The global rating agency Moody's Investors Service has again
slashed India’s 2020 GDP growth forecast. The latest projections by Moody's peg
2020 GDP growth to 5.4% (earlier 6.6%); and 2021 GDP growth to 5.8% (earlier
6.7%). The rating agency has highlighted the disruptions in global trade
arising due to spread of coronavirus as one of the reasons for slower growth.
In other concerns, lower than potential GST collections is one of the prominent
concerns expressed by the agency.
If the history is any indicator of the trade trends, we can
reasonably conclude that any major shift in the trade from one jurisdiction to
the other, even if it is due to temporary disruptions, is not easily reversed
after the disrupting condition cease to exist. Shift of automobile and
electronics manufacturing from Japan to USA and then from USA to China is one
example.
India lost some of its textile exports to Bangladesh due to
child labor issues. We also lost currency and derivative trading business to
Dubai and Singapore due to taxation and other issues. These shifts could not be
reversed despite some serious efforts.
Within country, West Bengal lost Tata Motors plant to Gujarat.
The state has failed to attract any other major industry after that despite
many promotional efforts. Punjab lost its industry and financial strength due
to militancy. It has failed to recover even after more than 25yrs have elapsed
since end of militancy in the state.
China is presently facing two disruptions - one due to the trade
related disputes with USA and the other due to spread of coronavirus. These
disruptions must have prompted a rethink amongst many global businesses who
source material and/or manufacturing services from China. A de-risking strategy
would warrant diversification to alternative sources of supply for goods and
services. Obviously most eligible sources like Vietnam, Taiwan, Malaysia, and
Indonesia etc are apparently making concerted to welcome the businesses looking
at diversification from China.
We do have seen some efforts being made in India. The efforts
however appear limited to lowering of corporate tax rates in line with the
other competing jurisdictions. No major effort seems to have been made to
ensure smooth transition of business from China to India.
Missing this once in a decade kind of opportunity would be a
costly mistake in my view. Evaluating this opportunity merely in terms of
revenue or trade may not be appropriate. It must be viewed and understood from
a much larger perspective.
With a huge number of unemployed, underemployed, unemployable
and employed in disguised youth, rising socio-economic inequalities, burgeoning
aspirations, increasingly shrinking blue collar jobs, stagnant wages which are
awfully short in meeting youth aspirations, we are staring at (for lack of a
better word) Latinization of our society - drugs, crime and sex becoming a way
of life for the youth who finds it hard to find meaningful occupation and lacks
resources for professional training and education.
The rising number of cases of petty crimes, drugs related crimes
and arrests, sex related crimes, day light robberies, cyber crimes etc provide ample
evidence that we are moving fast in that direction. For now, perhaps the
religion and traditions are providing some checks and balances, but this
resistance may not last much longer. Once we slip into the abyss, it may take
decades to come out. Remember, the naxal movement that started in 1960s under
similar circumstances, is still alive in some parts of the country.
The government needs to focus on employment generating ventures,
not for potential revenue generation but from the social view point. A total
and comprehensive review of the education and training ecosystem in the country
is also needed urgently and desperately.
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