Union Budget 2021 India: When FE asked me to write on the 91st Budget of India, the most important question that kept staring at me was not what the Budget is going to be rather it was, “why have we progressed backward in the last 73 years despite carving our future through 90 Budgets?”
By Hari Om Rai,
When FE asked me to write on the 91st Budget of India, the most important question that kept staring at me was not what the Budget is going to be rather it was, “why have we progressed backward in the last 73 years despite carving our future through 90 Budgets?”
Successful nations created large global firms for acquiring competitive skills and economies of scale for economic dominance. The state played a key role, with policy interventions providing protection, subsidies and a supply of credit to domestic firms during their learning phase.
Nations are rich only if they have large and successful domestic companies. The ecosystem of top 500 firms alone creates 30 trillion dollars, which account for 38% of the global GDP. Of these 500 companies; 9 are from Taiwan and create 66% of Taiwan’s GDP. 28 are from France and account for 60% of French GDP. 16 are from South Korea and account for 51% of Korean GDP. 32 are from Germany and account for 50% of German GDP. 111 are from China and account for 50% of Chinese GDP. 126 are from USA and account for 43% of the US GDP. While only 7 are from India, and merely make up to 13% of India’s GDP.
It is only due to the presence of large firms that a large MSME ecosystem flourishes thereby increasing the demand from the agriculture sector, which in-turn enhances demand from the industries, thereby creating a virtuous cycle of demand.
We were misguided by the likes of World Bank and the foreign trained Indian economists, to follow principles of the developed nations, leading to opening of our markets prematurely in the year 1991. In the boom years of 1990s failure to generate indigenous manufacturers’ technological capacity was hidden by the arrival of high levels of foreign direct investment but the country remained fundamentally weak. The credit in the economy started to divert towards unproductive consumer lending and speculation in housing / financial markets etc. and the credit started to slip out of the government’s control.
The government has clearly shown the strength of character to come up with a growth-oriented budget despite a high deficit of 9.5% of GDP during the previous year. But it is not sheer courage, the government has clear plans to make up for the deficit through various measures including growth, divestments, IPOs of institutions like LIC etc. In the nutshell, it is an all-encompassing forward looking holistic budget envisioned with a completely new paradigm.
Above all, government has given a clarion call to the industry with the announcement of creating global champions from India and backing this strategy with new, “Development Finance Institution”. Now the responsibility shifts to the industry to not only dream but dream big and stand together with the govt to make the country progress from poverty to wealth over the next three decades.
The author is chairman and founder, Lava International