This is no longer just a virus but the survival of the fittest. There are sparking debates as to what the future will be like and how the consumers will react? It is obvious that the demand will fall due to lack of purchasing power and supply of services will be hit as enterprises remain shut. But most importantly, what decisions should businesses and government take to reduce the impact?
Since 2010, China has been trying to be the manufacturing hub for various countries across the globe. As of today, it has around 2.85 million factories owned by worldwide companies. This has created a sort of over-dependence of the manufacturers on China. Specially in the electronics sector, where manufacturers are heavily dependent on China. But now as we have seen a shift of thought, manufacturers are no longer interested in continuing production in China.
Due to the global supply shock created by the pandemic, several countries are now keen to relocate global supply chains and diversify production from one single country to other countries. This is a big opportunity up for grabs for a developing country like India. You see there is something in common between both India and China. It’s the high population. China and India have over 1 billion in population respectively. This would mean that the cost of labor would be cheaper than most other countries. As of now, Vietnam has been the winner of attracting the companies. Around 4.8% of the total companies, which had left operations in China, have started operations in Vietnam.
What we have and what we need?
India needs to make sure it has every weapon in its arsenal to capitalize on the inevitable shift in supply chains. Like China, India’s biggest asset is its population. With close to 1.5 billion people, India has a lot of entrepreneurial minds which are eager to do business. Our IT sector is strong as well.
So, we do have the technological capabilities. What we need to improve on is the ease of business. In India, any aspiring business-person would require to have at least 12 licenses in order to start a business and getting those 12 licenses is quite a tedious work. The government should focus on the Ease of Business and allow changes to be made so as to attract foreign investment. The RBI should focus on easing the financial stress. Smooth financial flow and stability should be the priority.
Another area in which India is quite behind, is the infrastructure. You see, most of the cities and infrastructure in India are unplanned and even in places where it is planned, it is done to mimic Western cities. We have to understand that India is different from other countries, not just in population but also in culture and norms. It will be very complicated for us to account for all the complexities and design cities in our country. As of now, India has around 10 planned cities, which is quite low.
For every country, a transportation is quite important. Unfortunately, India lacks quite a lot in it. The government has already pledged an INR 15 Lakh Crore for Road and Highway construction across the country, in the next two years. Plans are already in the making; for several new roadways, railways and water transport system. The introduction of Talgo locomotives could do wonders in the railways. Investments are set to not only enhance development in industry and business but also drive growth and development in the surrounding areas. Urban-rural connectivity will improve, making the movement of people and goods faster, while driving real estate development.
But, with all of the areas required to focus on, we are forgetting the most important thing. It’s the environment. Out of the top 10 most polluted cities, 7 belongs to India. Currently, 56 per cent of India’s electricity comes from coal, 36 per cent comes from oil and gas and about 3 per cent comes from renewable sources. In my blog on the Arctic, I had talked about how global warming is affecting the Arctic. With the melting of the polar caps, many parts of India are under serious threat.
The creation of infrastructure, investments and strategies to scale up renewable energy, such as the installation of power grids, electric vehicle charging systems and energy storage, would accelerate low carbon development and present new long-term economic opportunities.
This is quite an important thing for a country like India. You see, India lies in close to the Equator. So, we get ample amount of sunlight. India should take advantage of this and invest on the solar industry. Although this has huge cost in the short run but as time progresses the benefits will go higher. It is estimated that there will be almost 65 million new low-carbon jobs created by 2030.
Historically, every global crisis has spawned era-defining innovation and irrevocable change in the existing global order, with nations at the helm that were able to capitalize early on emerging shifts. As Winston Churchill famously said after World War II, “Never let a good crisis go to waste”. The current pandemic will test the resilience and agility of the Indian economy for sure. However, with an opportunity like this, India needs to act fast in order to gain from it.
If you liked reading this post, a like would be awesome. Let me know in the comments below about your thought on this opportunity. Check out my previous post here. You can now follow me on Twitter and Pinterest as well. If you are new to this page, do drop a follow. Stay tuned for more by The Antique Economist.
I wish every Indian a Happy 74th Independence Day. Jai Hind!
Sources- Live mint, The Economist.