CEA’s review ahead of budget points to key focus areas and opportunities | Latest News India - Hindustan Times

CEA’s review ahead of budget points to key focus areas and opportunities

ByRajeev Jayaswal, New Delhi
Jan 30, 2024 07:56 AM IST

The document provides an opportunity for India to emerge as a reliable partner for “friend-shoring” and “onshoring” of business

Turning India into a trusted partner for global trade is a key opportunity that could drive growth, the finance ministry’s review document released on Monday said, identifying a digitally skilled labour force, constructive use of AI, further reductions in compliance requirements for MSMEs, clean energy transition and broad reforms in skilling, learning and health as crucial areas of focus for the Indian economy going forward.

India has an opportunity to emerge as a trusted partner for “friend-shoring”. (REUTERS)
India has an opportunity to emerge as a trusted partner for “friend-shoring”. (REUTERS)

The document, effectively identifying what will be in focus for the NDA government’s next term should it retain power in the upcoming general elections, noted that geopolitical frictions have led to geoeconomic fragmentation and disrupted global supply chains, bringing not just a challenge but an opportunity for India to emerge as a reliable partner for “friend-shoring” and “onshoring” of business.

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Friendshoring refers to giving import preference to allied nations, while onshoring refers to domestic procurement of goods and services.

In the preface of the document -- “Indian Economy -- A Review” -- chief economic adviser (CEA) V Anantha Nageswaran said: “Recent events in the Red Sea may have brought back concerns over reliance on global supply chains, further aggravating the slower growth in global trade in 2023. In other words, exporting one’s way to growth will not be easy. This reinforces the need to lower logistics costs and invest in product quality to hold on to and expand market share in areas where India has an advantage.”

One of the busiest global shipping routes along the Red Sea has been disrupted after Iran-backed Houthi rebels began targeting vessels in retaliation to the war in Gaza, the latest in supply chain disruptions after the pandemic and strained ties between the west and China.

The document is a commentary can be seen as a partial substitute to the customary Economic Survey released a day before the Budget. This year on February 1, the government will unveil an interim budget, with the full budget expected only after elections in July, when the 2023-24 Economic Survey too will be released.

Amit Kapur, joint managing partner of JSA, a law firm, said India is already witnessing the impact of improving ease of doing business “with significant relocation of manufacturing/assembling facilities to India” in the China-plus-one strategy adopted by the world.

The two areas have been part of the government’s policy focus, but are likely to become priority areas with government’s emphasis on “Make in India” and “Make for the World’ where cost and quality both matter, an official with an economy-related ministry said, asking not to be named.

The government launched the National Logistics Policy on September 17, 2022 with an aim to reduce logistics costs in India. According to experts, logistics cost in India is around 14%, as compared to 8-10% globally. “The cost is bound to come down after massive infrastructure developments across the country, which are meticulously aligned through the PM Gati Shakti National Master Plan,” said Nilaya Varma, CEO and co-founder of Primus Partners.

“Similarly, the government has quality control orders (QCOs) on many products. The purpose is to reduce dumping of cheaper and low-quality Chinese goods and encourage domestic manufacturers to produce quality products for both domestic and overseas consumers,” he added.

Recently, India issued hundreds of QCOs and lined up stringent quality norms for over 250 more items in 2024, including electric fans, freezers, aluminium cans and plywood. QCOs are non-discriminatory and a World Trade Organisation (WTO)-compliant trade protocol mechanism that allows a country to make compliance with its standards compulsory for selling specified goods in its market.

The government, which is eyeing a third-term (2024-29) after the elections in the summer, is also focusing on other challenges, such as the use of AI in a constructive manner so that it maximise value, reduce time and cost overruns, and does not lead to job losses, a second official said, asking not to be named.

“The government will devise ways to create new opportunities through skilling to convert this challenge into an opportunity,” he added. The finance ministry report said the advent of AI poses “a big challenge” to governments around the world due to the questions it poses to employment, particularly in services sectors.

Citing an International Monetary Fund (IMF) paper, it said about 40% of global employment is exposed to AI, with “the benefits of complementarity operating beside risks of displacement”. The paper suggested developing economies must invest in infrastructure and a digitally skilled labour force to fully harness AI’s potential.

Sustainable development and energy transition for a better tomorrow are also part of the focus areas that the government would take up in its third-term, the first official said. Citing the report, he also highlighted potential future reforms matters such as skilling, learning outcomes, health, energy security, reduction in compliance burden for micro, small and medium enterprises (MSMEs), and gender balancing in the labour force.

Experts said the Modi government is already prepared to take India to the next stage. “In recent years, a concerted policy push across major sectors of the economy, including infrastructure and agriculture, has yielded substantial gains. With an enabling policy environment and India’s significant strides in emerging technologies such as AI, 5G, the proposed roll-out of 6G, and advancements in semiconductor manufacturing, the stage is set for India’s ascent to a $7 trillion economy by 2030,” said KC Ravi, chief sustainability officer at Syngenta India.

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