Even before COVID-19, Indian business environment was not that rosy. Subsequent to hasty de-monetization and a most ill-conceived and untimely GST implementation, Indian companies started lowering their shutters for ever. As per July 2, 2019 reports from Ministry of Company Affairs, a total of 6.8 lakh registered business units under Registrar of Companies had closed permanently. It accounted roughly around 36.07% of 18,94,146 registered business units with Registrar of companies. It literally means, every third unit is closed. It has literally broken the back of the Indian economy leaving aside the impact on employment. But, Government of India kept measuring its success with the GST collections and Toll collections, not really understanding the real consequences of the business closures. Then came the COVID-19 great pandemic lock down, that put great hardship on the already struggling business units. The record shows that between April 2020 and February 2021, a total of 10,113 business units were officially closed, as per Registrar of Companies. This excludes the informal closures of retail and small shops. It is estimated that around 25 lakh retail shops and small units have closed during the period. And further estimated, 50 lakh small units struggling and estimated to see their ends before September 2021. This is quite alarming.
This is entirely a new business environment where the investor confidence is very low and buying power or the demand in the market is shrinking. It will further trigger for the market shrinkage and subsequent economic slowdown. This will be a cyclic loop that would take to conditions unbelievable and unimaginable. Do we have the clue to break the cycle? The nation’s economic policies are still on the post globalization mind-set. The market dictates the price and the policy. Government shall have minimal or no interference in business conduct. This is the reason that we have the escalating fuel prices at the retail market that are exclusively governed by the demand supply theories of globalization.
Government of India is more concerned on the debts to GDP ratio, foreign exchange reserves, GST targets, Income Tax collections, lowering of corporate taxes and other economic parameters that build’s the International Investor’s confidence and trust. These were the ambitious milestones and targets of Globalization era. We have exited this phase and the whole world has entered a new post pandemic world order. Even though precisely it is not, this period shall be an era of pre-globalization where the policy determines the economic order or the market.
Government shall have to be reactive to the market and need to intervene steadily and regularly until the market gains confidence. It is a period where domestic investors have to be nurtured and promoted. Government need to invest heavily and disinvestment is not an option as of now. Government managing the macroeconomics should forget about the debts considering that nations like United States of America have more than 100% debts of their GDP. Survival is more important than financial discipline. Managing homes to that of Nation is altogether different ball game. Keep the public hunger free and stress relived and they will stand together for nation building. The policy of non-intervention in business and market policy has to be revised. Government has to determine the market conditions.
Post COVID, the look out on world trade, International logistics, shipping, ports, education, health care, real estate and Infrastructure are all encountering an altogether different
demand supply requirements. Hence, our national policies on all these sectors have to be revisited and re-aligned to the changing world order. It is worth to mention that the defence policy and defence equipment infrastructure are going to go through an entire phase change. Maybe, pandemic has taught a most asymmetric warfare technique that without bloodshed you can let your enemy die down.
But, despite these changed business conditions, GoI is still pursuing its disinvestment policy, huge infrastructure spending’s, no market intervention policy that may pull down the economy further down.
With valuable lessons learned, will we align our economic policies to post COVID pandemic situation and lead the world order. The world demands that and it is time that great India needs to lead and not always to follow.
Views expressed above are the author’s own.
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