The Economic Survey – Is it an indication of ‘achhe din’ on Feb 1st?
Author: Debashis Bandyopadhyay
The Economic Survey 2022-2023 published on Tuesday shows all lights blipping Green! World’s highest GDP growth, continuation of the same during the current year, a healthy private consumption level, increase in capital formation both at public and private sector.
It also highlights a manageable inflation level and indicates the economy of India in a state of pink health, at least, by official version.
While the datapoints for the health of the MSME sectors are few, a 30 per cent increase in credit offtake during 11 months of 2022 shows a rosy picture.
But red flags are not few. The high global inflation has already hiked the cost of all commodities and there is a signal for more in store with the Chinese economy recovering from Covid.
The war in Ukraine has further enhanced uncertainty in prices, of petroleum, fertiliser, steel and others. This volatility in prices will affect the MSMEs most as they can neither buy in bulk nor can manipulate the cost of finished products.
And if specific measures are not taken by the Government to manage this volatility, many of the enterprises will suffer and their productive loan will go bad.
Another headwind for the labour intensive apparel, leather and other export oriented MSMEs is the recession looming over the global economy and job losses even in the developed countries.
There may be an immediate need for reducing the costs of the exporters particularly the taxes and the transaction costs, so that they can remain competitive in the shrinking global market and save lakhs of jobs here.
Government investment in infrastructure is a major driver of growth as the Economic Survey indicates, but participation of MSMEs in infra projects, particularly at the high value end is almost absent.
The medium sector enterprises with some impetus can surely work in the technology intensive ends of the infra projects, thus creating more employments at the sametime minimising the project costs.
With the near demise of the WTO regime, growth of global value chains is facing really strong headwinds, but GVCs are always money spinners for MSMEs who cannot make everything for any product.
Here again specific GVCs need to be focused where Indian MSMEs can gain some advantages. Let us hope some of these issues will be addressed by the Finance Minister today.
Disclaimer: The writer is a retired industrial advisor to Government of India. Views are personal.
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