In today's crisis, boosting exports can power India's growth

From successfully implementing electrical turnkey jobs to setting up and running of cement manufacturing units and subsequently running iron ore beneficiation plant, he has seen and done it all. But RP Gupta, an engineering graduate by training from NIIT, Rourkella (Odisha), has always found more joys and satisfaction in finding viable solutions for achieving higher growth of public income through his studies, research and insightful writing. His recent book 'Turn Around India' was released by the Prime Minister, Narendra Modi, giving acknowledgement to his insights and vision. Speaking exclusively to Bizz Buzz, RP Gupta, non-executive director, Shiva Cement Ltd, advisor to Shivom Minerals Ltd, and entrepreneur-turned author, shares his thoughts on a wide range of issues facing Indian economy and India's socio-economic structure

For a developing economy, investment led demand with an austerity in consumption is a right choice to arrest further decline of savings; that will affect investment damaging long term prospects. The consumption should grow along with the income. Artificial boosting of consumption led demand through bank loans or by government consumption spending is a misplaced choice. By this, there might be some temporary push to GDP growth but it will invite inflation causing miseries to public. Right choice is boosting the investment in productive assets and infrastructures

Financial investor and entrepreneur are the two wheels of economy; that must be acknowledged. Business risks must be shared among both wheels. Regulatory norms in the financial sector must match with Indian condition instead of importing from other countries

What does India need for consistent growth?

While building new capacities for production, there might be intermittent supply overhang causing loss to producers. For which, regular export is the only answer. But India is globally not so competitive. The global competitiveness doesn't depend upon the producers alone, but upon the whole gambit of policies and regulation. Those must facilitate exports to grow at the rate of 15-20 per cent every year. India's share of exports in the world is barely 1.7 per cent; that must increase to 3.5 per cent in the next 5 years. Failing which, the GDP growth may not be consistent. Radical changes in the policies and regulations might take some time. Hence, during interim period, India must extend export incentive in the selective sectors so that; the incremental export is 4/5 times of the export incentives. That will be revenue neutral, as estimated in my book. In today's crisis, boosting export is a prudent choice instead of relying upon the domestic demand alone.

There has always been a debate on what should be Indian's priority- investment or consumption-led demand? What's your take on this?

For a developing economy, investment led demand with an austerity in consumption is a right choice to arrest further decline of savings; that will affect investment damaging long term prospects. The consumption should grow along with the income. Artificial boosting of consumption led demand through bank loans or by government consumption spending is a misplaced choice. By this, there might be some temporary push to GDP growth but it will invite inflation causing miseries to public. Right choice is boosting the investment in productive assets and infrastructures. In recent years, the investment rate has declined from 38 per cent of GDP to below 28 per cent. That must be restored for consistent high growth. For this, private investment must be rekindled through a series of structural reforms.

Many a times in your book, you have mentioned that 'financial economy must compliment real economy'. What did you actually mean by that?

Financial sector must supplement and not disrupt 'real economy' for the growth and development of Nation. Current regulations protect banks and financial investors, but not the entrepreneurs; they have invested the seed and risk capital. In future, they will prefer financial investment instead of engaging in productive activities. If so, who will drive Indian economy and generate jobs?

Financial investor and entrepreneur are the two wheels of economy; that must be acknowledged. Business risks must be shared among both wheels. Regulatory norms in the financial sector must match with Indian condition instead of importing from other countries.

In this context, I must add that India needs major easement of the business and taxation laws. Currently, these laws are not encouraging the entrepreneurs for expanding their business. Even minor non-compliance or delay in compliance has caused the criminal prosecution. At this juncture, it is very crucial to inspire entrepreneurs and craft motivational spirit among them. India must surmount the past legacy of Colonial laws and resign from the syndrome of excess and tough regulation. That has adversely affected India's ranking on the front of 'economic freedom' and it must be improved.

The complete compliance of existing laws is not feasible even by a large corporate. Hence, the simplification of laws is a right choice. By this, the abidance of law shall progress and the respect for law and institutions shall succeed. Several studies have concluded that; the business laws and regulations must prevail but those must be simple and compliable by the majority and those must result in to developmental outcome. Legislature intent must be disclosed in the pre-amble of each law. Facilitation must co-exist along with the regulation.

So far you have discussed issues pertaining to the organised sector. But what about India's large unorganised sector?

I'm glad you raised the topic. The role of unorganized sector in India is not recognized so far. Hence, it lacks policy support. This sector contributes more than 45 per cent of GDP and employs about 84 per cent of work force. Those are majorly engaged in the trade, transportation, construction, restaurants and such other services besides manufacturing. They are managed by large numbers of self-employed entrepreneurs. Their contribution to GDP, exports and job creation is very high. Any Nation, in its developing phase, needs such unorganized sector; which will graduate along with the growth of Nation. Past history of Asian countries particularly Japan, will reveal similar stories.

As per fifth employment survey on September 15, 2016, by the Labour Ministry, about 47 per cent of the workforce is self-employed. They don't have a proper platform for expressing their grievances. Normally they don't resort to any agitation. The problems are somewhat enlarged after the recent lockdown. A dedicated annual survey may be conducted not only to measure GDP, but also to diagnose the problems enabling to make pro-active policy. This is the right antidote for resolving the job crisis.

You have also strongly advocated corporatisation of Indian railways. Could you please throw some more light on this?

Investment in the capital assets by Railway is lesser than 20 per cent of the investments in Road transport. Hence, the share of Railway in goods traffic has reduced from 86 per cent in 1950-51 to barely 25 per cent. Road transport of goods is obviously costlier. Hence, the average logistic cost in India is 2-3 times compared to peer nations. By this, cost of goods and services are inflated and India is loser on the export front. So as to overcome, Railway needs about Rs 30-35 trillion in next 5 years for capacity building and efficiency improvement. For mobilizing such huge resources, Railway must be split in to six corporates. Those must be listed on stock exchange. Each corporate shall raise funds from banks and capital market. At a later date, the entry of private sector may be allowed, as done in the Aviation Industry.