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In Covid Adversity Lies India’s Biggest Opportunity To Reboot
−− In the middle of this adversity lies a massive opportunity for India. Here’s how India could accomplish it
Apr. 2, 2020
So the World is ducking for cover to escape the onslaught of the deadly virus and the entire world is in a near lockdown.
At the time of writing this, a little over 7 lacs cases globally have been reported.
In this context, we read reports of how China, the country from where the virus spread, announcing that it’s back on it’s feet. Not only are it’s manufacturing units back in action, but China has started exporting critical care equipment like Ventilators, masks etc.
India, in the meantime has announced and is in the midst of a lock down to control the spread of the virus.
Many predict that this lockdown, would effectively relegate the coming fiscal’s GDP growth to about 2% or lower and possibilities are that their prediction indeed could be true.
But as the proverbial saying goes…In the middle of this adversity lies a massive opportunity for India. Here’s how India could accomplish it.
Boost Rural economy
Back in 1970, India had close to 80% of the population living in the hinterlands. The land we refer to rural India.
That number has declined over the decades and is currently at 65%. India can leverage a whopping 65% of it’s population even in the peak of it’s lockdown because the rural India is largely insulated from the virus, well, with some exceptions like Up, Bihar, parts of Maharashtra and Kerala.
Rural population in India
Issue:
National Sample Survey Office (NSSO) data shows that more than one-fifth of rural households with self-employment in agriculture have income less than the poverty line which is one of the prime reasons why the people migrate to semi/urban India. Agriculture labour productivity viz., gross value added (GVA) in India is less than a third of that in China and 1% of that of that in USA.
In 2016, the GOI had announced its intention of doubling farmer income by 2022. One way to accomplish this is to get an improvement in farm productivity (ratio of agriculture output to agriculture inputs). India now has everything to gain by focusing on this now.
Apart from this, there needs to be increased focus on agriculture-allied sectors if we want to improve rural income.
Livestock sector, which contributed around 4% to India’s gross domestic product (GDP) in 2018-19, is particularly critical.
India has a mixed crop livestock farming system, where livestock become an important secondary source of income. Small and marginal farmers have high dependence on the livestock sector. Hence, boosting livestock sector will have a significant impact in improving rural incomes.
GDP From Agriculture in India increased to Rs 6091.05 Billion in the fourth quarter of 2019 from Rs 3664.29 Billion in the third quarter of 2019.
Improving the Agri related incomes and throughput would ensure more food availability and lessen the starvation.
Increase in productivity and through put from the above sectors would also ensure a considerable decline in the food inflation
Food inflation in India is amongst the highest in the across all developing nations. Controlling this would help both urban and rural India.
Thanks to the lockdown, Govt can provide surplus power and water to the farmers and plan to ensure a bountiful harvest this season.
Incentivize Rural Manufacturing and services sector
Improvement in employment in the manufacturing and services sectors are considered critical in improving rural income because these sectors pay more. The manufacturing sector in rural India contributes 18% to rural output, but employs only 8% of the rural workforce. The rural workforce finds it difficult to get absorbed in the manufacturing sector. This is where skill development programmes in rural areas will play an important role.
The services sector contributes to about 27% to rural output, as against 55% to India’s GDP. A strong push to sectors like food processing, warehousing and logistics will hugely benefit farmer incomes, reduce the wastage of perishable commodities and provide employment to rural workers.
“Growing industrialisation in India’s villages has brought them almost on par with towns in terms of industrial output and employment. In 1992-93, rural factories produced only 43% of the gross output produced in urban factories and employed 38% of total persons engaged in urban factories. By 2008-09, this figure increased to 101% and 89%, respectively. The figures have stagnated since then. That rural factories generate the same output with fewer employees has an important implication”.
It means that India’s rural factories are more capital- intensive in nature. A factory is more capital-intensive if it employs more capital per unit of labour. In 1992-93, average fixed capital (value of plants, machinery etc.) invested per factory was Rs 1.6 crore in both rural and urban factories. By 2017-18, it had become Rs 21.8 crore in rural factories and Rs 8.3 crore in urban factories. Fixed capital invested per person engaged in rural factories in 2017-18 was Rs 30.6 lakh against Rs 13.4 lakh in urban factories.
With significant investments in manufacturing already made in rural India, India should leverage on these facilities. It is important however to ensure that the capacities of these facilities be altered to produce things India needs.
De-clutter the Mega Cities and incentivize migration into Smart Cities
The lockdown has forced businesses to let employees operate from home. This is going to help most businesses pivot the way they do business and engage with employees.
Each business is going to attain a certain efficiency in this phase and improving on the engagement could mean businesses re-looking at the office space and infrastructure needed and the number of staff they need physically in the mega metros. This phase could also let businesses evaluate the need for them to operate in the geographies they operate in.
It is amusing to see how the media is based in the top 4 metros and it just takes incentivisation and infrastructure creation in a different city for the entire ecosystem to move leaving the immovable parts of the business in the large metros. This would free up the chocked cities, reduce the cost of doing business and boost the movement into smart cities. This is the exact logic that can be applied sector by sector and India can re-create hubs.
If Delhi NCRis an auto hub, can the offices be shifted to Chandigarh, logistic hubs be Agra or Jaipur instead of all of it being in Delhi NCR?
Could India create a marine logistics hubs in Kakinada and Vishakhapatnam and create the entire East Coast to be the import and export nodal points and can the western hub shift entirely to Gujarat instead of having Jawaharlal Nehru port. Can the development be spread across a larger geography and resources allocated accordingly?
Re-skilling and Upskilling
One thing CoVid is doing is that it is re-defining how classes are conducted. There are so many universities and coaching classes taking on-line classes already. It wouldn’t be a farfetched idea to use the online classes to re-skill and upskill the huge number of unskilled, semi-skilled people to leverage the demographic dividend better. With so many platforms offering training in coding and big data and with so much data centricity happening in every sector, it is imperative that India develops the talent pool that is employable in the new world. What this adversity has brought upon us, is the urgency of a paradigm shift. It would benefit everyone If the skill development ministry can formalize this make-shift adoption of digital to impart training and recognize and offer certifications.
There are many other things that could be accomplished but while the urban India is staying safe by shutting itself and healing, the above steps could ensure that the rural India could make up for the drop and also help India Inc pivot and start a new decade with new growth engines!
Source: BW BusinessWorld
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