India is Betting Big on Self Reliance in the De-globalized Post Covid World

Introduction/Background

Indeed, as the government was at pains to explain, Atmanirbhar aims to make doing business easy at the ground level as well as make the Indian MSMEs more competitive in wake of the Covid 19 Outbreak. Further, the government also pointed that “top down planning” was a thing of the past and instead, empowered entrepreneurs at the regional and sub-regional levels would find doing business easier than in the past. Moreover, by decentralising decision making and a turn towards localism, the Atmanirbhar Bharat Policy ensures a multi level push towards self reliance and self sustaining enterprises.

The Specifics: Atmanirbhar Bharat Policy Demystified

- Opening up sectors such as Defence to foreign investment from 49% t0 74%

- Provision of tax cuts to MSMEs

- A Rs3 Lakh Collateral Free Credit Line to MSMEs and a flexible loan repayment schedule

- Creation of a One Nation, One Market model by unifying the rules and procedures for food and other sectors that were hitherto diverse and complex with specific policies for each state

- Injecting more liquidity into the MSMEs through fiscal and monetary measures

Taking a cue from the Central Government’s push, several states have announced more sops for MSMEs by making hiring and firing of labour easier as well as freeing up land acquisitions from the “tyranny of restrictions” such as majority landowner approvals for sale and other such measures. For instance, the state of Karnataka has passed a law that would help MSMEs in adopting hire and fire workers based on market conditions and have also land acquisition for industrialists to be directly made from the landowners instead of going through the government agencies.

Adoption of Glocal Approach

While many have pronounced globalisation as “over” due to the Covid 19 outbreak that has forced nations inwards and towards a closed border and erecting walls situation, the Atmanirbhar Bharat Policy is somewhat of a “welcome relief” as it merges the incentives for global investors with the facility of tie-ups with local MSMEs. Of course, there are some challenges in terms of shrinking of export markets that can prove to be a dampener for investors. Having said that, global investors can benefit by local investments and a readymade domestic market, although demand depressed, can bounce back due to the various stimulus packages announced as part of this policy.

How Atmanirbhar Bharat Would Impact MSMEs

Thus, the Atmanirbhar Bharat Policy, by way of a mixture of Supply Side Incentives and Demand priming measures seeks to address some of the Macro and Micro economic factors for the recession. The Supply Side is targeted through Incentives for the MSMEs and the Demand priming is being anticipated with both fiscal and monetary measures. By incentivising Entrepreneurs to ramp up capacity through tax cuts, credit easing, and flexible labour policies, the government is expecting the revival of the MSMEs. Further, the moratorium on loan repayment, lowers interest rates, and easy credit off-take rules are meant to induce the Indian consumer to loosen his or her purse strings.

What is in it for European Investors

The Atmanirbhar Bharat policy aims to redress this “execution lag” which would be music to the ears of the MSMEs, whether foreign owned, or domestic. As mentioned earlier, opening up key sectors, hitherto protected, from foreign investment, is another “game changer” when coupled with the strenuous efforts to improve the “Ease of Business”. As the cliché goes, India lives in Bharat or its Towns and Villages, and hence, this policy is transformative in the sense that it addresses the aspirations of the above segment. Moreover, the horrifying visuals of Millions of migrant workers left in the lurch due to the hasty lockdown would have spurred the Indian government to acknowledge the importance of the MSMEs and the plight of the informal sector workers has been recognized to some extent.

The Way Forward

In addition, the policy would also meet the expectations of those investors seeking markets for their products, though the condition that they must be made in India has to be met. In other words, global investors not particular about exports but the existence of domestic captive markets in India can benefit from this policy. Having said that, the recent skirmishes with China mean that there might be some hostility towards global investors who are invested there and want to do so in India as well. Moreover, though India offers a relatively stable political climate with continuity of policies even when governments change, the same cannot be said of the social environment, wracked as it is by periodic bouts of unrest.

Conclusion

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Rammohan Susarla

Writer seeking metaphysical fulfillment by publishing meditations and ruminations about the world.