A greater thrust on clusters, ease of doing business, research and development, trade revitalisation and data sovereignty - these appear to be some of the priorities of Modi 2.0. Employment, too. At industry body CII's National Council meeting in Delhi on Friday, four ministers of the NDA government shared their thinking with many CEOs and investors.
Here's a snapshot:
Nitin Gadkari, Minister for Road, Transport & Highways, Shipping and Micro, Small & Medium Enterprises, mentioned the need to increase the country's "employment potential" multiple times. One way is to make small and medium businesses more competitive. The minister stressed on the importance of clusters to get such businesses going. He invited private sector participation - "make you own cluster, we (government) will help you".
Clusters are important given India's 'missing middle' problem - India has a large number of unproductive small companies and not enough mid-tier firms (the sixth economic census found that India has 58.5 million establishments. An overwhelming 95.5 per cent of them had one to five workers). There is an economic and employment imperative to making smaller firms more productive and larger. Clusters are a way of doing that. According to a report of the Working Group on Clustering and Aggregation for the 12th Five Year Plan, submitted to India's Ministry of Commerce and Industry in 2011, 'enterprises can better improve their competitiveness due to the presence of specialised suppliers of raw materials, parts and components, machinery, skills and technology as well as other supporting services. Developing clusters is not only a means to improve the competitiveness of industry but also an instrument for alleviation of poverty, generation of sustainable employment, fostering innovation, enabling better, effective and sustainable credit flow'.
Prakash Javadekar 'Minister of Environment, Forest and Climate Change' and 'Minister of Information and Broadcasting' emphasised on the need for innovation. The industry wouldn't grow or exports wouldn't rise unless India innovates, he stressed. India's innovation ecosystem is broken - innovation hubs, in advanced countries, are in the universities. In India, many universities are just shops and research happens elsewhere. This anomaly got to be corrected. "We are contributors to innovation, not owners of innovation," he said.
In other words, much of Indian businesses have not developed technologies that have global relevance which they own. Many small companies make me-too products with pretty archaic technology. They indulge in cost-play and are often at the periphery of the market doing opportunistic sales. Many industry watchers feel this is a hangover from the past, when the Indian industry were given protected markets.
Hardeep Singh Puri, Minister of State of Civil Aviation, Housing & Urban Affairs, and Commerce and Industry suggested India can take advantage of evolving trade situations. The trade war between the United States and China - if it escalates - could work in India's favour if the country's businesses can step in and export at lower rates than what the US imposes on the Middle Kingdom. China would import goods and services worth several trillion dollars over the next five years. Can India position itself as a reliable exporter?
That's a question many businesses themselves don't have answers to. Trading with China of course isn't easy but there are bigger forces at play. There is a reversal of globalisation. Between 2004 and 2011, global trade was growing almost double the rate of global GDP growth of about 3.5 per cent - economies were far more open to trade. This trade growth slipped in 2009 after the Lehman Brothers collapse and the ensuing recession but recovered for a couple years. However, since the 2012, global trade has dropped and is growing slower than global GDP growth, data from the credit rating agency India Ratings and Research show.
Ravi Shankar Prasad, Minister of Law & Justice, Communications, Electronics and Information Technology clearly stated that India will uphold her data sovereignty and that there could be no negotiation on this belief.
Not just India, many countries in Europe are worried about data sovereignty or data localisation. Europe is increasingly being worried about the powers of GAFA - Google, Apple, Facebook and Amazon - the four companies, all American, deal with personal data and an European document on data protection says that "GAFA has collectively made us accustomed to voluntarily waiving our rights regarding personal data".
The head of an Indian policy body recently told Business Today that "the world is now seeing weaponisation of the payments system. After 9/11, everyone started monitoring the payments system for terror. In the last two-three years, payments have become an actual tool for asserting power. Traditionally, the source of power was military. Then it was economic. Today, there is a third source, the digital platforms. GPS, payment systems, identity systems. The digital platforms can get weaponised. So every country has to fight for Digital Sovereignty".
The think tank head further added that if India's payments system were to be controlled by others, India is controlled by others. "Any sanctions against India, in the future, could be around payments. Nobody likes the change. Therefore, you see an organised effort by all the US affiliated trade bodies to thwart it. The US has a vested interest in making us a digital colony," he had said.