BY D.C. PATHAK
A substantial GDP contraction, that was anticipated, confirms how a serious aggravation was caused to the economic downturn in India by the lockdown compelled by the Corona pandemic. The Modi government is already working on the economic revival over the last few weeks of Unlock — rightly emphasising on the pattern of ‘vocal for local’ since a robust indigenous base has been an acknowledged strong point of Indian market, historically speaking. Sustained possibly by India’s tradition and culture, this base remained intact even through the advent of the ‘Age of Information’ that was brought in by the success of the IT revolution.
In the era of ‘knowledge economy’ that had globalisation as its hallmark, a great distinction of the Indian economic scene was that it combined a top of the line IT-based segment with a traditional ‘produce, sell and profit’ part resting on the domestic supply chain. The indigenous economy with its upshot of ‘savings’ is believed to have helped India to tide over the global economic downturn of 2008. The country has hopes of an assured success in working for its economic revival — slow but steady — from local markets upwards, outside of the dependence on imports and exports.
Post-lockdown business initiatives have one equaliser in the world of competition — submission to the triple protocol of ‘thermal testing’, ‘social distancing with mask’ and ‘hand hygiene against surface touch’. This is the new compulsion about conducting business, for players big or small, that slows down the customer flow and curtails the strength of employees handling work at any given time. The interrelated businesses of travel, tourism and hospitality have taken a hit and these sectors may recover at an uncertain pace. Trade in essential products and services including medical supplies, however, is already catching up and localised or even zonal deliveries are being organised by firms with the help of minimal computerisation — the global reach of establishments like Amazon is in a way being matched by Indian businesses offering online services in an immediate setting. Luxury items and high-end products of global brands will take some time in reestablishing their customer connect but in India there are already plenty of ‘green shoots’ helping the local markets to come into full swing. India’s economy will recover faster if ‘manufacturing’ is located more and more on its own soil.
Job loss remains the primary reason for economic distress and some form of unemployment dole may have to be provided by the government selectively for a period to check domestic unrest.
Economists and business management experts are analysing the prospects of economic revival in India mainly in terms of global parameters and perhaps underestimating the internal strength of Indian markets. Indian businesses and trade, however, would do well to do some course correction in regard to the practices they followed earlier — so that they could respond well to these changed times. A few of these strategic changes can be identified. First, ‘business intelligence at the micro level’ has become more important. The state of demand locally and in the country, law and order situation, arrival of new players, updates on rules and regulations that were impacted by the nature of corona Unlock and factors affecting the supply chain operations are all crucial for continuity of business. Correct information on them must be collected — macro-level information on ‘ease of doing business’ had to be translated into ground level realities on each of these parameters.
The second material shift in the business approach should be to take to ‘cooperation and partnership rather than competition’. In the recovery period, many can benefit through shared operations. Apart from the M&As happening on intrinsic merit, there would be plenty of scope for businesses sharing human resource, delivery processes and supply chain. Partnership embraces the entire gamut of shareholders, vendors, employees and channel partners and, in fact, brings in the customers in its orbit as well. The classic capitalist pattern of maximising profits in the free market economy by somehow outwitting others, can return only when the Covid impact fades away completely — this is not going to happen in a hurry.
The third approach point pertains to ‘cost effectiveness’ in running a business activity. In the days before the pandemic destroyed global markets, success in business was often determined by the capacity of a player to make an enormous expenditure on ‘promotions’ to push others into the sidelines — this only showed that a trend towards seeking disproportionate profit or, in other words, indulging in profiteering was in full swing. It has to be realised that the recovery in the post-Covid phase with emphasis on this happening from local markets outwards, has brought the application of the principle of ‘cost effective operations’ to the fore. Being cost effective is being ‘smart’. Smartness is the capacity to produce more per unit of resource available with the enterprise — the three resources are money, manpower and time, the last being particularly relevant to the objective of ‘recovery’. It should be examined if any business operation could do with one hand or one step less. Computerisation has made businesses cost effective by cutting down the delivery time and thus economising on the new resource called ‘time’. However, a conscious review should be made by the top management for introducing cost-effectiveness in the enterprise wherever feasible.
The fourth flag point for economic recovery arises from the dictum that ‘all business is human activity’. When two companies compete it is, in fact, their leaders who are in the fray. Down the line it is the quality of human resource that would often bring advantage to one enterprise over the other. It is now accepted that skilling, re-skilling and up-skilling enhance the productivity of an employee and prepare him or her for ‘multi-tasking’ that organisations in the phase of recovery would benefit from. This would be a distinct advantage for business entities in a situation where they were adopting the strategy of cooperation and partnership. And finally, it is extremely important that the ‘quality of products and services’ is assured during the phase of economic pick up because customer loyalty is an important tool for generating ‘demand’ –that in turn is the sine qua non for business revival. Any disappointment with quality can ‘kill’ a product for good as the purchaser would have come to the market with greater expectations. Mark of assured quality would give the enterprise an extra competitive lead when other producers came on the scene — by giving it the stamp of being the ‘original’ in the revived market. Temptations to pass off untested stuff or provide service of tentative character have to be avoided by businesses keen to get back on their feet.
A discussion on economic revival will not be complete without taking the pointer to the role of the government during this kind of ‘depression’. Fiscal discipline demands that the oversize machinery of the government should be suitably pruned — the available manpower should be deployed for productive activities ‘closer to the field’ and fresh inductions generally reduced except in security services and defence. Every pair of hands in the government must produce more work than before — government employees should be setting an example of this during the Unlock phase. At the same time, it has to be ensured that the tax administration in its misguided zeal to increase revenue did not start squeezing the honest tax payers. The government has to step up work on mega infrastructure projects, with or without foreign collaboration, to provide employment to skilled and re-skilled people and thus put money in circulation. This would increase ‘demand’ that was the prerequisite for economic revival.
It is a matter of great satisfaction that the call of ‘Atmanirbhar Bharat’ given by Prime Minister Modi is focusing on mega projects in different spheres being launched in public-private-partnership mode. In the Indian context, the Food Corporation of India(FCI) — which had an image problem — must build a cold storage facility in every district so that farmers could sell to the government agency, at MSP, whatever part of their grains they were not able to market directly. India’s indigenous economy depends a great deal on MSMEs for revival. Financial aid to these must be very direct and real and not rendered in a ‘construed’ way through ‘loans’ given without significant concessions. A certain amount of ‘risk’ of some of the financial aid turning into an NPA had to be taken by the State in this extraordinary situation.
(The writer is a former Director Intelligence Bureau)