imposing tariffs as ual decelerating motion. A high as 80% on barley imports, is a country so demand-driven has fine example of how maverick the trade disputes can be been grappling with evils that Infeeniti 2020
Vision: Vocal for Local’ was the tagline through which a vision for the nation to become fully independent was envisioned and lent out to the citizens that had tuned in to for assurance and guidance. The exact vision would be a wide spectrum covering: Boosting the domestic manufacturing sector, thereby, reducing international trade dependence As a second step, the locally produced goods and services would require hefty promotion Minimalizing trade imbalances, because completely shutting off trade is not an option in the globalized world A Mercantilist Approach: In effect, a mercantilist approach to trade was being proposed, that proposes the government regulate international trade to reduce trade deficit and create a surplus instead. The end goal is wealth amassment for the country and strengthening of the indigenous industries. One must, however, not muddle the concept with protectionism tactics. The stance is not anti-trade. It is more of identifying and leveraging on domestic potential that, if given a sufficient boost and if, given the opportunity to scale up, could be rendered competitiveness in the global trading space
Scheme: If we are to dissect the entire package into four broad tranches, we can neatly lay out the sectoral and functional allocations in a tabular formal for better perusal
Tranche 1 Specifications Specification Title
Allocated Fund (in Rs. Cr.)
Effective Fiscal Stimulus
Working Capital Facility for Businesses (including MSMEs): Emergency Funds
300,000
0
Subordinate Debt for Stressed MSMEs + Fund of Funds for MSMEs
20,000 + 50,000
0
Employees Provident Fund (EPF) + Reduction in EPF Rates
2,800 + 6,750
2,800 + 6,750
Immediate support for businesses and workers.
Special Liquidity Scheme for NBFC/ HFC/MFI + Partial Credit Guarantee Scheme for Liabilities of NBFC/MFI
30,000 + 45,000
30,000 + 45,000
In effect, a liquidity booster which acts towards a long-term interest.
Injecting Liquidity for Power Distribution Companies
90,000
0
Boosts long-term private investments
Reduction in TDS/TCS
50,000
50,000
Tax-cuts and hence hold short-term value.
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Effectiveness
In effect, it provided no immediate fiscal relief since it was extended as a loan.
Tranche 2 Specifications Specification Title
Allocated Fund (in Rs. Cr.)
Effective Fiscal Stimulus
Effectiveness
Provision of FoodGrain Supplies for Migrant Laborers
3,500
3,500
Holds immediate value as it provides relief in kind to workers.
Interest Subvention for Mudra Shishu Loans
1,500
1,500
Holds immediate value as it provides a grant.
Special Credit Facility for Street Vendors
5,000
0
In effect, it provided no immediate fiscal relief since it was extended as a loan.
Credit Linked Subsidy Schemes for the Housing of Middle-Income Groups
70,000
70,000
Holds immediate value as it provides interest rate and EMI reduction.
Additional Emergency Working Capital for NABARD + Credit through Kisan Credit Card
300,000 + 200,000
0
In effect, it provided no immediate fiscal relief since it was extended as a loan.
Effectiveness
Tranche 3 Specifications
Specification Title
Allocated Fund (in Rs. Cr.)
Effective Fiscal Stimulus
Food Micro Enterprises
10,000
0
Pradhan Mantri Matsya Sampada Yojana
20,000
0
Agricultural + Animal Husbandry + Beekeeping + Herbal Cultivation
100,000 + 15,000 + 4,000 + 500
0
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Long-term: Skill upgradation.
Tranche 4 Specifications Specification Title
Allocated Fund (in Rs. Cr.)
Effective Fiscal Stimulus
Effectiveness
Viability Gap Funding
8,100
0
Long-term: Investment in social-infrastructure.
MNREGA Allocation
40,000
40,000
Immediate relief.
The focus to impact immediate consumption spending seems to be a lost goal here. In most cases, the aim was to bring about a long-term resilient and reliant change in the economy. Now, while this seems like a long-term utopia, a short-term bearable reality was probably the need of the hour. Justifying the Scheme: According to the administration and the Finance Minister, Nirmala Sitharaman, the pressing need was to restart the businesses and immediate support was provided for that. The wages had to be paid, and the fixed costs to keep operations running were to be met. These were provided. However, the provision for direct cash transfers (less than 1.3% of the GDP) seemed problematic on a lot of levels due to the sheer scale of the nation’s populations, and its needs. ‘Grants for how many?’, was a question that topped their justifications. Multiplier Effect: The safest and the most effective approach in this instance was to project the multiplier effect. If enough impetus was provided to get the nation running back again on its own two feet, the Infeeniti 2020
working capital provided to businesses, banks would channel the multiplier effect for the whole nation.
This again is reliant upon the aggregate investment demand. Only if this short-term goal acts as the intended shock absorber, will the next stage to achieve long-term Opinion: growth in sectors to stand shoulder India has had a reputable position -to-shoulder in global competitions in the ‘Ease of Doing Business’ or- stand to fruition der. Even then, for manufacturing Hence, even though the package to be the linchpin for the nation’s delivers a promising long-term muleconomy, there are still a lot of ti-faceted benefit, the short-term other factors that need modifica- uncertainties pose a major threat to tions. It’ll need strategizing rethe plan of events. A short-term forms, policies and major initiamonetization scheme backed by an tives to foster an environment of expansionary fiscal policy could achieving sustainable growth have been a reliant strategy to help through innovation. In continuum the fate of over 136 crore Indians of ‘Make in India 1.0’, this scheme Way Forward: Scott Morrison, the for ‘Atma Nirbhar Bharat’ cannot, Prime Minister of Australia stands on his viewpoint that the posthowever, be viewed as a pandemic world will be poor, danstandalone policy. gerous, and disorderly. In cases of More than three-fourth of the global supply chains, no country package is aimed at infusing po- can be expected to trust other natential liquidity and about credit tions in the international trading offtake at an aggregate level. One scenario. Trading will not be obsopossible loophole that can be lete, but openness will not be synpointed here is the dependence of onymous to dependence. Put in this every scheme’s success on the context, ‘Atma Nirbhar Bharat Abhigrassroot consumption demand in yan’ seems like the lead the world the economy, on which rides the may be set to follow. A cry to beentire profitability of the business- come self-reliant encompasses a es and investment projects. The mission to strengthen the entreprerealization of the intended vision neurships, the business houses, creto inject liquidity in the economy ating not just jobs but opportuniand translating that to credit ties. Only then the economies will offtake rests on boosting demand power up enough to become for credits in the market. enough for themselves
Atma Nirbhar Abhiyan - Is it the only way forward? Sayani Saha and Ashi Madhariya SCHMRD What exactly is Atma Nirbhar Abhiyan? - Lets deep dive With COVID 19 hitting below the belt, has left the world economy in tatters. India’s GDP levels dropped 23.9% in the Q1 of this fiscal year. Black Swan or not COVID definitely has distorted India’s recovery curve. Hence these are unprecedented times and we need unprecedented measures to come out of this deep trough. While economist’s may argue on whether the recovery curve would look anything like U,V,W or extended U, everyone is hoping rather praying for a miracle to happen and break this dreadful nightmare. Yes, by miracle its implied to the invention of vaccines. As of now 176 potential COVID-19 vaccines in the works right now across the world while 35 of these are under clinical evaluation, according to the World Health Organization update. Apart from developing a vaccine it is noticeable that COVID disrupted the global value chain’s (GVC’s), during the past forty years, much of global manufacturing production has been organized in what has become known as global value chains (GVCs). Raw materials and intermediate goods are shipped around the world many times and then assembled in yet another location. The final output is then reexported to final consumers located in both developed and developing markets. This intricate chain fell apart as Infeeniti 2020
COIVD started engulfing the world steadily. As a result, immense significance is being given to boost the LVC’s (Local Value Chain), improving resiliency which includes looking inwards and boosting the existing local manufacturing so as to compensate for the supply shocks. This is readily known as “Self-Reliant” or “Atma Nirbhar”. PM Modi, in his fifth address to India since the national lockdown announced a financial stimulus of 20 crore to ease the economic tensions. This package was named ‘Aatma Nirbhar Bharat Abhiyan’ with the hopes of India to start its recovery cycle and slowly step towards becoming self-resilient But certainly, being selfdependent is different from complete deglobalization and protectionism. No doubt COVID has added pace to the process of deglobalization and is driving world economy to retreat from global economic integration. But this retreat will not mark the end of globalization, a process that has reached a historically high level. But globalization can be reversed, if not fully. The Great Recession of 2008-10 marked a historic turning point in the degree of global economic integration. Now, in response to the current health and economic crisis, policymakers across the world appear poised to take deliberate steps to reinforce the movement toward deglobalization. Already before COVID there were added fuels to deglobalization and protectionist trade for example
China began to turn inward with policies to promote the indigenous development of leading industries, United States embraced an “America First” policy, shifting away from trade liberalization (withdrawing from the Trans-Pacific Partnership) and moving toward protectionism, The United States also initiated a trade war with China over its unfair trade practices, significantly reducing bilateral trade
And fast forward to today COVID is adding momentum to the same. The World Trade Organization has forecast that world trade will decline between 13 and 32 percent in 2020, much more than the expected fall in world GDP. Whilst it is never recommended to be overly dependent on other countries for supplies, COIVD made us realize the only way to survive trying times like these is to boost the local manufacturing. The need of the hour for India is ‘Glocalization’ which means an amalgamation of being global as well as to look inwards at the same time. Complete deglobalization and protectionism will bring any good to any country,
while it was clear that globalization for the past 40 years had reached its peak and was reaching the end of its cycle. It is true that globalization, the concept itself will undergo a transformation but a world sans globalization will suffer a major setback Make in India- First Step towards Atma Nirbhar Make in India, an initiative taken by Prime Minister Narendra Modi in 2014 to make India selfdependent. This mission is aimed to develop India as manufacturing and R&D hub. This movement brought a paradigm shift - Government as the authority to govt. as the business partner to propagate privatiza-
This initiative was targeted to the issues faced by India: In 2013, India was among the ‘fragile 5’ of the BRICS Nations and was downgrading on an overall basis. India was losing its credit ratings. Global investors saw this situation as risk. To eradicate such contemplations about India, PM Narendra Modi thought of giving nation a push for boosting its economic conditions. Infeeniti 2020
To eradicate such contemplations about India, PM Narendra Modi thought of giving nation a push for boosting its economic conditions. This initiative garnered great support from numerous stakeholders, business stalwarts, investors and Indian citizens. The Department for Promotion of Industry and Internal Trade (DPIIT) collaborated with a bunch of experts and designed a dedicated pool of information into an app, website and other platforms. A roadmap was built to raise the contribution of manufacturing sector by 25% in the nation’s GDP along with more attractive projects for the Public-private partnerships. Make in India is the 1st step towards Atma Nirbhar Bharat. Strengthening this initiative will be a generous benefaction to the Atma Nirbhar Abhyan , disseminating through out India. This transition will challenge the entire economy of the country making India a potential competitor at the world forum. This Abhiyan caught a waging fire during the Indo-China border tensions resulting in banning of Chinese products and services. On 29 June, India banned 59 Chinese apps moving forward in the way of selfsustenance.
2020 has turned the ‘Atma Nirbhar Abhiyan’ into raging fire bringing out the importance of independence and Make in India but there are certain bottlenecks in the process of India becoming completely self-sustaining. - India being the 2nd largest populous country of the world has lots of complexities when it comes to managing the country. - The economic packages are unable to reach the roots. For instance, small and medium level farmers are unable to extract the benefits due to inefficiency in the last mile delivery. - Natural wonders of the country are still unidentified. Still, billions are expensed in imports. - Lack of robust R&D units, without perpetual work on innovation and development, no country can prosper.
- Regulations for calling countries and setting up their manufacturing units along with the domestic hub to create a potent manufacturing hub. - Rework on the policy interventions, to make ‘Make in India’ a part of the economy. Lack of heavy investments and attractive incentives for the domestic as well as global investors. - Special focus on the dormant and infant sectors and industries. Implementation in phases, proper strategy in the presence of experts to finalize the roadmap.
The above-mentioned impasses needs to be expunged from the country in order to lay the Atma nirbhar foundation stone.
Author’s Opinion !
"Do not whine, do not complain, work harder, spend more time! “- Joan Didion This is what India needs to strive hard for. Atma- Nirbharta or self -dependence does not come in a short span, it’s a rigorous and incessant dedicated hard work of the entire nation along the designed roadmap with goals outlined, policy’s in place . Yes, it is the way forward, but definitely not the ONLY way forward. It will definitely be our second independence. But again too much of anything causes harm, thus we need to look inward but we need to keep a foot outward too.
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While Atma Nirbhar Abhyan entails creating a world class manufacturing ecosystem, employing the skilled domestic labors and inviting private participation to protect domestic sovereignty, increase local manufacturing, being vocal for local, India should also step up the game in the global platform.
Atma Nirbhar Abhiyan- Is it the only way
forward? Uday Maggon, Reny Shah Indian Institute of Foreign Trade, Delhi
During the 1st two Five Year Plans (1951-1961), Indian policymakers pushed for import substitution to achieve selfsufficiency. They progressively implemented stricter measures with each plan-period. However, this plan back-fired as it fueled the growth of black market imports and the few that managed to obtain import licenses priced their goods at high prices. In their bid to protect the domestic industries from foreign competition, they removed the stimulus that motivated Indian businesses to perform efficiently. It was the Indian common man that had to bear the brunt of it by purchasing sub-par goods at uneconomical prices, creating an unstable market. The failure of the policies was substantiated by India’s share in world exports falling from 1.4% in 1953 to 0.5% in 1990. The planners of the economy then decided to change the goal to self-reliance, wherein it’s imperative to have enough forex reserves to import what’s necessary
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instead of looking to manufacture everything indigenously and it started with the abolishment of License Raj in 1991. Over the years, the goal of selfreliance has remained constant, taking the form of Make in India and now, Atma Nirbhar Bharat Abhiyan. It was PM Modi’s vision to build a self-reliant and selfsufficient India. This would be underpinned with 5 pillars- Economy, Infrastructure, System, Demography and Demand. In lieu of this vision, Finance Minister, Shrimati Nirmala Sitharam earmarked funds that make up to 10% of India’s GDP to not only soften the economic blow dealt by the pandemic but also serve as a long term roadmap to economic growth. The package of Rs. 20 lakh crore was released in 4 tranches.
The first tranche primarily focuses on relieving MSMEs from the immense finance stress they’re under with Rs 3 lakh crore allocated to collateral-free loans and Rs 50,000 crore equity infusion for MSMEs through Fund of Funds. Further announcements included Rs 30,000 crore worth of liquidity relief measures for NBFCs, HFCs etc. and another Rs. 90,000 crore for power distribution companies The second tranche catered to migrant workers, street vendors and farmers. Rs. 5000 crore credit line was announced for 50 lakh street vendors and a Rs. 2 lakh crore credit line to be made available to farmers through Kisan credit cards. The relief measures for stranded migrant workers cost about Rs. 11,000 crore
The third tranche aimed at providing relief to the struck down agriculture and allied sectors with Rs 1 lakh crore allocated to agriculture infrastructure. The funds would be utilised to improve cold-storage chain and revamping the post-harvest management. The objective was to take locally-produced goods to global markets The final instalment focused on the following sectors- coal, minerals, defence production, air space management, airports, MRO, distribution companies in UTs, space sector, and atomic energy. Additionally, Rs 40,000 crore was allocated to the MGNREGA scheme to curb the growing unemployment rate
The burning question: is this the only way forward? To answer that, we would need a deeper look into what the policy entails. Some of the major issues addressed are: India is the world's tenthlargest importer and the nineteenth-largest exporter. China is a long-term Geo-politicomilitary threat and has hegemonic designs. It contributes to 14% of our imports and we ran a trade deficit of USD 48.66 billion in 2019-20. Infeeniti 2020
Primary imports from China include clocks and watches, furniture, mattresses, plastics, electrical machinery, electronic equipment, chemicals, iron and steel items, musical instruments, toys, sports goods, fertilisers, mineral fuel and metals. We must become selfreliant for manufacturing these goods. Around 60% of our GDP is driven by domestic private consumption and in terms of being a consumer market, India is the 6th largest. The Prime Minister in “Mann ki Baat” emphasized on the huge opportunity that the toymanufacturing industry (estimated to be worth Rs. 7,00,000 crore) presents to Indian entrepreneurs. It’s imperative to capitalize on this, and other manufacturing opportunities to improve
our trade balance and reduce our dependence on Chinese imports A powerful economy is necessary to ensure political sovereignty and this policy will help us take a strong stance against China’s expansionary interests, ease the border tensions and halt China’s infiltration into East Ladakh to bolster their CPEC routes. Since private players are now being allowed to manufacture defence equipment for the
the Indian Defence, we would ensure our territorial integrity by reducing dependence on foreign sources for defence armaments (over Rs. 1,00,000 crore annually from mainly Russia, Japan, Israel and United States) We can harness our human capital (workforce of 520 million) to become the industrial base for the world. Limiting our imports to only critical components, we can set-up large assembling and manufacturing units for numerous electronic devices of which mobile telephony and television head the list. India exported 36 million units of smartphones in FY 2020 as compared to 17 million units in FY 2019 which meant a 111.76 % growth. In terms of value, export of smartphones was worth Rs 21,000 crore in FY20 with a growth rate of 91%. Most of these manufacturers are based elsewhere but chose India for setting up assembling units due to the massive advantage India offers by way of competitive land and labour costs, stable regulatory and political environment and quantity of human capital. This is just one of numerous opportunities available for India to revamp its position to become a global assembling juggernaut Job creation will get a tremendous boost. Unemployment Rate in India reached an all time high of 23.50 % in April 2020 after reaching a record low of 6.70 % in November 2018. The pandemic has only made it worse with GDP shrinking by a whopping 23.9% for the Q1-20. With the influx of Rs. 40,000 crore in the MGNREGA scheme, the impetus given to manufacturers and entrepreneurs alike would facilitate job creation
in registering property, India ranked 154, in paying taxes, 115 and enforcing contracts, 163, according to the World Bank. Indian manufacturing units have to conform with 6,796 compliance items. Indian manufactured goods can take 7-10 days to reach a port whereas it takes less than a day in countries like China, Bangladesh and Vietnam. These numbers are hardly what a nation aspiring to be AtmaNirbhar seeks
While a host of macro-issues seem to have been addressed, many areas haven’t been touched upon sufficiently There’s a noticeable lack of focus on R&D. Indian industries are severely lacking when it comes to value addition and cost effective equipment. One of the key reasons for India pulling out of RCEP was the massive quality gap in New Zealand dairy products as compared to Indian products. Letting them enter Indian markets would have allowed Indian consumers to avail better quality products at cheaper prices. This is just one among many verticals where India is lacking technologically. Protectionist policies can mask these shortcomings for the short term perhaps, but unless there’s a focused improvement on R&D, India will not be able to attain self-reliance The conversion of potential liquidity infusion into improved credit demand by MSMEs is conditional on the demand for credit in the market. Right now, there is a significant threat of MSMEs and farmers taking easy loans to pay off past debts which will not boost aggregate demand and hence, credit offtake will Infeeniti 2020
not be enhanced Profitability of all businesses is subject to market demand and customer purchasing power, both of which have been affected adversely due to Covid. This affects the expected profitability of investment projects, reducing the investment demands which further reduces the demand for credit. The evidence lies in the fact that credit deposit ratios dropped steadily since lockdown was enforced.
India has jumped 79 places from its position in 2014 to rank 63rd in the Ease of Doing Business Index. On surface level, the improvement in EoDB might paint a rosy picture, but the reality is, to start a restaurant business in New Delhi one needs 45 documents to obtain just one of 26 licences. Owning a gun requires only 19 documents. Out of 190 countries, based on 10 benchmarks,
OPINION India will have to maintain trade relations with the world while strengthening its own domestic industry by streamlining the governance system and go beyond mere amendments to previously executed measures and feel-good announcements. Swadeshi does not and should not be interpreted as isolation, as it is impractical to expect our country to manufacture everything on our own.
Ease of Doing Business
63
Dealing with Construction Permits
27
Getting Electricity
22
Registering Property
154
Paying Taxes
115
Trading Across Borders
74
Enforcing Contracts
163
Resolving Insolvency
52
India’s performance on various parameters wrt 193 countries
We need to accept our limitations and seek imports where needed. While the Atma-nirbhar Bharat Abhiyan is a massive step in the right direction to rectify many stumbling blocks, there are a host of issues that are plaguing the Indian economy, especially in the manufacturing sector, that have not been addressed in the new policy. Hence, it is NOT the only way forward.
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Do financial markets reflect the true state of the economy during uncertain times like COVID? Divya Singhvi and Keshav Tawari IIM Bangalore Economy Down, Stock Market Up! Is this another bubble waiting to burst? An interesting analogy compares the economy and stock markets to a man walking his dog in the park. The man (economy) moves in a straightforward stride with few deviations. His dog (stock market) on the other hand, is on a leash and runs in the same direction but at times chases a squirrel to the left or a butterfly to the right and goes completely berserk. Well, the stock markets are a leading indicator of the economy and hence there is the expectation that they will show bullish trends when the economy is booming and bearish trends when the economy is under stress. Currently, due to the COVID-19 pandemic, the Indian economy is projected to shrink by 6.8% in FY21, financial results of most corporates declined with top and bottom line revenue performances being one of the worst in the last 12 quarters, leading to cost cutting and downsizing by laying off employees and scaling back compensations. Unemployment in the country was at an all-time high of 23.5% in April’20. Aviation, Hospitality & Non-essential consumer goods, NBFCs and real estates have taken a major hit and once the moratorium expires, banks’ NPAs are only expected to go up. All of this is only going to add to the misery of the common man. Infeeniti 2020
On the other hand, the Sensex fell from the all-time high of 42,272 in Jan ‘20 to 25,981 in Mar’20 and surprisingly is now trading at 38,700. This is despite there being no economic or healthcare wise improvements in the prospects of the nation. This quick recovery has left many economists and financial analysts puzzled! Has this really happened for the first time? The graph above paints a different picture. While it is often seen that the stock market is thriving despite the economy performing sluggishly, this however is seen as a shortterm mismatch. Historically, we have seen that annual gains of more than 50% in the market have generally coincided with turning points in the economy and are accompanied by improvement in the GDP growth rate. This makes the current situation rare since the economy and stock markets are in such tangential directions. The most surprising part being the speed of recovery since even after the 2008 global financial crisis the SENSEX took almost a year to recover to prior levels. So clearly it is the speed with which the Sensex fell and recovered, even before the pandemic is over, that is the matter of concern. However, Indian stock markets aren’t the only ones showing such tendencies. During the 2008 financial crisis, the stock markets globally fell by 40-60% even though the economy didn’t really shrink by 50%. This was followed by S&P 500 tripling in the next 6 years which was of course not backed by such high growth in GDP.
During COVID, the second quarter growth rates in US took its worst hit since the Great Depression of 1930s due to the coronavirus lockdown. However, the major stock indexes have almost recovered back to precrisis levels making this one of the shortest bear trends in history. So, what exactly is causing such a large dissonance between the markets and the economy this time around? Firstly, the stock market is mostly forward looking and tries to discount the future while the economy shows the present state. Secondly, the economy includes all strata of society, but stock market is limited to those with sufficient disposable income and is primarily dominated by a much wealthier class. When we look at the astonishing movement in the stock prices there are certain macroeconomic, behavioural and global factors which can explain this anomaly. Central Banks and Governments have played an important role in increasing the liquidity in the market. As a chief economist says, “This Rally in equities is clearly not driven by fundamentals – its driven by the liquidity support from federal Reserve.”
Role of Central banks: RBI has continued to decreased repo rate from 5.15% in Feb ‘20 to 4% as of today. In US, the Fed is now targeting rates between 0% to 0.25% down from a previous target range of 1% to 1.25%. Central banks all over the world are adopting quantitative easing to increase liquidity in the market
During the pandemic, IT companies have managed major fixed cost reductions and have sustained their business through a ‘Work from home’ model. Pharma too has gained from increased medical expenses and lesser dependency on China for API. The expectation of bright future prospects for the companies in these sectors has led to a Governments Boost: Markets rally in their stocks. are benefitting from massive monetary stimulus by the gov- Another phenomenon that we see ernment - ₹10 trillion in India occurring in stocks that entered and $2 trillion in US worth of the COVID scenario with large cash reserves and financial economic rescue packages strength is their ability to weather Higher savings: Investment through the crisis and end up from retail investors in Q1FY21 gaining market share from the shot up 78% Q-o-Q to ₹33,731 smaller competitors. In any case, crore in the cash segment. The most analysts and rating agencies number of demat accounts have accepted FY21 as a washout have also jumped by 2.9 million year for earnings and growth. In from Jan to May ‘20. This indi- such a scenario, managing to gain cates people with liquid funds market share leads to higher valuare preferring to invest in stock ation for such stocks. A prime exmarkets in the absence of oth- ample of this is Asian Paints. er lucrative options. Given the higher liquidity in US (due to rate cuts & fiscal stimulus), we see a surge in investments from FIIs into India and other developing markets – it foreign touched a whopping $2.87bn in June ‘20 surpassing Mar ‘20 inflow of $1.14bn.During the COVID scenario, markets saw an increase in the number of short sellers. One of the highest in the last 15 years. However, as the market kept rising (opposite direction to their expectations), the short sellers needed to cut their losses. In order to do so, they ended up by buying shares, which lead to increased demand and hence increased prices. Investors are placing large bets on sectors such as tech and pharma Infeeniti 2020
Additionally, stocks such as Reliance, Infosys, ICICI Bank and HDFC Bank which had a higher weightage in Nifty and SENSEX pre-COVID as well, have rallied during COVID leading to an even higher weight in the index. Thus we can see that it is just a few stocks which have resulted in driving up the indices to a large extent. Additionally, commodities such as gold always tends to gain when interest rates are low and political and economic uncertainties are high. Primarily due to its value as a safe investment alternative.
OUR OPINION
Given the lack of sustainability of the factors currently driving the bullish trend of the stock markets, this bubble is expected to burst sooner rather than later. This is primarily because the current prices in the market are not driven by the fundamentals but by excess liquidity. India’s NPA crisis continues to plague the banking sector and the deteriorating financial health during the pandemic is only going to lead to further defaults post the moratorium period expires (Sept onwards). The government has attempted to induce demand through stimulus. However, the government has little fiscal space to provide a booster shot to the economy having already breached the fiscal deficit target.
Currently, there is a stark difference between the economic fundamentals of country and the stock market rally with India reporting a -23.9% GDP degrowth in Q1FY21 whereas the markets have rallied more than 15% in the same period. The degrowth numbers are in fact expected to be worst when damages in the informal sector are taken into account. As mentioned by the RBI governor, the rally is fuelled by liquidity pumped in the market and is not expected to sustain at these levels for too long. China is India’s largest trade partner which can be seen through its trade deficit contribution of $ 53.6 billion. Rising tensions between the countries and increased boycott of Chinese goods, especially raw materials has the potential to impact India’s manufacturing ability and
domestic businesses until they find alternative suppliers. So while the hopes for a vaccine are fuelling current investor sentiment, COVID related fatalities and grim economic conditions are the present reality. The vaccine and subsequent economic recovery remain a distant dream and a correction of the stock market is on the cards to converge with the economy. Because after all, as Ritholts said, “The index isn’t the real world�.
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Do financial markets reflect the true state of the economy during uncertain times like COVID? Himani Jindal, Indian Institute of Foreign Trade, Kolkata Opinion: Why stock market performance is not always linked to the real economy While the global economy is reeling from the aftereffects of the COVID virus, the stock markets seem to have escaped from its brunt. The pandemic has caused the global economy to shrink rapidly. As per the predictions of the World Bank, global economic growth is expected to shrink by 5.2% in 2021. This has further been exacerbated by the increasing unemployment levels witnessed all over the globe. Yet the stock markets around the world are booming while the The pandemic shows no signs of economies are sinking. Accord- abating. Yet, the stock markets ing to a US-based think tank- In- show no sign of downward movestitute for Policy Studies, unem- ment. What could be the reason ployment in America increased for this glaring paradox? by 45.5 million between March 18 & June 17, 2020. Moreover, 1.Economic stimulus by governthe US GDP shrunk to (-4.8%) in ment: the first quarter. However, One of the major reasons for this NASDAQ Composite still wit- performance by stock markets is nessed an incredible increase of the large economic stimulus pack41.8%, while the S&P 500 rose ages granted by central banks by 27% during March 18-June around the globe. 17,2020. In US, roughly $2.3 trillion was inEuropean stocks outperformed jected by the Federal Reserve to the S&P 500 in June. The CSI 300 help support small and midsize of Shanghai, China witnessed a businesses, & state and municipal steep recovery, while the Nikkei governments. The Fed rapidly be225 in Japan gained over 35% in gan buying government debts and June2020. private assets-such as corporate In India, stock market rose debts of companies like Tesla, Coca sharply after a brief dip in March -Cola, Apple & AT&T. They also ex2020. Between March 23 & June tended loans to various market 12, stock market rallied due to a participants simultaneously, leadhandful of stocks. This happened ing to a surge in stock market indiwhen restrictions were still in ces. Further, interest rates were place leading to severe down- reduced to 0.25% to further inturn in economic activities. crease liquidity in the market Infeeniti 2020
All these measures increased investor confidence and prompted them to return to the markets. This has led to the bullish recovery of the stock market indices. However, instead of generating real returns, most of these funds have been diverted into capital markets for providing quick returns, thus increasing speculative activities Increased Investment Inflow: India has witnessed a steep increase in foreign investment inflows during the pandemic. Although a deficit was caused due to excessive dumping in March & April, FPI increased sharply thereafter. FPI flows into equities stand around $230 million as at August 2020. $7.5 billion moved to the domestic stock market, thereby increasing the indices. Moreover, deficit financing by the central bank will further reduce the cost of capital, leading to more FPI & FDI inflows in India
However, this has led to an increase in the PE multiples. Markets are highly valued, despite lower earnings forecast for current year & FY21. Disassociation from Fundamentals It is now evident that stock prices are not reflecting the macroeconomic indicators accurately. As per a Business Today report, net profit of 532 (Indian) companies fell by 39.5% in Q4 of the current year. This was accompanied 4.7%. decrease in revenue performance. As stated earlier, Indian stock market increased sharply in April & June. However, only 3 stocks- Infosys, RIL & HDFC were responsible for 43% of the increase. These 3 companies added Rs 6.3 lakh crore to their market cap during this period. Another pressing concern is the Non-performing assets (NPAs) for banks which might lead to further stress in the Indian economy. It is clear now, that even business fundamentals are not being reflected correctly in the market indices. It is important that correction of stock market takes place soon. Although a good monsoon and demand growth may lead to recovery and growth, there are risks which are still evident- including the ensuing pandemic and the current geopolitical tension. If this trend continues to persist, speculation will increase substantially and the bulk of the benefit will only go to the few at the top of the economic pyramid.
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Business Acquisitions and Consolidations
– The way forward
Nishika Gupta Symbiosis Institute of International Business Introduction: The COVID 19 pandemic has left the world in a conundrum. Where the major stakeholders including the international organizations like WHO, UNICEF; financial institutions, research and development institutions have been very skeptical about the course this coronavirus can take, small scale businesses have already given up. These unprecedented times are a true test to humanity. When the whole economy has taken a downturn, it is the big businesses that will have to come forward to the rescue of small businesses. Moreover, a shift to the ‘New Normal’ might not be that big a challenge for the big players. But, for small-scale businesses, even a minute change in the supply network can be a big hit to its sustainability. Many a sectors have seen an up rise in the business due to its nature aligning with the current demand, i.e., ‘ONLINE’. We do hear this word off and on these days. And most certainly, it is these businesses that are really adding numbers to their profits. One of the biggest sector that has profited in this time is the e-commerce and more precisely the online grocery business. This article highlights some of the key financial data of this industry, the role it can play by acquisitions and consolidations for the better adaptability and survivability Infeeniti 2020
of small businesses and the way forward to it. E-Commerce Sector: The Grocery Business The panic among people for the stockpiling of grocery was witnessed all around the world. The stock of general food items like wheat flour, rice, packed instant food; vegetables like potato, onion with greater shelf-life and common household items like toilet papers, cleansers and disinfectants were the first to disappear from the shelves of the grocery stores. A paradigm shift to online grocery shopping for a major chunk of the traditional buyers who previously relied only on the brick & mortar stores for their grocery supplies was witnessed The top grocery delivery services in India are Big Basket, Grofers, Amazon Pantry, ZopNow, and FoodZu. Major players in the online door-step grocery delivery like Big Basket and Grofers have got an opportunistic advantage over the small neighborhood kirana stores. Grofers saw a surge of 90% orders per day whereas Big Basket saw a surge of 88.6% orders per day post-lockdown.These e-commerce websites had seen such a great demand that they had to stop the intake of new orders. The pop-up on every new Big Basket order read, “We'll be back soon! We are currently experiencing unprecedented demand. Considering this, we are restricting access to our website to existing customers only
Fig: Comparison between Big Basket and Grofers Pre and Post-lockdown
Please try again in a few hours.” Grofers was no different when it came to handle the risen demands. “Due to the sudden rush, we have stopped servicing many locations, but we are working to increase capacity and will be resuming operations shortly.” Business Model of the e-commerce grocery sector: The Hyperlocal trend of many big-biz in the country has created a sense of responsibility among several businesses. The concept has not only opened doors of opportunities for small neighborhood stores but also instilled in them confidence by associating them with the big names. This trend has seen an amazing result of which many start-ups coming with the same concept is a testament to the fact. In layman language, the hyperlocal concept refers to being restricted to a particular geographic area. It allows the delivery partners to pick up commodities from the local – kirana store and deliver them to the customers
Below are some of the ways in my opinion in which such incidences can happen with small businesses too and they can produce better results Fig.: The business models for different door-step grocery delivery partners
could be done. This would reduce the uncertainty of availability of products in their partner stores. Also, they will have a better control on the Sales Order Management seeing to the availability of the food products and the workforce that is available to work
Another model that is followed is the combined inventory and warehouse system which basically runs on the
Hub and Spoke Model. In this model, a well-integrated inbound and outbound logistics could be seen. The finished products are procured at a warehouse from where it is distributed by the delivery partners. Brick & Mortar Stores: These are the regular stores on which the traditional buyers have always counted on. But the blow given by this pandemic has forced them to switch to ONLINE Grocery purchasing. The big reason behind is the broken supply chain that has made it almost impossible for the stores to renew the stock which has resulted in a huge loss of potential buyers. Moreover, the safety concerns adds on to the misery of these small businesses. Acquisitions and Consolidations – Need of the Hour: Whenever we hear of M&As and Consolidations, we have a perception of some big business giants coming up together and creating a monopoly. But we must understand that mergers, acquisitions and consolidations are sheer ways of creating value! Infeeniti 2020
Fig.: Key issues faced by the kirana stores
Opinion: 1.Mergers – Every locality has at least one kirana store and a milk booth. Here, a horizontal merger can be brought into play. During the lockdown also, milk production factories were functional. Although, the food production factories were also not shut but the major problem lied with the transportation of food items from the City Transport Centers into the city due to the lack of workforce. Since, the milk production factories are basically under the Milk Federations of the State, provisions could be made for the transportation of food commodities along with the milk. Every kirana store should be temporarily merged with the milk booths for the logistics function. Vertical Mergers – For big companies working under hyperlocal model, instead of going for pickups from different delivery partner stores, a vertical integration
Acquisitions – To prevent the death of the small partner stores of the big businesses in case of hyperlocal models, these big companies should come forward and acquire them as a temporary solution. This would benefit the acquirer in 3 ways: 1.These kirana stores could turn into small warehouse facilities where the finished products could be directly brought. Logistics could be a minor problem here as the order would be in bulk as compared to a kirana store order 2.The increase of customer base would the most prominent result. Before COVID 19, only a few people might be a regular online grocery shopper. But since the kirana store is acquired, the customer base of the kirana store now becomes the customer to the big business also one kirana store could be made to cover even the neighboring localities
Seeing to the safety concerns, the delivery partner could also be fixed locally creating an employment generation opportunity. The threat of the disease has forced many people to leave their jobs too. So, securing the employee health will give him a motivation to work for the company
Conclusion:
An opportunistic progress is good if we go by the economic growth concept. But, a humanitarian approach is all that is required in times of such economic crisis where even survival becomes a challenge. So, the onus lies on the big giants. Mergers, Acquisitions and Consolidations should not be The benefits to the small busi- viewed as mere tools of forming a ness will be in the following cartel or gaining monopoly but as a ways: helping hand to the small businesses and peers also. Firstly, a sinking boat can be pulled out of the water Secondly, there will be an increase in its Stock Keeping Units (SKUs) Third, the operations and logistics part no more remains a concern for the small business owner Consolidations – The online shopping experience for most of the people had been very tiresome when it came to certain food products like poultry products. Since milk has a shorter shelf life, it became very difficult even for the big businesses to procure it and get it delivered soon due to the workforce constraints. So, some divisions of the big businesses should consolidate for an increased workforce, decreased cost of purchase and decreased logistics management
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Business acquisitions and consolidations - The way forward Darpan Jain PGP2, IIM AHMEDABAD In early April, when most of the world was in lockdown and sports fans across the globe were distraught due to all games being postponed, a specific section of football supporters was brimming with joy. These supporters had seen their historic club lose its local dominance over the past couple of decades. But the time for domination was back, they thought, as this famous club based out of North East England was subjected to a takeover bid. Newcastle United F.C. or ‘The Magpies’ as its commonly called, was in for a bright future if this takeover could be completed. The club had received a £300 million ($375 million) bid from a consortium of buyers including the Saudi Public Investment Fund (PIF), Amanda Staveley’s PCP Capital Partners, and British businessmen, Reuben brothers, each vying for an 80%, 10%, and 10% stake respectively.
“With a deep appreciation for the Newcastle community, we have come to the decision to withdraw our interest in acquiring Newcastle United Football Club. Unfortunately, the prolonged process under the current circumstances coupled with global uncertainty has rendered the potential investment no longer commercially viable”.
In acquisition agreements, the MAC clause gives the buyer the option of withdrawing from the transaction.
However, this piece is not about exploring the legal aspects, so we will stop at that. After Cineworld backed out, Cineplex filed for damages to which Cineworld filed a counterclaim, and now, both parties are fighting in court, with the deal Although there were other factors off the table. So much for a friendly touted to have influenced this deal! deal, it is fair to assume that the pandemic had a fair role to play.
A more concrete example would be the breakdown of the Cineworld and Cineplex deal. UK Based global cinema chain Cineworld Group PCL had agreed to pay $34 per share in cash, amounting to a 42% premium for Canada’s largest movie chain, Cineplex Inc., in a friendly takeover bid. The deal was valued at over $2.5 billion at the time and would have resulted in North America’s Figure 1: Largest cinema chains in North America (number of screens) (Jones, 2019) largest cinema chain (Figure 1). On the next trading day itself, Cineplex By mid-April, talks were in an shares rose more than 41% (by All in all, COVID-19 has triggered a advanced stage and football $9.87) to $33.88. downturn in global M&A deals. In fans around the world were getting ready for another Man- But what was once a ‘friendly’ the first half of 2020 itself, Deal volchester City and PSG. But takeover soon turned into a court ume dropped by 49%, while deal M&A’s are complicated, and battle. Cineworld backed out of the value was down 22% YoY. In addithese were no ordinary times. deal claiming “certain breaches” tion to the Newcastle and CinCOVID-19 had taken over the by Cineplex, hence invoking the eworld deal, several others have fallen through. Xerox stopped its world, inflicting infections and ‘Material adverse effect’ clause. pursuit of HP, while SoftBank deaths in 200+ countries, A Material Adverse Event (MAE) backed away from its planned cutting off global supply chains, clause enables a party to withdraw bailout of WeWork. There have and well, postponing (or cancelfrom a contract in circumstances been huge market capitalization ing) exams! This deal was no where there is a material change losses as well, with Travel & Hospiexception. By late July, the deal after its signing. Such clauses are tality losing 49% and the Banking had collapsed after the PIF withusually found in acquisition and sector losing 31% market cap by drew its bid. The statement they financing agreements. April itself (Figure 2). released was as follows: Infeeniti 2020
Unsurprisingly, some deals that were still being finalized were struck at considerably lower prices. Total price/EBITDA, a key ratio to measure price adequacy in M&A deals, had fallen below seven in March and April (median level usually between
the former fear overpaying due to the huge uncertainty around the target’s future financial prospects and the latter feel that they will be asked to accept an artificially depressed price
Low debt yields: Ten-year government securities were at ~5.7 percent in June compared to 7.0 percent a year ago Dwindling valuations: Overall market cap-weighted valuations fell about 1/4th from December 2019 to March 2020 Rising liquidity stress: More than 60% of top-500 companies had less than 90 days’ cash on hand These are generally true in other countries too Strategic themes for M&A value addition So how can companies take advantage? They can do so by identifying and choosing one of the following themes. These can determine the value attainable in particular moves that companies make and, in general, shape their inorganic strategies.
Why Managers sit tight during such crises There are enormous logistical In such a climate, it is tempting problems created by the inability for managers to sit tight and re- to travel and hold personal duce M&A activity. This can be meetings. Although video conferattributed to the following five encing has risen over the years, it is still a poor substitute for inproblems : 1 Intra sector consolidation: Altperson due diligence hough the pandemic has caused The management might feel severe economic damage across they have more important Sellers or target companies want the board, some sectors and some things to cater to. One of the quick cash. An M&A deal with a firms within the affected sectors top-most priorities is achieving notoriously lengthy process is not have suffered more. Fissures are maximum liquidity, especially at really designed for this appearing within sectors as a wider a time when sales and cash flow gulf is created between companies It’s not all gloomy… are rapidly decreasing with sufficient funds and those However, the situation also pro- without it (Figure 3). As the effects Similarly, for sectors and compa- vides opportunities. M&A history get deeper, this gap will only grow, nies that benefit from the crisis, suggests that in past downturns, giving the former group a healthy managers have to deal with up- the companies that pursued acquicompetitive advantage. This imbaltake in demand for their prod- sitions and divestitures in a strucance can subsequently lead to conucts/services (Telecom, Pharma, tured way outperformed their solidation, with weaker firms being Video conferencing, etc. in the peers. Although the differential brought off by stronger ones current case), which means varied by sector, it could reach as dealing with supply chain ex- high as six times over! And if we 2. Portfolio Divestitures: With pansion and other problems look at it, certain financial factors scarce resources, companies could do make it possible for well- rush to save their stars and cash The ‘moving target’ problem in capitalized companies to revisit cows, hence, leaving non-core seccompany valuations. Buyers their past M&A strategies and tors unattended. This will necessiwant great deals, and sellers make a strategic move. In the Inditate carve-outs and divestitures of want to extract the maximum an context, these include: these sectors to relevant players price. But in such a scenario Infeeniti 2020
3.Acquiring regional firms: As the pandemic dries up resources for smaller regional firms, established companies may move to acquire local brands that are strong in particular niches. The leaders can reenergize these brands by using their big production footprints while also gaining new customer segments that were catered to by these smaller firms
Creative due diligence: Video tours and drones can be used to conduct inventory checks, paperwork can be studied in virtual break out rooms, employees can be evaluated over video calls
Far from being out of action through 2020, companies that act strategically and use M&A during this unprecedented economic earthquake will be the ones most likely to prevail as economic activi4. Alliances and partnerships: As ty rebounds companies move towards digital channels, nimble companies will want to extend their presence. Alliances for sharing customers, data, and cross-selling will provide lifelines for these companies to stay relevant Companies have to act quickly. To structure the process, they can make appropriate timelines focusing on the short and medium-term. The following framework can help Strengthening Due Diligence amidst crises But what about Due diligence, you ask? As pointed earlier, one of the hurdles created by the pandemic includes a lack of personal meetings that adversely impacts due diligence procedures. This can be reduced using tools like Earn-outs: Tying the final purchase price to the future performance of the business Indemnities: Allows the buyer to keep a percentage of the purchase price in an escrow account, which would be released to the seller only when all its claims about the business, (such as the state of its inventory), can Infeeniti 2020
Financial Sustainability during COVID times Blue Turtle : Sarmita Maity and Ashmita Sadhu Indian Institute of Social Welfare and Business Management (IISWBM), Mantra to sail through these times through this storm Where domestic Kolkata
Officially India has managed to lead the world’s most deadly pandemic with a socking count of 4,811,712, where its daily counts are increasing; it has humbly outstood itself to make the worst-hit economy so far. It’s not because it didn’t have good policies but it lacked effectiveness and competence in every nook and corner. Taking up ideas from similarly affected economies and putting it in a place where it does not even fit is an act of foolishness. The COVID-19 pandemic has not only revealed our vulnerability as human beings but also our reliability on each other. Where ongoing climate crisis has made us visualize a horrific picture of our current healthcare conditions it has also made clear where we stand in terms of a resilient and sustainable future. Disruptions are highly seen in developing countries, where needs of the hour are rapidly changing, so are the steps taken by the organizations, private sectors, and the government. Infeeniti 2020
will not only require an inclusive economy but also having strong financial stability backed up with the idea of what is best for environment, society as well as profitable. Covid infected market. Following the early dip due to the onset of COVID, the Sensex has managed to climb back up near the pre-COVID stage, but this kind of depiction of Sensex shows a huge economic oddity. The fact that the current stock market does not shows the current picture of the real economy is a matter of debate for analysts. With the rising amount of stability in the financial market be it for the introduction of stimulus packages or liquidity influx in the capital market by the government, the prediction of vaccines by the end of this year or by the start of the preceding year turned out to be a ray of hope for investors and traders to be a step ahead with their investment in stock, bonds, and other govt securities. Then again, this can be a grave concern where this opportunity can become a threat at any point of time. Having such financial market dilemma the strength of financial stability will be automatically put to test. So, does a strong financial base during such crisis give an upper hand in landing in a better place rather than being badly hit? Definitely. More than ever, organizations should place sustainability at the heart of their business operations. Huge amount of liquidity and working capital is needed for business houses and organizations to safely pass
demand has come to a halt, fall in production due to extended lockdowns, unorganised sector has received a big blow in terms of unemployment more than the organized sector; the government, other than anyone should be concerned the most. During recent times Indian government announced a policy that provides a financial package of Rs. 20 lakh crore for the benefit of common people which is less than 10% of the GDP of India, among which the entire amount is yet to be invested which is next to nothing for a country so badly affected consisting of a huge no. of populous already living under poverty and the no. of which seems to increase with the increasing disruption caused due to COVID. This package also states that it consists of an 80% loan. Did anyone think who are those people willing to take loans if they have merely nothing to repay back? So, when it comes to sustainable finance let the private sector lead the way. Repairing lives during such phase requires billions to recreate investment, pre-COVID supply, and demand chain, domestic growth and new jobs for more resilient financial future which can be easily and efficiently done by private sectors. Such extraordinary times also challenge the working of small businesses and start-ups suffering a major loss due to pandemic. They must be trying to reduce their fixed costs, which includes acquiring new workplaces and maintaining old workplaces and logistics, in order to lower the break -even point. Cost-cutting also includes laying off employees
It’s not possible for some companies to operate remotely. Employees of those companies might be going through a detrimental fear of losing their jobs; some of them have already lost. Business leaders must focus on the emotional health of their people because studies say downsizers do not outperform non-downsizers in a long run. As we are not really sure when this pandemic will end, how long it will take to revive the economy it’s the time when the old and experienced business houses can take up the opportunity to the full scale and merge with small ones which will cut redundant operation costs for both of them resulting in lower consumer prices as well as increased efficiency of overall production and accelerated growth, some amount of unemployment can result in this process which is where the government should be ready to provide necessary employment schemes. Self- Reliance and Self- Sufficient. This pandemic taught us, the importance of being “Atma Nirbhar” (self- reliant and selfsufficient), which also includes the growing tensions between countries. Does Self-Reliance mean putting a complete ban on imported goods and boycotting foreign product or to promote indigenous products and also ensuring the cost and quality? Self-reliance cannot be achieved overnight; it is practically difficult in short term for India as India imports $75 billion worth of goods every year from China to the extent that parts of the Indian industry are dependent on China. Even the global supplier of Hydroxychloroquine, India depends on China for its raw Infeeniti 2020
material. To become self-reliant a country needs technical advancement which in turn requires decades of research and development. For example, India rarely produced PPE kit before, but due to this pandemic, it became one of the highest manufacturers of PPE kits. Being “Atma Nirbhar” demands huge investment to set up supply chain, technical advancement in any sector and global managerial skills which can be only possible by private sectors. This is why Government should allow the private sector to play a major role towards a self-reliant future but that does not mean privatization is the only way forward, that can be one but necessarily not the only one. Privatisation a way. Addition to the vision presented by the Prime Minister of India Narendra Modi on 12th May was that of privatizing organization owned by the government which included 14 major coal blocks, railway, airports, defence industries as well as some other profitable national industries. Selling of these organizations to private sectors will count for a huge benefit in terms of efficiency and resource optimization, rapid improvement in quality, incur revenue and help raise cash to reduce public debt but the need here is to put money in the hands of common and deprived people. Will that really work out in the shortrun is a matter of question here because private organization mostly focuses on their own profitability by increasing consumer prices. The time when people merely have money in their hand a COVID patient in private hospital is charged around 3-4 lakh approx. So government should intervene and put a check-in these areas, not only healthcare but also areas where government if taken necessary
steps could provide services in an efficient and socioeconomic way. Opinion. To recreate resources for future, the only way is to fully utilize human resources that India has in abundance. Laying off workers just to take forward the idea of privatization for a strong and stable socioeconomic structure in future; now at this crucial juncture would be a grave mistake. Such are the times that will cost a huge amount of money, but not doing so will cost more in near future. Not spending now will push the economy in such a stage where it will be busy building pillars without having a strong base leading to reduced incomes, unemployment, reduced taxes resulting in a bigger hole of fiscal deficit even with less spending. Nothing now should be more important than raising the domestic demand of entire economy. Selling of shares, bonds, government securities, wealth taxes for multinational companies, levy of direct and indirect taxes on corporate firms must be thought of. Not only this but comparing previous economic conditions, there has been a sharp fall in foreign exchange inflow due to constant decline in remittances, export earnings and FDI which has made policymakers choose between increased development spending and stringent fiscal space so let’s encourage export for now. We have discussed a lot about sustainable growth and the ways to recover the economy back, but sustainable recovery of economy will mostly depend on the impact of pandemic and time taken to contain it. Also, important is the consumer behaviour and how they react to such scenarios. All these will play a major role to bounce back the economy