India is doing well, but domestic capitalists unwilling to trust & invest here

Lakshmana Venkat Kuchi *

After two morbid years of bad news on every front and most notably on the economic front, we in India today can take pride that we have moved into the big five globally when it comes to the size of the economy - yes we have pipped our colonial masters and pushed them out of the top cub.

For sure, a matter of pride for every Indian that India has grown its economy, but on the flip side there is also need to be cautious about going overboard as this growth does not seem to benefit a majority of the citizens who are living a life of poverty and deprivation.

Let’s first celebrate our entry into the top five club when it comes to the size of our economy - yes with an economy worth US $ 854.7 billion in nominal cash terms, India pushed the UK that has a cash value to US $ 816 billion down to sixth place. Of course, given our population, the per capita GDP, is staggeringly low compared to any of the developed Nations including the UK that we have just replaced.

This is only to say that we must celebrate our success, but temper the sentiments with realistic caution that we are far away from our destination and that repairing and developing our economy is still work in progress.

It is in this context we should also view with some amount of worry as to how India slipped in the Human Development Index globally by two places - indicating as to how the man on the street is still worse off in the overall analysis.

What is concerning is that India’s position on the HDI has slipped for two consecutive years-which means that we haye our task cut out to make efforts and ensure that the benefits accruing from a growing economy, the fastest growing large economy that India is, reach to a larger section of the population that today is reeling under the burden of steep price rise in essential commodities and the relative absence of employment opportunities.

What a lower ranking in HDI 132/191 countries indicates is that in the arena of welfare measures and quality of life of citizens we are still found wanting-with the quality of life judged by parameters like life expectancy, health, literacy etc. Obviously one of the shortcomings of the GDP is that it does not measure the welfare of the people and its growth does not automatically ensure wellbeing or betterment o'f welfare of the people.

So in as much as we take pride in celebrating our success collectively as a Nation in achieving greater outputin production of goods and services, we also need to stop for a moment and rethink and introspect if the situation calls for a change in our policies aimed at the poor and the downtrodden.

On this the Modi Govt ought to be lauded for its commitment to the poor, in continuing to support them with free rations started during the Covid pandemic, but are we collectively as a Nation doing enough that as individuals and as factors of production -land, labour and capital- for improving the quality of life of the last man standing?

One thing that comes readily to the mind is the role of the Indian capital and capitalists - who seem to be enjoying benefits accruing for their ability for collective and effective lobbying with the Government for winning a host of concessions, but are unwilling to invest in economic activities that can spur growth with employment.

During the UPA regime, it was noticed that India was growing - but it was growth without employment, as unemployment began rearing its head along with inflation, and steep price rise and these combined with other emotive issues put paid to the UPA regime in 2013-14.

The Modi Government seems to have cottoned onto this phenomenon and the recent chiding of the industrialists community from the Union Finance Minister Nirmala Seetharaman can be seen in this context. At a recent event she asked the Indian businesses as to what was stopping them from investing in India when foreign direct investors, foreign portfolio investors and domestic retail investors were confident about India.

Stock market continues to be on fire, but the same sentiments are seemingly missing in the domestic investment scenario as the India Inc apparently is holding its hands back.

She is also right in questioning as to why the large business and companies delayed in making payments due to the MSMEs, which are the lifeline of the Indian economy and the largest generator of employment across the country, besides contributing significantly to the GDP as well as exports of the country.

But over the past few years, the MSME sector has been badly hit by the pre-pandemic economic slowdown, the pandemic itself and its aftermath and large number of MSME units have either closed down or facing imminent closure - resulting in loss of jobs and livelihood across the country.

If her disappointment, or even anger, is any indication the Central Government may come out with some concrete steps to goad the industry into stepping up domestic investment that it was hoped would increase after Central Govt gave concessions in corporate tax and also increased capital expenditure.

An exasperated Finance Minister sought to know from the Indian industry what is it that it was hesitant about. Let me quote her exact words from media reports that reveal the thinking prevalent in the Govt about the private sector.

“If it is not sort of impertinent to say this now, I equally would want know from the Indian industry what is it that they are hesitant about.... Since 2019, when I have taken charge of the Finance Ministry, I have been hearing the industry doesn’t think it is conducive (for investments). (They said) ‘Alright, bring the rate down’; the tax rate was brought down. ‘Give production linked incentive’ (PLI)--we have given PLI. I want to hear from India Inc., what is stopping you?" Sitharaman asked business leaders at the event.

What is inexplicable is that the domestic industry remains apparently unconvinced, “When countries and industries abroad think this is the place to be in, at this time, FDI is coming, FPIs are coming, stock market is also so confident, Indian retail investor believes, in them...Is it, like Hanuman, you do not believe in your capacity, in your own strength, and there has got to be somebody standing next and say, ‘Hey, you are Hanuman, do it’. And who is that person to tell Hanuman? That certainly can’t be the Government".

Now the Finance Minister’s exasperation, if seen in conjunction with the fact that more number of High Network Indians are leaving the county for foreign shores indicates the assessment of the wealthy about the economic situation prevalent in the country.

They, for sure, are not placing their bets on India, it seems.