The opportunities are galore, especially in the industry sector which has been growing at a slow pace because of easy imports from China and other countries in South East Asia. In recent years, the country faced an average annual trade deficit of US$ 100 billion. India’s merchandise imports vastly surpassed their exports. Exports of services provided some saving grace. Last year, total exports from India (merchandise and services) stood at US$ 528.45 billion, while total import was estimated at US$ 598.61 billion, noted the Commerce and Industry Ministry. The pattern is bound to undergo a change in the coming years. Domestic output of industrial and farm products are expected to witness an encouraging growth in the immediate future.

The government has to act fast to create new opportunities to drive domestic industrial production and fully tap its mining resources to slash imports. The defence manufacturing output needs to be strongly pushed up. India’s military strength is the world’s fourth largest after the US, Russia and China. While all the three other military giants are also among the world’s top defence manufacturers and exporters, India competes with lowly-placed Saudi Arabia as the top weapons importer. The persistent Chinese and Pakistani buildups and threats along the borders — LAC and LOC — have wisened India to step up domestic military production, directly or with foreign equity and technical collaborations.

Armament manufacturing tie-ups with foreign suppliers need to be made truly attractive. Such tie-ups will open a big opportunity for local input producers and suppliers. The department of defence production, under the defence ministry, and the 60-year-old Defence Research and Development Organisation (DRDO) need to work hand-in-hand to support the new defence manufacturing policy. The Department of Defence Research and Development, formed in 1980, administers DRDO and its 50 laboratories. The new defence manufacturing policy must ensure that defence scientists don’t feel threatened by foreign participation in weapons manufacturing. The government would do well to formulate and implement such an integrated defence manufacturing policy without any delay.

The infrastructure growth needs to be stepped up. Domestic investors in large infrastructure projects are few. In this area too, foreign industrial and financial investments need to be pepped up. The government has to be choosey about partners. Going by the past experience, India needs to be careful about tapping the China-led Asian Infrastructure Investment Bank (AIIB), which invariably leads to Chinese participation in Indian projects as the lowest bidder. China controls about 31 percent equity stake in AIIB as against India’s eight percent. Thanks to AIIB, China is already involved in several strategic infrastructure projects in India. To keep China out, India would probably prefer bilateral project funding and participation. Japan, South Korea, the US, Canada and EU countries provide much better option. Japan is particularly keen to work with India in the later’s infrastructure development. The Japanese International Cooperation Agency (JICA) is willing to fund India’s infrastructure projects. JICA is already funding one of India’s biggest railway infrastructure projects — a Rs.1.1 lakh crore Mumbai-Ahmedabad bullet train network. The Japanese agency is funding 81 percent of the total project cost. The project will include the purchase of 24 train sets from Japan. Unfortunately, delay in land acquisition is threatening a time and cost overrun.

Post-Covid, India needs to focus on a rapid domestic production of consumer durables, both white and brown goods, which offer a big market in semi-urban and untapped rural areas. Demand for consumer electronics has been booming. The shipment of television sets has been increasing 15 percent annually to reach the highest level of 15 million units in 2019 on the back of the rising demand for affordable smart TV sets. India’s appliance and consumer electronics market was worth Rs 76,400 crore (US$10.93 billion) in 2019. The appliances and consumer electronics industry is expected to double its reach to reach Rs.1.48 lakh crore ($21.18 billion) by 2025. The consumer durable market segment comprises a huge middle class and a relatively large affluent class. Global corporations view India as one of the key markets from where future growth is likely to emerge. The growth in India’s consumer market would be primarily driven by a favourable population composition and increasing disposable income.

Until 2018, India’s GDP composition, as estimated under CIA Factbook, put the services sector at 61.50 percent, industry at 23 percent and agriculture at 15.40 percent. However, in terms of GVA, the share of the services sector accounted for 54.40 percent, followed by industry 29.73 percent and agriculture and allied areas 15.87 percent. With such services such as air travel, tourism, hotels and restaurants, sports and pubic entertainment set for slow-to-negative growth in the immediate future, the sector is bound to lose its share and shine in the country’s overall economic growth trend. Instead, the low performing industry sector is poised for much bigger growth, especially with the government focussing on domestic manufacturing. The government has to be more choosey about the import basket and import generation sources. India’s foreign trade may no longer be delinked with the country’s foreign relations. It is time for the GST Council to have a relook at tax rates to attract large new investments in industry by global companies to drive growth while the services sector takes time to recover itself. (IPA Service)