Converting emergency into opportunity: PM Modi unleashes ‘mother of all reforms’

May 17, 2020 11:38 AM

Today, only 60% of Indian airspace is available for the air traffic of civilian airlines. Covid-19 has fully grounded the aviation business not only within the country but also globally.

economic stimulus package coronavirus, coronavirus economic package, coronavirus pandemic, India's response to covid-19, india economic package covid-19There are some interlinkages amongst the sectors which would be going for major reforms.

By Dr Ajey Lele

Finance Minister Nirmala Sitharaman has announced structural reforms in eight sectors which include coal, minerals, defence production, airports and civil aviation, social segments like health and education, power distribution, space and atomic energy. The minister has made broad counters about each sector known. These are the biggest reforms ever announced by the NDA government including its previous term. This policy statement is about growth-oriented reforms and as expected to boost the overall business environment in India. It appears that the government has decided to convert the Covid-19 emergency into an opportunity. The future of these reforms would depend on actually how successfully India is able to control the spread of coronavirus in the post-lockout phase. All will depend on how fast the country can go back to normalcy.

It has been declared that the specific details in regards every sector would be announced by the respective ministries and departments. Since “the devil is in the detail” hence at this point in time, it would be difficult to undertake a very detailed assessment of these reforms. However, still, some broad assessment looks possible.

Most of the sectors for which the structural reforms have been announced are the strategic sectors. Such sectors for all these years were generally not tinkered with for obvious reasons. However, in the post-COVID-19 phase, the world is not expected to operate the way it was operating for so long. Hence, it appears that the government has realised that now the time has come to focus more inwards and reduce dependence on the outside world. Also, there is an increasing realisation that some of the business sectors have taken a major hit owing present crisis and all this is going add to the existing level of unemployment. Hence, there is a need to generate new employment avenues.

There are some interlinkages amongst the sectors which would be going for major reforms. Particularly, defence and aerospace would have some similarities. Few important decisions have been taken for the defence sector and this would have a long-term impact on India’s military-industrial complex (MIC). MIC is usually an informal alliance between a nation’s military and the defence industry.

Government has clarified that now they would be listing specific military platforms, weapon systems and other equipment, which cannot be imported. All three services would be required to ensure that they fulfil their hardware requirements based on the systems developed domestically. This is expected to boost the Indian defence industry at one hand and also would be able to reduce the inordinate delays in procurement and servicing. Increase in FDI from 49% to 74% would definitely attract more investments. The decision taken in regards to bringing in more corporatization in the ordinance factory setup is very encouraging. These factories getting listed on the stock exchange could in a way push them to perform better and become more competitive. There is no clarity yet, whether these factories would be allowed to export their products. If the domestic defence industry has to grow then the government must permit them to export.

Today, only 60% of Indian airspace is available for the air traffic of civilian airlines. Covid-19 has fully grounded the aviation business not only within the country but also globally. Significant amount of aviation fuel could be saved, if we rework the flying routes. This could demand making some portion of remaining 40% airspace available for civil aviation. For many years there has been much discussion about developing India as a hub for MRO. Now, this is going to become a reality. However, very systemic efforts and investments would be required to make this idea a reality. In addition, there is an announcement for developing six airports. It is important to note that, there is a difference between making an announcement on the paper and actually developing a successful project. The experience of one of the recent projects called UDAN, regional airport development and “Regional Connectivity Scheme” (RCS)is got very good. As per some reports, the success rate of this scheme is less than 20%. The concerned agencies responsible for carrying out aviation reforms needs to appreciate that civil aviation is a very tricky business and they would be required to be extremely professional.

Space is another sector where the suggested reforms clearly indicate that the government is very keen to build a domestic space industry. Making geospatial data gathered by India’s remote sensing satellite network available to the domestic industry is a much-awaited reform. Presently, various industries are procuring such data from foreign agencies at a very high cost. Another useful decision is about allowing the usage of ISRO’s testing facilities to the private sector. This would immensely help the space start-up sector.

All in all, the reforms announced by the government would provide a major boost to India’s overall industrial ecosystem. The government has taken the first step. The success of government intentions would be depending on, how efficiently various agencies implement this mother of all reforms.

(The author is Senior Fellow, MP-IDSA, New Delhi. Views expressed are personal.)

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