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Decoding recovery path of the Indian economy

By Dr Niranjan Hiranandani

No one ever thought of the scale and magnitude of disruption that was caused by the Covid-19 pandemic. In the aftermath, the resurgence would be equally trying especially in a country like ours with a complex economic framework. 

However, we need to applaud the government for paving the way for an impressive recovery, with a judicious mix of spending and structural reforms.

Like always the world has taken notice of the positives and showed faith in India’s story once again as visible in the growth numbers of segments such as foreign direct investment (FDI), foreign policy investment, and corporate bond market inflows. It all points to strong investor faith in India’s economic resilience. Besides, upwards revisions by rating agencies in India’s GDP forecast are all repeating the same story that we have kicked in the rebound phase.

The Ripple Effect

The unleashing of structural reforms and the stimulus packages announced by the government did take effect in various sectors as the fiscal response has been calibrated to reap maximum benefit. The one that stands out is the extension of the 100 percent credit guarantee scheme to 27 stressed sectors. Besides, fiscal stimulus and tax rebates for growth-critical sectors, such as housing, would have spillover effects, thus indirectly boosting demand-led growth. 

Reforms and timely fiscal interventions in other critical sectors are already showing positive results: the Gross Value Added (GVA) for three sectors– agriculture, manufacturing, and utilities– has been positive in Q2, as compared to just one, the agriculture sector, in Q1 this year. Similarly, the expansion of production linked incentive (PLI) schemes –that give incentives to firms– worth 1.46 lakh crore for 10 new sectors will give a boost to the manufacturing sector, and result in long-term benefits for the economy.

The liberalization of the notoriously rigid formal labour market would expedite India’s upward movement in the ease of doing business rankings, and attract further investments., India has moved up 79 positions in the World Bank’s Ease of Doing Business’ rankings since 2014.

Fears of Fiscal deficit

The stimulus packages and therefore, additional non-budgeted spending –along with falling tax revenue,– by the government to wean off the COVID crisis has led to pushing India’s budget gap wider to 8 percent of GDP in the current financial year, more than double the targeted 3.5percent. The expanded support package– to rescue companies and save jobs amid the pandemic–given by the government amounts to 15 per cent of the economy, adding to the global stimulus that has touched $12trillion. 

The fear that the fiscal deficit will loom large on the government in the future to manage fiscal prudence is not unfounded. However, the finance minister has assured time and again that fiscal deficit fears won’t derail government spending as government spending is important to bring the economy on track. The forthcoming union budget will focus on public spending on Infrastructure to ensure sustainable economic revival. There is a dire need to reinstitute Infrastructure Development Bank for long term funding of infrastructure projects.

Authorities to the Rescue

A multi-pronged policy response — the efforts and intelligent balancing act done– by the apex bank in India, the RBI, during the Covid crisis is praised by the government and the people of India, equally. The reduction of key interest rates along with the restructuring of outstanding loans, moratorium of given to the borrowers and extension of on-Tap TLTRO to 26 stressed sectors under the Emergency Credit Linked Guarantee Scheme (ECLGS 2.0) are some of the strategies that have helped the businesses tide over the crisis.

The way RBI is trying to resolve the shadow banking crisis that has plagued the country since 2018 has found many takers including the government. The government on the other hand is rooting the idea of privatising a couple of state-run banks that have received cabinet approvals.

Conclusion

The year 2020 may not have belonged to India, but the future certainly belongs to this nation for its resilience, faith, and sheer optimism.

(The author is the national president of the industry body, ASSOCHAM and NAREDCO. The opinion appeared in IANS)

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Business Latest News

India invites foreign investors, cites healthy FDI inflows

New Delhi: While inviting the participation of foreign investors into India’s economy, Union Minister Piyush Goyal said that during the April-September period, the country received FDI inflows worth $40 billion.

Addressing the inaugural session of CII’s Partnership Summit 2020, through virtual means, Minister of Railways, Commerce & Industry, Consumer Affairs and Food & Public Distribution Goyal invited foreign investors to be a part of India’s growth story.

The Minister said continuing on an open path, India has been systematically opening up new sectors of the economy.

He said that FDI (Foreign Direct Investment) flows in India have been continuously growing.

“During the first nine months of this year, at the peak of Covid-19 pandemic, our FDI has grown. We have one of the most facilitative FDI policies in the world. During the April-September period, FDI inflows are at $40 billion, which has been higher than last year by about 13 per cent,” he said.

“Last year, we announced one of the most attractive tax rates available anywhere in the world at 22 per cent tax for businesses in India and 15 per cent tax for new manufacturing facilities set up after October 2019.”

Besides, Goyal cited that a number of new schemes have been introduced, including the ‘Production-Linked Incentive’ scheme to attract industries to come to India.

“We have investment promotion cells in all the ministries. Central government and the states are working together to attract and promote investments even before the onset of the pandemic, India was rapidly announcing a slew of reform measures aimed at improving the economy and productivity levels in the economy.

“India is introducing conducive reforms and facilitation measures to encourage greater global involvement in our V-shaped recovery. I invite you to board the bus of development, growth and prosperity that Prime Minister Shri Narendra Modi is crafting for the people of India,” said Goyal.

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Business USA

155 Indian companies create nearly 125K jobs in US: CII report

Washington, DC: As many as 155 Indian companies have invested $22 billion in the US, thus creating nearly 125,000 jobs in the country, according to a report issued by the Confederation of Indian Industries (CII) on Monday.

The report, “Indian Roots, American Soil 2020,” is a state-by-state breakdown of tangible investments made and jobs created by 155 surveyed Indian companies doing business in all 50 states, as well as Washington, DC, and Puerto Rico.

Texas, California, New Jersey, New York and Florida are home to the greatest number of workers in the US directly employed by the reporting Indian companies, the report said.

“Indian-Americans have made so many important cultural, economic and scientific contributions to our country and Texas values your hard work and innovation. So keep up the good work!” said Senator John Cornyn, who is also co-chair of the Senate India Caucus.

CII said that the surveyed companies disclosed the highest amounts of foreign direct investment (FDI) in Texas, New Jersey, New York, Florida, and Massachusetts.

The states with the top concentrations of Indian companies reporting were New Jersey, Texas, California, New York, Illinois and Georgia.

“Together, 155 Indian companies employ nearly 125,000 people across 50 states, the District of Columbia and Puerto Rico. The total value of tangible investments made by these 155 companies exceeds $22 billion,” the CII said.

Indian investments in 20 US states stand at over $100 million each, CII report said, adding that 77 per cent of the companies plan to make more investments in the US.

As many as 83 per cent of the companies plan to hire more employees locally in the next five years.

Now, as the world, and both India and America grapples with the coronavirus, “we need to take this moment to rededicate to building good jobs for Americans, for Indians,” said Senator Mark Warner, C-Chair of the Senate India Caucus.

“We need to recommit ourselves to building stronger relationships between India and the United States,” he said.

The surveyed companies also provided data regarding their corporate social responsibility (CSR) and research and development expenditures, which totaled $ 175 million and $900 million, respectively.

“The report draws attention to the contribution made by Indian companies to local communities through their CSR initiatives like supporting students, organizing special skill and training programs,” India’s Ambassador to the US, Taranjit Singh Sandhu said.

This report tells the continuing story of successful and innovative Indian companies attracted to the US as one of the best places to do business, and the US locations eager to welcome those companies, said Diane Farrell, Acting Deputy Under Secretary for International Administration, US Department of Commerce.

The growing ties and investment between US and Indian business communities support jobs and opportunities for both our nations and help us respond to global challenges, like COVID-19, said Peter Haas, Principal Deputy Assistant Secretary of State.

Chandrajit Banerjee, Director General of CII, said the survey results show that the US is a preferred investment destination for Indian companies which are contributing significantly to supporting local jobs.

The results in the survey capture a snapshot in time, documenting tangible investments and direct jobs only, so I believe that the actual economic impact of Indian FDI in the US is much larger, he said.

It is critical that the US Government continues to provide a supportive policy environment for Indian companies to flourish and enhance their operations in the US, especially to aid economic recovery at this time, Banerjee said. (PTI) 

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