Time for a govt-industry partnership

Jayant Bhuyan

The incident of September 11th in the United States and the current war will only accentuate the impact of the economic slowdown that was already being felt. However, it may still be early days yet to say how things will pan out.

The trigger for the need for urgent action by industry and government, in fact, had already been taken and some concrete steps have been declared by the government in the form of the Prime Minister’s meeting with his Council for Trade and Industry on 7th September, before the events took place.

Today there is no indication that any of the follow up action that had been planned by the government is being slowed down. What had been set in motion is not being put on hold. The Prime minister had emphasized at the meeting about the implementation aspect of the policies on various fronts. Further, the infrastructure projects were also set to receive a fillip. It is important now that there is no let up.

The current war that is being waged in Afghanistan is, so far, localised. Early signals are that, for example, the exports to West Asia may not be affected. But, it is time to wait and watch depending on how the war will develop. Should oil prices harden, then this would push up prices and costs and, thus, likely to affect bottomline of industry.

There are, however, some sectors where its impact is being felt. Clearly civil aviation and the tourism sector cannot escape this. While flights have been curtailed, cargo shipments could also be affected as the insurance premium has also gone up.

In the hotel industry, there has been many cancellations of tours and bookings across the country. Both business and tourist traffic will be affected. Take Goa for example. This is the beginning of the tourist season. And a large chunk of tourists in Goa are through chartered segments. This will clearly be affected.

Tourism in fact will have a multiplier effect. Cancellations in hotels will have its impact on their vendors, suppliers and taxi services. Tourism is the fulcrum around which a large number of other services operate. It is both a wealth creator and an employment generator.
The software industry will also be affected. Nearly 24 per cent of India’s software exports is accounted for by the United states. This will clearly be an area of casualty.

Another area that could get affected if the war gets prolonged is the actual inflows in the foreign direct investment. New proposals
will receive a set back. Last year, we received only about $ 2 billion in foreign investment.

That is a very meagre amount compared to the potential. One area that could get adversely affected is the inflows of foreign institutional investment.

In such a background, what is to be done? One, we need to tone up domestic tourism. That is a clear area of opportunity that we will have to develop out of these troubled times.

Second, the implementation of policies, projects and disinvestment should be hastened with urgency. Both the government and Indian industry should work towards this.

Third, the domestic market —specifically e-governance opportunities — could emerge as an alternative to software exports.

Some districts like Indore in Madhya Pradesh is a good example of where constructive work has been done, particularly in segments like the computerisation of property records, which also has a positive impact in better tax collections. The point is that software development can focus on the large potential domestic application needs.

There is also need to take steps to tone up foreign investment inflows. The government policy should shift from a broad approach to specific commodity groups. It is also important that we diversify our portfolio of foreign investment and increase Asian investments. Also, it is important to make a renewed effort at garnering investments in the infrastructure area.

Finally, Indian industry which is already under pressure and taking corrective steps should further take concrete measures to tone up domestic investments and become more competitive. Another area that it should do is to look at investing outside the country, which a number of companies are now doing.

Clearly, times are tough and challenging. But then this is the time for Indian industry and government to work in partnership, to work out a new future.

(Jayant Bhuyan is secretary general, The Associated Chambers of Commerce and Industry of India)