Nationalism, resilience and a digital push – the Indian economy's defining factors

Each time there is a financial shock or crisis, we ask ourselves whether we are resilient – whether we can weather the shock, whether we will come out unscathed or with minimal damage.

No prizes for assuming we are doing the same, again. Manufacturing in India was already at a low when the pandemic struck. Several small businesses shut down, and larger ones faced the brunt as the workforce went back to their villages. Through the months of April until September, when activity started limping back to normal, we kept asking whether we were strong enough.

In a panel discussion on this very topic at the ET India Inc Boardroom, Ashima Goyal, Economist, Professor, Member of Monetary Policy Committee said it was surprising how much better we are doing than expected. This meant we are actually are quite resilient, she said.


Her co-panelist, however, did not share her optimism. Even before the pandemic there were issues with the Indian economy, Neelkanth Mishra, MD, India Strategist and Co-Head of Equity Strategy-Asia Pacific, Credit Suisse, pointed out. He added there were significant problems with manufacturing GDP, and it was imperative for the country to reduce dependence on external balances.

The ET India Inc Boardroom brings together industry leaders, policy makers and economists to discuss and deliberate key sectors of the economy. Over the five-day conclave, experts will uncover trends and challenges in the BFSI, Retail, Manufacturing and MSMEs sectors, as well as the economy as a whole.

Abheek Barua, Chief Economist and EVP, HDFC Bank, said, "We are perhaps in an era of shocks and going forward there is a need to build buffers for extreme events." He added that the challenge is to make tackling risks a part of the policy.

Removing bottlenecks
In his fireside chat, Alfred Schipke, India Mission Chief and Assistant Director of Asia and Pacific Department, IMF, said, "I think the potential for India's economy to continue to grow at high and sustainable levels are very good. But the key is to eliminate some of the bottlenecks".

He said the financial system is critically important because, in order to channel savings to the most productive parts of the economy, there needs to be a functional financial system. India, he said, needs to continue strengthening the framework to deal with bankruptcies given that several corporates have high debt levels.

Resilience and policy move aside, all speakers, across panels agreed that it was important for growth to percolate to the lowest layer of the pyramid. One way for this was to increase the reach of digital technology in the country.

Nationalism
While the speakers agreed that several things need to be done for the economy, Devashish Mitra, Professor - Economics, Syracuse University, Samiran Chakraborty, MD and Chief Economist, Citi India, Siddharth Tiwari, Chief Representative - Asia and the Pacific, BIS, and Saugata Bhattacharya, Senior VP and Chief Economist, Axis Bank spoke on the question of what is economic nationalism, how long has the concept been around, and how relevant is it today. More importantly, is the Atmanirbhar Bharat programme a form of economic nationalism? Samiran said Aatmanirbhar Bharat is a mixed version, and while on the one hand, it is tactically doing economic protectionism, it keeps the capital account as open as possible. "To compete on the global stage, we need to get our house in order first and that is what we seem to be doing with this scheme." Siddharth also stressed the importance of Free Trade Agreements and Regional Trade Agreements and said they should be fair, and free from political cycles.

Going digital
The government's digital push – be it in the form of Jan Dhan accounts, or Kissan cards and schemes linked to them – has been a tremendous experience, but there is a lot more to do, said Sanjeev Kaushik, Additional Secretary, Department of Financial Services.

"Cash is the biggest enemy of digital," said Shalini Warrier, Executive Director, Federal Bank. She added that the important thing to do for the wider adoption of digital technology was to reduce friction and make the use of technology seamless. Also, from a merchants' standpoint, it was imperative to reduce costs. "No one step will get us there. We need to take a series of steps. We need to keep experimenting," she said.

There are merchants on the one side and customers on the other. Talking about the third pillar of digital payments, Pralay Mondal, President (Retail, SME, Operations & IT), CSB Bank, and Rajeev Ahuja, Executive Director, RBL Bank, both said banks will be forced to become enablers when merchants and consumers ask for technology. While disruptions can force people to go digital, like demonetization and the pandemic did, the challenge is from the mobility standpoint such as a poor WiFi signal or bad mobile network.

(For front-line insights on Economy, Retail, MSMEs, Manufacturing and Banking & Finance tune in to ET India Inc Boardroom (www.etboardroom.com) from 22-26 February and hear from over 50 industry leaders.)

Watch all sessions of Day 1 (Economy)


(Also read: As the world opens up post pandemic, exit strategies, inflation rule economists' minds)