Post-COVID-19, India can emerge as a major investment hotspot if certain policies and existing economic frameworks are used more effectively
Post-COVID-19, the world will certainly change but it is difficult to predict what will finally emerge. As of now, even the end to this scourge does not appear to be in sight but one day it will. However, are we preparing ourselves for a time when the world does come out of the crisis? Yes, there is bound to be a greater focus on health care. It has been long overdue in India. It is a wake-up call. The biggest sufferers of the lockdown have been the poor unorganised workers, most of whom are daily wage earners. There were horrid stories about those that attempted to migrate back to their villages to be with their families. The country will have to seriously think in terms of social security for such workers, another long over-due intervention.
There are, however, a few opportunities that appear to be emerging. News is filtering from a number of countries that they want to withdraw their investments from China. Can India become the new destination for such an investment? Some states have gone ahead with the suspension of certain labour laws to become attractive for investments. But the key question is whether labour laws are the primary inhibiting factor in promoting investment. I had tweeted a few days ago: "The world is mighty upset with China on account of COVID-19. This presents a huge opportunity for India as many companies plan to shift out of China. Let us prepare the ground forthwith to welcome such investment into India. Let us try and make life easy for investors. It can be done". The world will keep debating about the 'role' of China in the emergence and spread of this virus but it is clear that a large number of countries have already started thinking in terms of shifting their investments out of China. Can India seize this opportunity? In my understanding, it can but the key question is, how?
The steps announced by the Reserve Bank of India recently have the potential to impact investors within the country even though these steps are limited to creating additional liquidity that need not necessarily lead to investments. There is an argument that liquidity was not a major factor even before the arrival of COVID-19. It was more on account of the 'fear' factor and the lack of demand. COVID-19 will only aggravate the problem of lack of demand. However, the 'fear' factor can and should be tackled.
The Government will have to consider the following steps forthwith to attract international investment (these steps will also help revive the sentiments for domestic investors as well):
Revive the Project Monitoring Group (PMG) in letter and spirit. This group came into existence during UPA II and managed to do what was unthinkable during that time when scams were breaking out every other day. Enforcement agencies were hounding civil servants and decision making had come to a grinding halt. Clearances for various projects were stuck. By putting in place a transparent web-based mechanism for clearances and by engaging intensively with the state governments to expedite clearances, projects worth more than Rs 5 lakh crore were cleared in 15 months. Both the premier chambers of commerce and industry (CII and FICCI) wrote to the Prime Minister 'the PMG has been playing an exemplary role in getting the necessary approvals and clearances for projects that have been stalled'. There was also a request from these chambers to expand the mandate of PMG.
Make all clearances time-bound and process transparent. This is already being attempted by Samagra Foundation in Haryana in close co-ordination with the State Government
Streamline all the processes of clearances. With the data getting generated at the PMG, the bottlenecks can be identified.
Don't suspend the operation of labour laws as this will create the wrong impression all over the world about our concern for this vulnerable section of society. The workers are already suffering on account of the lockdown. The problem is not as much with the laws as with their implementation. The problem is with the 'inspector raj' that can easily be dispensed with without conveying our lack of concern for legitimate rights of the labour force.
The aforementioned steps will provide comfort to investors. These steps do not require any legislation or any amendment to existing legislation. This can be done forthwith. Investors will have at their disposal an institutional mechanism which can be approached in case they run into a problem. Over a while, as the processes become streamlined and digitalised, the role of PMG will also change.
Apart from the above, other fiscal and monetary measures can be put in place to put more money in the hands of the consumer. FRBM Act may have to be amended to enable larger deficit financing. Steps will have to be taken to revive construction activities. The precipitous fall in petroleum prices and the consequent reduction in bitumen price can be leveraged. The Government will be well advised to make all the due payments expeditiously.
The Government would already be working on a package to revive the economy but the key factor really is creating an investment environment that will help private investors (both domestic and international) feel 'comfortable'. Road-shows did not help in that past. They will not help now. What will help is action on the ground. It can be done. It should be done in the interest of the country and its people.
Views expressed are strictly personal