Question 1

Unclog the credit lines: Nurture MSMEs to empower India's economic growth

Accepted Answer

In pushing for greater inclusivity, India recognises the social and economic imperative of broad-based growth. For a country as large and diverse as ours, the fruits of development must not just trickle down to those at the bottom of the pyramid but opportunities must be created for everyone. In this context, the MSME sector plays a crucial role by fostering entrepreneurship and contributing significantly to employment, output and exports.
There are over 6.3 crore MSMEs in India. They collectively contribute approximately 33% to GDP, including nearly half of all manufacturing and 40% of exports, and employ about 120 million people. While mega projects and FDI inflows grab eyeballs, MSMEs operate at a scale next only to the agriculture sector and are vital in achieving inclusive growth and furthering India&#8217;s manufacturing ambitions.
GoI has looked to strengthen MSMEs through measures encompassing a broad spectrum from credit support to formalisation, technology upgradation, skilling and market assistance. Schemes like the Prime Minister&#8217;s Employment Generation Programme (PMEGP), Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), Entrepreneurship Skill Development Programme (ESDP) and Raising and Accelerating MSME Performance (RAMP) are some of the key initiatives in this regard.
In recent times, the Emergency Credit Line Guarantee Scheme (ECLGS), with an outlay of ₹5 lakh crore, proved to be a lifesaver for MSMEs that faced an uncertain future during the Covid disruption. However, mandatory registration under TReDS (Trade Receivables Discounting System) for companies with a turnover of more than ₹250 crore should be considered as it will unlock receivables of MSMEs and support cash-flow &#8211; instead of collateral-based lending.
Similarly, in the context of GST implementation, mandatory registration of MSMEs on the Udyam portal to avail benefits under state schemes is an important step as data collected can be used constructively.
Further, with the launch of the Udyam Assist Platform in January, informal micro-enterprises have now been brought into the fold. While SHGs were initially a means to augment members&#8217; financial security, some states like Odisha are now facilitating the transition of these informal associations into MSMEs with attendant benefits.
Building on the &#8216;One District, One Product&#8217; (ODOP) scheme, the Prime Minister Vishwakarma Scheme has an outlay of ₹13,000 crore and is designed to empower artisans and craftspeople. It will enable them to embrace modern technology while preserving traditional skills. Fittingly, the announcement was made at the inauguration of the first phase of the India International Convention and Expo Centre named Yashobhoomi, which, along with Bharat Mandapam at Pragati Maidan, has created world-class infrastructure for tradeshows and industry exhibitions, besides promoting conference tourism.
In an era of globalisation, MSMEs cater to domestic and international markets. Therefore, their ability to adapt to the changing landscape is crucial. India&#8217;s Foreign Trade Policy (FTP) recognises this and focuses on simplifying export procedures, reducing clearance time and lowering compliance costs, thus enhancing competitiveness. Moreover, there is a dedicated chapter on e-commerce for the first time, underscoring the role of such platforms in India, achieving the ambitious target of $2 trillion in exports by 2030.
The ability of MSMEs to adopt best practices relating to sustainability is also important. This is not just from the point of view of India&#8217;s commitment to decarbonisation and energy transition but also from the perspective of global value chains. Indeed, for today&#8217;s environment-conscious consumers, ranking highly on sustainability metrics is as important as cost and quality considerations.
The &#8216;Zero Defect, Zero Effect&#8217; (ZED) scheme aims to nurture the transformation of MSMEs into national and international champions by improving their quality, boosting production, increasing profits and protecting the environment.
Ficci&#8216;s recent report on SMEs is a nationwide survey of more than 600 SMEs in the manufacturing sector. It has an assessment of the awareness of, and preparedness for, digitalisation and sustainability and will prove handy for policymakers to design interventions, which can build on existing schemes.
Given Ficci&#8217;s extensive outreach directly and through member bodies, the report is an extension of the effort to engage with various stakeholders to further the national agenda of sustainable, inclusive and resilient growth.
As India moves ahead with confidence and aspires to be a developed nation by2047, MSMEs will have to play a significant role in achieving broad-based growth. MSMEs must continue to be nurtured so that they flourish and contribute meaningfully to India&#8217;s rise as an economic powerhouse.

Question 2

The China+1 window is finite. Grab it urgently

Accepted Answer

Speaking at an event last month, Prime Minister (PM) Narendra Modi emphatically stated that India will be the world’s third largest economy in the coming years. The World Bank, International Monetary Fund, Asian Development Bank, and the Reserve Bank of India have all weighed in on the country’s bright prospects; and SBI Ecowrap has stated India will overtake Germany and Japan to take a place on the podium by 2027.
A large, unified domestic market with an increasing investment appetite, favourable demographics as the rest of the world ages, and reforms borne out of conviction, have come together to bolster the economy in an otherwise gloomy global environment. However, growth is never a straight line. Indeed, while India is unlikely to escape short-term challenges due to a slowdown in the large consuming economies of the West, the building blocks being put in place will ensure we get to the target.
A major factor which must also be considered is China+1, a push by governments and companies alike to de-risk global supply chains from being overly reliant on one geography. This is especially so given the simmering tensions between the United States (US) and China which has led to certain restrictive trade measures and counter-measures. Even if there is a narrow path where tensions do not significantly escalate or spill over into unintentional conflict, there is sufficient forewarning of such a scenario which is leading major global corporations to reconsider their business plans.
However, it is not preordained that India will benefit from geopolitics; it merely gives us an opportunity that must be seized. It is in this context that one should view the plethora of reforms and policy initiatives undertaken by the central government to make India an attractive destination for investments, especially relating to the manufacturing sector that must play a major role in a $5 trillion economy.
Production linked incentive (PLI) schemes with an outlay of ₹1.97 trillion have been announced for 14 sectors, with more under consideration, where India is import dependent or otherwise needs to build capabilities. Perhaps the most important is semiconductors, which are used widely but are also prone to trade sanctions with a reliance on critical minerals as well as cutting-edge technology. However, PLI is a one-off measure intended to create manufacturing champions and cannot be a panacea for all that needs to change in the manufacturing ecosystem.

The PM Gati Shakti-National Master Plan, the National Logistics Policy, and the National Single Window System to facilitate and support investors, are important policy initiatives that make it easier to do business in India and add to its allure as a preeminent investment destination.
India’s large pool of labour must also be given the right skills which back up our manufacturing — and, indeed, service sector — ambitions. This is especially important as Artificial Intelligence and Machine Learning (AI/ML) are likely to disrupt jobs which are low-skill and repetitive in nature. The Skill India Mission launched in 2015 and the National Education Policy (NEP) 2020 address the imperatives in this regard, and the industry must also come forward to contribute towards achieving desired outcomes.
Finally, there must be a continual push to address pain points which hinder the ease of doing business. The Jan Vishwas (Amendment of Provisions) Bill 2023, which was recently passed in Parliament to decriminalise minor, technical or procedural defaults, is a good start, and more such instances must be identified where penal consequences are not commensurate with the offence.
During his visit to India last month, World Bank President Ajay Banga said India did not have an unlimited window to tap into the China+1 opportunity; in his assessment, India has 3–5 years to attract global supply chains. Those decisions are being taken now even as we speak and history rarely affords a second chance, let alone a third. Therefore, it is imperative that all stakeholders — the central and state governments, regulators, lending institutions, and the private sector — are aligned to achieve India’s growth ambitions.
The world has undergone much change since the first industrial revolution. Today, as Industry 4.0 fundamentally shifts how global production and supply chains operate, the PM recently made a distinct connection between an industrial revolution and the aspirations of the people by linking the fourth industrial revolution to Indian aspirations. Modi was spot on when he said, “Yahi samay hai, sahi samay hai” (This is the right time). Indeed, this is India’s moment.

Question 3

Critical Minerals Critical

Accepted Answer

The world is witnessing rapid technological advancement, which, while propelling growth and prosperity, is bringing to the forefront the importance of critical minerals, classified into energy minerals and rare earth elements. Nickel, lithium and cobalt have applications across various sectors, such as renewable energy, electric mobility, consumer electronics and high-end industrial applications. Consequently, their demand will rise rapidly, underscoring the need for a reliable and resilient supply chain.
Moreover, India aims to be a manufacturing powerhouse and is committed to achieving net zero, implying a shift to clean energy. Thus, to unlock the nation’s full potential, it is imperative to formulate a national resourcing strategy for critical minerals.
GoI has undertaken several initiatives, including adopting the National Mineral Policy in 2019. Moreover, Khanij Bidesh India Ltd (KABIL), has been set up to ensure a stable supply of critical and strategic minerals for the domestic market. However, more needs to be done. The Ministry of Mines and Minerals (Development and Regulation) Amendment Act 2015, to review and include minerals which have been kept out of its purview. In addition, junior miners should be incentivised to take up exploration, and the in-house mining capability of domestic companies must be harnessed. A staged approach via minerals and investments in end-to-end value chain will increase the nation’s manufacturing output, creating job opportunities and capturing demographic dividend.
The challenge is that the supply of critical minerals is limited. With demand expected to increase exponentially because of a greater global emphasis on renewable energy, the country needs a concrete strategy. This is more so because the global supply chain of these minerals is concentrated in certain regions and unevenly distributed. Nations blessed with such resources are looking to take control to meet their needs and that of friendly countries.
While several critical minerals are found in India’s soil of natural resources, there must be a concerted effort on exploration to determine the exact availability of each, besides scouting for other strategic minerals. On the policy front, the government must fund research projects that develop recycling, reusing and repurposing strategies, and breakthroughs in technology for mineral exploration and processing must be pursued as many critical minerals are deep-seated or located offshore and often require complex processing.
Therefore, there is need for a comprehensive national resourcing strategy. The Ficci report on New Age Energy Minerals, released in June, has compiled geographical and geological information, details of the value chain, including end-use sectors and applications, market outlook and long-term demand forecasts for critical minerals. It advocates prioritising exploration and leveraging India’s mining expertise and strategic ties to locate and access critical minerals.

India, Australia and Japan entered the Resilient Supply Chain Initiative (SCRI) in 2020 to attain sustainable, balanced and inclusive growth in the Indo-Pacific region. This and the US, forming the Quad, recently set up a working group for critical materials and technologies. This year, India and Australia committed to working in concert towards investment in critical minerals, especially lithium and cobalt, and developing supply chains both within and beyond their countries. This move came after a year of signing the India-Australia Critical Minerals Investment Partnership.
It must be understood that control of the entire mineral value chain is not feasible. India should play to its strengths and capitalise on opportunities. The country is well-positioned to participate in diverse global value chains and contribute to mining, processing and manufacturing. However, we must enhance our domestic research and development and emerge as a market leader in mineral-related technology. Fostering the development of a mineral ecosystem is necessary to achieve the nation’s economic and environmental objectives.
Given this backdrop, a national resource strategy focusing on critical minerals is the need of the hour. India must actively participate in global value chains to contain and safeguard its supply chains. Acting quickly and decisively will boost the nation’s growth trajectory and lead to Atmanirbhar Bharat.

Question 4

Budget: Balancing growth priorities with fiscal consolidation

Accepted Answer

The Union budget announced against the backdrop of multiple global challenges, even as India is well positioned, comes across as balanced and progressive; it accords primacy to growth while also emphasising inclusiveness and sustainability. There is a distinct continuity of vision and action on the government&#8217;s part to make India an economic powerhouse during Amrit Kaal.
The thrust laid on capital expenditure with an increase in outlay by over 33% to ₹10 lakh crore will enable India to continue its growth momentum and enhance resilience in the face of global headwinds. The significant public capex on transport infrastructure, including highest ever outlay for the Railways, will make industry competitive, help accelerate growth and create more jobs. In conjunction with a 66% increase in the outlay under PM Awas Yojana to ₹79,000 crore, there will be a noticeable multiplier effect across myriad sectors of the economy.
Digital infrastructure has been the backbone of New India&#8217;s success, and we see this being extended to agriculture and education in this budget. The digital public infrastructure for agriculture proposed to be built as an open source, open standard and interoperable public good is a welcome announcement, which will help address the challenges of Indian agriculture sector by ensuring better access to inputs, credit, insurance as well as market intelligence. It is fair to say that digital agri-infrastructure can pave the way for a revolution in the sector similar to what UPI has done for the financial sector.
Likewise, the proposed Centres of Excellence for AI will enable India to be future ready. I also compliment the finance minister for providing a thrust to innovation by allowing private sector to get access to select ICMR Labs for collaborative research. Further, the proposed pharma research and innovation programme through centres of excellence will also encourage more private sector led medical research in the country.
There is a clear focus inclusiveness in the budget. For instance, it lays out a roadmap for resolving challenges faced by MSMEs relating to finance and credit. The proposal to set up entity DigiLocker for MSMEs and the National Financial Information Registry are positive steps which will help remove information asymmetry, enable financial institutions to assess credit worthiness, thus facilitating efficient flow of credit to MSMEs. The infusion of ₹9,000-crore corpus under the revamped Credit Guarantee Scheme will enable additional collateral-free guaranteed credit of ₹2 lakh crore and also help bring down cost of the credit by 1%. Furthermore, by including payments to MSMEs under section 43B of the Act and allowing deduction only when it is actually made (ie. cash basis instead of accrual basis), it is expected that the scourge of delayed payments will be effectively addressed.
In addition, the budget has also laid a strong focus on the poor, vulnerable and weaker sections of the society by introducing various initiatives for their social and economic upliftment. The relief provided to the middle class by enhancing tax rebate to ₹7 lakh and revision of the tax structure both in terms of slabs as well as the surcharge rate will help boost private consumption.
There is a strong focus on sustainability, reflecting India&#8217;s firm intent to meet its net zero commitments. Provision of ₹35,000 crore for priority capital investments towards energy transition and energy security is a good step which will go a long way in achieving India&#8217;s vision for renewables and green energy. The budget proposals have covered nearly all aspects of green energy, including energy storage, energy evacuation, and financing as well as vehicle replacement.
Finally, there is a continued focus on enhancing ease of doing business through measures to simplify compliances and reduce litigation. The launch of Phase-3 of the E-Courts project, proposed simplification of KYC system, one-stop solution for identity and address updation through DigiLocker, and use of PAN as the common identifier are significant steps will have considerable impact.
Overall, the FM has done a commendable job by presenting a budget which balances growth priorities with a fiscal consolidation glide path thus lending credibility to the intricate exercise. It truly sets the template for India to become the world&#8217;s next growth engine.

Question 5

Time to invest in India

Accepted Answer

The pandemic has proven to be the breakout moment in India’s long overdue emergence as the world’s next engine of growth. Starting with a measured approach to the timing and quantum of the economic stimulus while supporting those at the bottom of the pyramid to embarking upon bold reforms, Prime Minister Narendra Modi’s vision for a New India is bearing fruit at a time when one-third of the world’s economy is facing a slowdown.
The world is looking to India for leadership since entrenched, self-serving positions have left very little wiggle room for others to have any moral suasion to ease geopolitical tensions. In that sense, the mantle of the G20 presidency has come at the right time, allowing India to influence the global agenda based on its own priority of accelerated, inclusive and resilient growth.
The inherent strength and prospects of its economy are the foundation on which India has built the credibility necessary to occupy a seat at the high table. Hence, a laser-sharp focus on growth is imperative to both better the prospects of its people as well as lead the world. And who knows this better than Finance Minister Nirmala Sitharaman. Speaking at FICCI’s 95th annual general meeting, she said that the upcoming budget – the last full budget before general elections – will “set the template” for the next 25 years, which is India’s Amrit Kaal.
India’s rise comes at a time when there are significant challenges, given a gloomy global outlook. According to the International Monetary Fund (IMF), global growth will nearly halve to 3.2 per cent in 2022 and fall further to 2.7 per cent in 2023, reflecting stalling growth in the US, China and the Euro Zone. Higher food and energy prices have led to global inflation peaking at 8.8 per cent in 2022 which is, however, expected to decline to 6.5 per cent in 2023 and 4.1 per cent in 2024. India’s own fight against inflation, which is largely imported, has been aided by fiscal and monetary policy working in tandem with a little help from easing commodity prices.
Developed nations are struggling to tame inflation as they adopted excessive stimulus measures. According to a report by the McKinsey Global Institute, in 2020 and 2021, “households globally added $100 trillion to global wealth ‘on paper’ as asset prices soared and $39 trillion went into currency and deposits were minted” and “debt and equity liabilities increased by about $50 trillion and $75 trillion, respectively, as governments and central banks stimulated economies”. Meanwhile, the continuing Russia-Ukraine conflict is inflicting fiscal pain beyond the immediate region while China’s Covid policy has disrupted supply chains, which are now once again threatened by a potential fallout of an abrupt reversal.
However, India stands out as a rare “bright spot” with the economy estimated to grow around 7 per cent in FY23 and a growth forecast of 6.1-6.5 per cent in FY24, thus retaining the tag of the fastest-growing large economy in the world. In an encouraging sign, retail inflation eased to 5.88 per cent in November, thus coming within the RBI’s tolerance band after 11 months. While it is too early to declare victory in terms of taming inflation, policymakers must now chart out a path that prioritises growth.
Having recently surpassed the UK to become the world’s fifth-largest economy, India is likely to overtake Japan and Germany before the end of the decade to become the third-largest economy in the world. This has been made possible by reforms aimed at enhancing ease of doing business and reducing the cost of doing business in a large, unified domestic market along with a focus on boosting the manufacturing sector through the Production Linked Incentive (PLI) schemes, which are helping attract large investments including in critical areas like semiconductors.
With the government having done the heavy lifting in terms of public infrastructure capex during the pandemic period and its immediate aftermath, the attention must now shift to the private sector investment cycle which has been steadily gaining momentum.
India has much to share with the world at a time when there are very few beacons of hope. Its priority as G20 president is to focus on areas which have the potential to bring about structural transformation leading to accelerated, inclusive and resilient growth. Similarly, the concept of LiFE (Lifestyle for the Environment) draws upon ancient sustainable traditions to reinforce modern-day environmentally conscious practices. Finally, knowledge sharing in areas like digital public infrastructure and financial inclusion will enable the wider adoption of disruptive technologies.
Investors – both domestic and global – must now come forward and participate in the India growth story which, in turn, will give a much-needed boost to global growth going ahead. Speaking at the World Economic Forum last year, PM Modi said “Make in India, Make for the World”. There has never been a better time to invest in India and reap the benefits of what it has to offer.

Subhrakant Panda

Managing Director, IMFA | Past President, FICCI

Subhrakant Panda

Managing Director, IMFA | Past President, FICCI

Op-Ed