India must refocus at the core domestic economic fundamentals
-Pramod Bhasin,,Chairman, ICRIER
India is just recovering from a massive second wave of Covid19 pandemic where the immense loss of lives has melted even the strongest hearts and economies. Despite the Indian states

India is just recovering from a massive second wave of Covid19 pandemic where the immense loss of lives has melted even the strongest hearts and economies. Despite the Indian states announcing unlock-plans, the NitiAyog has warned that if India repeats the strategy of Jan-Feb, the third wave might be more spine chilling. Amid all this Pramod Bhasin, Chairman, ICRIER kindly consented for an online interaction with Independent Journalist Mahima Sharma, who on behalf of Indiastat, put forth some straight questions pertaining to COVID19’s impact on India’s growth, strategy, global relations and economics. And how can India be truly rising and shining out of this grave crisis that continues to plague not just the economy, but the health, employment as well as mental well-being of its masses. And Bhasin has expressed high hopes, if India implements certain reforms in various sectors by making AI and technology as its backbone, that too without any delay. What are these reforms, let's take a look.

MS: At the outset, I would like to know about your journey from Genpact - a global professional services firm to ICRIER - as Chairman of an autonomous, policy-oriented, not-for-profit, economic policy think tank that attracted/impressed most you at ICRIER.

PB: It's my privilege to be able to work with ICRIER, one of the foremost think tanks in India and Globally. Building and running a global professional services firm is a very exciting and creative journey, and draws on all our entrepreneurial skills. And yet during that journey, it becomes clear how much policy making and excellent economic research impacts us as citizens, communities and businesses and the country as a whole. ICRIER is uniquely positioned for this. The calibre of researchers, their quality and excellence and the impact their research can have on good policy decisioning is far reaching. It's an entirely different but equally enriching experience to be able to think much more deeply about issues that impact our country, versus meeting quarterly or annual profit targets-and in many ways, far more fulfilling.

MS: The primary focus of ICRIER is to enhance the knowledge content of policymaking and targeted at informing India's policymakers and improving the interface with the global economy. In your view, which are the bare necessities for India.

PB: Today we are confronted with the most unprecedented times. India’s policy priorities have to be redefined in view of the current challenges.

There is the classic challenge of slow growth - the economic growth has been weakening over the last few years, and was just 4.2% in 2020-21, that is before it was hit by Covid19. There has been a disruption in economic activity leading to a loss in the output and jobs. The manufacturing sector is the worst affected. Fiscal deficit is rising and the effectiveness of monetary policy is reduced. There has been a slowdown in exports and private investments have fallen and a related concern is the fall in investor confidence.

Consequently we must refocus on the core domestic economic fundamentals of the country while synchronizing India’s foreign trade policy with FDI policies, digital policies, skill development and employment generation policies. Our growth will always have to be inclusive and environmentally sustainable. A more holistic approach for growth is required.

There is a major role for evidence-based research. Through our ongoing research on the ICRIER’s thrust areas, which are very well aligned with the policy priorities of the country, we hope to provide informed policy inputs in laying out a roadmap for competitive, inclusive and sustainable growth.

There are two essential and valuable tools we must use. One is data-to be captured and used in the most unbiased and effective manner. Currently, there are no robust mechanisms to collect data on so many different sectors-in a timely and relevant manner-on the unorganised sector, especially with respect to jobs, healthcare, and education. The ongoing situation requires us to be armed with real time data for countless economic issues. The second essential tool is technology and platforms. As a country we can leapfrog many different constraints by the use of technology and building platforms in many areas, similar to financial services and Aadhar.

MS: The outbreak of COVID-19 has severely impacted almost all the economies of the world. There is an immediate need to build an ecosystem in critical sectors to mitigate the pandemic risk. Kindly enlighten on how that can flow stepwise?

PB: We need to recognize that pandemics could visit us again, although their severity might differ. There is an immediate need to identify certain vulnerable essential goods and services for pandemic preparedness through a judicious combination of developing greater self-sufficiency and diversification of our supply chains in these areas. For instance, while India has a reasonably good pharmaceutical sector, it is dependent on other countries, including China, for the supply of critical basic ingredients. In fact, the share of China in total imports of these ingredients in 2019-20 was 40%. In 2020-21, in the first 10 months (April’20 -Jan’21), it went up to 46%.  We need to provide immediate support to small scale businesses and entire populations of workers who have been severely impacted, this is a time when they need our full support.

There is a need to fix the shortages in the health infrastructure. India’s health expenditure as a percentage of GDP is around 3.5-3.6%, which is much lower than many other countries including Brazil (9.5%), Nepal (~6%), Myanmar (4.8%) and Sri Lanka (3.75%). This cannot be fixed overnight, but should be prioritised in the short-to-medium term.

Our education infrastructure also needs to be fixed. Not just in physical terms but with a far larger population of teachers and doctors and medical staff and tutors and all the softer aspects that impact healthcare and education beyond physical clinics and hospitals and schools. Substantive legal reform is sorely required to increase the speed and efficiency of our legal systems, as well as the timely accessibility to legal recourse for all parts of the economy.

Then there are issues that need to be addressed in the long-run - which are fundamental to the Indian economy. Covid-19 and the lockdown measures implemented to contain it have exposed the marked inequalities that put certain sectors of the economy more at risk of adverse outcomes than others. Essentially, there is a need to revive the informal sector. A disaggregated level vulnerability risk mapping for the informal sector would facilitate policy makers with some indication regarding the areas, which are likely to be most adversely affected by the COVID-19 outbreak and specifically where should the government target its resources and accordingly plan a data driven intervention strategy.

MS: On the other hand, there is no denying that the many shades of the COVID-19 crisis have ensued both fallouts and opportunities. In your opinion, which are the sectors where India has the options or could avail to speed up its economic growth?

PB: To achieve India’s goal of becoming a USD 5 trillion economy, post pandemic re-prioritisation of key sectors needs to be done. One sector, which immediately comes to my mind is the agriculture sector which has shown great resilience. Agriculture registered a positive growth of 3.4%, despite Covid. So, sales outside the mandi system can work even better with greater choices to farmers.

The pharmaceutical and biotechnology sectors are areas where India has putative advantages, especially in vaccine production infrastructure. Healthcare remains the top priority with features such as an expanded primary healthcare network, multi-functional infrastructure, national health protection coverage and adoption of digital tech.

I believe vast opportunities lie in the start-up space in India. India has the third largest start-up ecosystem in the world. According to the 2020 NASSCOM report, start-ups are growing at 12-15 percent y-o-y and today, India has more than 50,000 start-ups. A lot of these start-ups are actually run by women! I think a huge potential lies in this segment of the economy.

Finally, there is potential in the digital space - both in the manufacturing sector and in technology-based services. Specifically, going forward, we can build our potential in manufacturing of electronic devices, cybersecurity, Internet of things, AI and machine learning.

MS: In the current scenario, when education has taken a beating due to literacy going online and not the entire nation's students being digital media savvy/or afford the same, how can the nation Develop a Digital Infrastructure for Early Education and Skill Development for Job Creation?

PB: The sudden transition to online platforms for work and skill development has deepened the already existing digital-divide. Two conflicting scenarios are emerging – one, depicting rural India and the other urban. With digital learning taking the centre-stage, Covid-19 has played a critical role in highlighting the digital divide in India.

Despite the surge in wireless users in recent years, semi-urban and predominantly rural India are miles apart in their online presence. According to the 75th NSS survey estimates, there are merely 27 subscribers to 100 people in rural areas, adding to the existing challenges of unbalanced access to basic education infrastructure. This has widened the gap between the demand and supply of skills, therefore inhibiting productive job creation. One of the ways to bridge this divide can be through improving the availability of low-cost education devices capable of working in a network-less scenario. There is also a felt need to complement jobs with re-skilling and upskilling opportunities. India has introduced various job matching portals to bring job seekers and employers on one platform, these portals fail to address the huge skill mismatches prevailing in the labour market.

Finally, there is a need for strengthening collaboration. Digital platforms will have a great role to play, going forward. But it will only be possible if the obstacles in the education sector are transformed into opportunities and platform players act as a catalyst for social change in the Indian education sector. It is important to establish frameworks for effective collaboration with international Edu-tech companies, skill councils and industries to explore new forms of teaching, learning and assessment to drive 21st century skills.

MS: Considering the global concerns and opportunities on corporates and SMEs across different sectors, the growing presence of China, and the close relationship between India and leading economies, including the US, all participants highlighted the rising opportunity for India to achieve a higher share of the global market share as a leading manufacturer and reliable supplier. How can India harness this to its full potential amid tensions within the continent?

PB: The combination of trade wars, trade policy shocks and the COVID-19 pandemic has brought the issue of diversification of global supply chains to the forefront. India, US, Japan, Australia, amongst many others have expressed the need to reduce their dependence on China. China is the largest import source accounting for 14% of total import for India, 19% for the US, 26% for Japan and 29% for Australia. India finds a huge opportunity in this development as it finds itself as a prime contender in the alternative investment destination competition. Initiatives such as Make in India, Digital India and Atmanirbhar Bharat were initiated with the objective of making India a global manufacturing hub. However, the policy of implementing a tactically reduced trade openness combined with openness in capital flows to attract shifting supply chains can be a huge challenge. This is in addition to the unfinished reform agenda that we already have-stepping up infrastructure, undertaking labour reforms and providing finance at competitive rates. Clearly these have continued to hamper the Indian manufacturing industry from achieving the ‘scale’ effect which is extremely important to have a competitive manufacturing industry.

More importantly, India must shed its bureaucratic shackles, which tie everyone up in extraordinary red tape - whether it is defence procurement or the manufacture of vaccines or railway production or the start-up landscape in India. There is a need to ensure that the cost of doing business is low and there are no administrative and bureaucratic hurdles. While the Government has created various special economic zones, these have not been completely successful in providing a conducive environment for the manufacturing sector. Several concerns remain unaddressed- particularly those related to domestic sales, single-window clearance and support from the state governments. There is a need to build enclaves that deal with issues related to crucial factors of production -labour and land, in addition to a conducive business environment.

In the changed global context, if we wish to attract global players then we would need to be prepared with new technologies such as automation and robotics and be equipped with the requisite skills. So skilling the workforce is going to be a big challenge.

With global value chains becoming more complex, there is also an increased use of skill-intensive inputs, like services. This process of 'servicification' suggests that upstream activities, such as R&D and product design, together with downstream activities, such as branding and advertising, are acquiring a much larger share than parts and components. This is another area where India can take advantage of future opportunities.

MS: Vaccine diplomacy and India: What's your take on this in light of the country's socio-economic uplift?

PB: One must acknowledge that the current wave of the pandemic and the expected 3rd wave, are dreaded to be far more severe and unexpected. Given the severity, we need to have a plan of execution for vaccinating more than a billion people in our own country. While some amounts of vaccines were made available to poorer countries, most of the doses exported were actually to fulfil commitments made to Covax and Astrazeneca. It is impossible to think that one manufacturing facility in India would be able to fulfil both domestic as well as international demands of the poor countries. The production capacity of these vaccines needs to be enhanced by 3-4 times.

It is worth mentioning that the Government of India has put forth a proposal before the WTO to consider a Trade-Related Aspects of Intellectual Property Rights (TRIPS) waiver for Covid-19 vaccines. This proposal would temporarily waive pharmaceutical patent protection, and substantially reduce the costs of manufacturing vaccines globally. Recently, the United States Trade Representative has also supported the waiver. The waiver would allow WTO member countries to produce generic versions of any coronavirus vaccines and Covid-19 treatments.

MS: China's mega-refineries are killing Asian oil companies. Oil prices in India have hit a never-before record high. Under such double-sided pressure, what are the measures that the economy needs to take to establish globally and the nation's faith in the economic reforms?

PB: The international crude oil prices are high ($71.70  per barrel), including the Indian Basket of Crude, which comprises Oman, Dubai and Brent crude. The other biggest reason behind higher fuel prices in the country is the high rate of central and state taxes. The central and the state taxes if foregone, would lead to loss of revenue for the government.

China's mega refineries are throttling other Asian refining capacities. This leads to a problem in terms of the price that Indian and other Asian refineries can charge. Indian refineries have to become internationally competitive in comparison to China.

There is a need for restoring faith in reforms. One, bringing petrol and diesel under the Goods and Services Tax (GST) is an unfinished agenda of the GST framework and getting the prices under the new indirect tax framework can help. Some estimates suggest that petrol prices can go down to Rs 75 a litre across the country if it is brought under the ambit of the GST. Two, inducing greater fuel switching (movement away from oil) and energy efficiency within the system. While these improvements have been occurring autonomously for a long time, they need a more concerted push specifically in certain sectors.

MS: India and International relations in the global cybersecurity and cyberspace. According to you, where does India stand, where It should ideally be to harness its full potential as a Digital Leader and what steps will be needed to assure that. (Please suffice the answer with relevant data).

PB: India’s current cybersecurity policy was established in 2013, and it tried to direct policy towards creation of a secure cyber ecosystem, creating an assurance framework, encouraging open standards etc. India has been developing a revised National Cyber Security Strategy, which is being formulated by the Office of National Cyber Security Coordinator at the National Security Council Secretariat. This revised strategy was expected to be released in 2020 and is still under development keeping in mind the increased cybersecurity risk that has emerged during the on-going pandemic. So this is where India stands.

To harness its full potential as a global digital leader, India would need to consider policy steps that go beyond cyber security, and encompass other larger issues of internet governance. In doing so, there is a need to participate in standards development globally and also clearly articulate standards for manufacturing of electronic devices.

There is also a need to build an enabling regulatory environment. There is clearly a legislative vacuum that is being filled in by ad-hoc regulatory tools, and self-regulation.

Critical information infrastructure needs to be protected. In order to realise a resilient infrastructure, it is also crucial to build transparent and accountable institutions and processes that will address emerging concerns.

India must improve its collaborative efforts on regional and international efforts to address cyber security issues. India needs to explore other multi stakeholder approaches, and could also initiate some of its own with prominent allies on cyber issues. At the same time, there is a need to invest in cybersecurity training and capacity building and build both culture and infrastructure for better security.

MS: The World Bank has raised India's growth projection by a massive 4.7 percentage points to 10.1 per cent for 2021-22. But post multiple bank frauds coming to light, offshore India derivative bets face heat from global investment banks. What's your take on this? And how can India strengthen faith in international investors?

PB: There appears to be some confusion regarding the World Bank’s recent growth projections for India. The said upward revision to 10.1% is obviously relative to the pre-covid projection for 2021-22. Since economic growth turned sharply negative in 2020-21, the upward revision for 2021-22 simply reflects the rebound from the negative base. When growth in both 2020-21 and 2021-22 are taken together there is still a huge output loss compared to the pre-covid growth projections. It may be noted that according to both the RBI and the IMF India is estimated to grow even higher in 2021-22, at 10.5% and 12.5% respectively.

These growth projections for 2021-22 need to be seen in perspective. Three dimensions readily come to mind. First, the strong rebound that shows India as the fastest growing economy in both 2021-22 and 2022-23 in IMF’s World Economic Outlook of April 2021 is a statistical illusion. It is the base effect of the steep fall of -7.7% in 2020-21 as estimated by India’s Central Statistical Office. Even if we use the higher IMF numbers, India’s average growth across the three years 2020-21, 2021-22 and 2022-23 would remain under 4%.

Second, this implies that the high growth in 2021-22 notwithstanding, output loss relative to the pre-covid projections is expected to be substantial, and amongst the highest in major economies.

Third, none of these estimates have taken India’s Covid second wave into account. What this means is that these projections would almost certainly be downgraded in the near future. Therefore, one needs to take a long-term view of the Indian economy.

India can strengthen faith in international investors by cleaning up the banking system, providing a competitive, stable and predictable policy environment, and assuring investors of a good physical and social infrastructure that would reduce the overhead costs of doing business in India.

MS: Digital currency and India: What cautions India would need to take in terms of a global leader if Bitcoin/digital currency is legalized? And what are the repercussions that we must be ready to face in an adverse economic scenario? Last but not least, what kind of mileage can India expect in terms of an economic uplift?

The digital currency space in India is marred by political uncertainty. Global experiences reflect that cryptocurrencies have the benefits of better record keeping and improved efficiencies in cross border payments. But they also have risks. Several countries are trying to mitigate some of these risks through regulations. Some countries such as Japan, Canada, Switzerland regulate cryptocurrencies under their anti-money laundering provisions.It may be worthwhile for Indian regulators to look at regulatory best practices in other jurisdictions, rather than proposing an outright ban. With an estimated 1.7 million Indians trading in digital assets, it may be prudent to recognise its potential benefits for the economy and formulate appropriate legislation for its regulation, including provisioning for consumer protection and addressing concerns of money laundering and terror financing.

I think there exists a robust interest in the Indian market for crypto assets. As a consequence of which, the demand and popularity for cryptocurrencies has grown steadily In India. Soon after the RBI lifted the ban, multiple domestic cryptocurrency exchange platforms and trade markets came up. Furthermore, many international crypto exchanges have also set up shop in India.

Moreover, with an expanding internet infrastructure the market for digital assets is anticipated to witness an increase. In the absence of regulations, there are higher chances of scamsters robbing consumers of their assets. Therefore, rather than banning, the Government would be well-advised to enact legislation that has provisions dealing with consumer protection and security. To be successful and profitable in India we need an environment of policy certainty.

MS: How does ICRIER plan to participate in the Prime Minister's action plan to promote economic growth through his Industry 4.0 Initiative?

PB: The Industry 4.0 initiative involves harnessing AI and other technologies of the fourth industrial revolution for achieving developmental objectives and for promoting social good. Importantly, Industry 4.0 is not just about robots, but also about adopting a human centred approach to development. Releasing these opportunities unleashed by Industry 4.0  will require India building a vibrant and engaging community of experts and building consensus among policymakers, academics, private sector and development practitioners on the need to tackle these challenges from a multisectoral and multidisciplinary perspective. This is important as our policymakers need reliable, accessible and useful information about how current policies are working, as well as possible alternatives and their likely costs and consequences. ICRIER seeks to provide policy solutions to the biggest economic challenges facing India, using nonpartisan research firmly grounded in facts. Over the last few years, a number of studies undertaken at ICRIER have sought to understand the implications of Industry 4.0 on the future of work and how these will impact labour markets.

In the coming years, we hope to continue providing high quality, data backed research to understand how policies can be designed to achieve a variety of goals-

-- Create more jobs, particularly in the unorganised sector

-- Accelerate the manufacturing and services activities particularly for export markets where there may be a vacuum created by the desire to reduce concentration in China.

-- Build on the start-up and digitalization momentum that India is already witnessing.

-- Focus on reforms and policy decisioning and implementation in the agricultural sectors which remain the most significant part of the Indian economy.

-- Focus on trade policies that impact global supply chains across the world, and building an economy that is hugely cognizant about climate change and designing policies accordingly.

MS: In which specific area can ICRIER contribute to the "Ecosystem Fostering & Development"?

PB: Several areas require inputs for sound policy making. Here I would again like to emphasise on technology and the scale and potential of the digital economy for ecosystem fostering and development. There is a need for building regulatory capacity and ICRIER through its policy-oriented research can contribute to it.

There is also a need for greater focus on trade and FDI policy, especially with respect to building self-sufficiency in the manufacture of key inputs, such as communication devices and equipment. Continued policy focus in this area including the role tariff and non-tariff barriers, can help India achieve export competitiveness in these sectors. Focusing on manufacturing and exports, especially of electronics and communications hardware, will help generate positive spillovers for the economy and must remain an area of continuous research.

There is a need for infrastructure development and the role of Public Private Partnerships - India has the inherent advantage of being endowed with a large addressable market. Continued research on business models and execution of infrastructure projects using state-led programs and PPP will be useful insight for policy makers.

The rise of bots and Artificial Intelligence (AI) has brought new job opportunities for established industries. AI’s transformational potential stems from its ability to lend itself to a diverse range of applications across a range of sectors. One can witness AI-based applications in healthcare, manufacturing, transforming quality control, production lines, and supply chain management, and in services creating personalized product offerings and high-quality customer engagement. Emerging policy must focus on designing frameworks for their responsible adoption with ethics forming the core of algorithm design.

Along the continuum of rudimentary to complex business processes, the digitally enabled labour force finds opportunity for employment and maximising productivity. As is any new trend in the economy, the growth of microwork and online freelancing is limited by several challenges. The important policy levers include labour policy design - a focus on acknowledging online freelancing as an acceptable occupation and source of income. However, vulnerabilities of this segment are far from over. Continued research in this area will help faster development of such platform based digital businesses.

MS: The pandemic has adversely impacted income levels and pushed over 75 million into poverty. India's middle class has shrunk by nearly 33 million. In your opinion, what measures should the government take to improve per capita income in our country?

PB: Concomitantly, efforts need to be made to re-allocate displaced workers to those sectors of the economy which are witnessing a surge in demand and facing labour shortages. As we transition through the pandemic, these two steps will be helpful in minimizing further job losses and in providing a cushion to some displaced workers. However, direct income support would still remain the principal means of providing immediate relief to a disproportionately large share of the workforce in informal enterprises and informal workers in formal enterprises. Employment guarantee schemes too, will play a critical role in providing support to those rendered unemployed. This will require not just strengthening and effective implementation of existing rural employment guarantee schemes, but also establishment of an urban employment guarantee scheme. The need for an urban safety net has never been more acute and apparent.

About Pramod Bhasin, ICRIER

The ICRIER Chairman’s career spans a professional & entrepreneurial journey in Financial Services & Business Process Management across the globe. He is considered the pioneer of the BPM Industry in India, with GENPACT being his infant in 1997 and a global giant now. He was earlier the CEO of GE Capital in India & Asia and prior to that worked with GE Capital in Stamford, CT in the Leveraged Buy Out group. He has been the Chairman of Nasscom and noted "IT Man of the Year" by Dataquest. And scaling various heights over the years, PramodBhasin is the present Chairman of ICRIER - an autonomous, policy-oriented, not-for-profit, economic policy think tank. ICRIER’s main focus is to enhance the knowledge content of policy making by undertaking analytical research that is targeted at informing India’s policy makers and also at improving the interface with the global economy.

About the Interviewer

Mahima Sharma is an Independent Journalist based in Delhi NCR. She has been in the field of TV, Print & Online Journalism since 2005 and previously an additional three years in allied media. In her span of work she has been associated with CNN-News18, ANI - Asian News International (A collaboration with Reuters), Voice of India, Hindustan Times and various other top media brands of their times. In recent times, she has diversified her work as a Digital Media Marketing Consultant & Content Strategist as well. Mahima can be reached at

Disclaimer : The opinions expressed within this interview are the personal opinions of the interviewee. The facts and opinions appearing in the answers do not reflect the views of Indiastat or the interviewer. Indiastat does not hold any responsibility or liability for the same.

indiastat.comJune, 2021
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