Since Independence, the Indian State has faced challenges to its territorial integrity from external actors, both state and non-state. Internally, the nation has been continuously engaged in dealing with multiple fault lines, some of which continue to fester even after decades of proactive political, economic, social and security initiatives. Successive governments have attempted to bring their own unique approach to maintaining peace with India’s hostile neighbours and resolving conflict within the hinterland, with varying degrees of success.

The BJP led NDA government made a break with past practises through strategic doctrinal shifts in dealing with its hostile neighbours as well as in creating a climate where internal challenges can be holistically met. The policies first came to the fore in the first BJP led NDA government (2014-2019) and saw a continuation of the same when the BJP led NDA again won the national mandate.

The External Challenges

India has been involved in five wars, four with Pakistan and one with China, since Independence. India’s land frontiers still remain vulnerable to external threats, largely a result of historical legacies. Besides protecting its land borders, there is also a need to protect its long coast line and Island territories.

Pakistan

Pakistan’s hostility towards India has more to do with ideology than the so called ‘Kashmir issue’—a fact glossed over by many analysts. The question  of ideology came up at the birth of Pakistan itself. Was it to be a secular state, a state of Muslims or an Islamic state? This lack of clarity still exists in Pakistan and is one of the reasons why Pakistan continues to teeter on the brink of disaster.^[i] Recent peace overtures by Pakistan, with Pakistan army chief, Gen Bajwa calling for a resolution of the Kashmir issue in “a dignified and peaceful manner as per the people’s aspirations,”^[ii] did not cut much ice with the Indian establishment, which in response, stated India’s desire to have “normal neighbourly relations with Pakistan in an environment free of terror, hostility and violence.”^[iii]

The above is a fundamental policy shift in India’s dealing with Pakistan. Prior to 2014, Indian policy was geared to maintaining the status quo. This implied a willingness to settle the Kashmir issue on the existing Line of Control (LoC). The Simla Accord of 1973 was designed to freeze the borders as they lay. This was also the framework which drove the Manmohan Singh-Pervez Musharraf initiative, subsequently disowned by Pakistan after Musharraf’s departure. In contrast, the Narendra Modi government has reasserted India’s claim over all the territories of the erstwhile state of Jammu and Kashmir, illegally occupied by Pakistan. Towards this end, the abrogation of Article 370 and Article 35A of the Constitution and the splitting of the state into two Union Territories, marked a fundamental irreversible shift in the governments stand. At an election rally in Haryana in August 2019, the Raksha Mantri, Shri Rajnath Singh stated that if talks are held with Pakistan, India will not discuss any issue other than Pakistan-occupied Kashmir.^[iv] Similar statements have been issued by other political leaders too.

Pakistan resorted to the use of terrorism as a foreign policy tool in the late 1980s—a policy they have maintained till date. With both the countries becoming nuclear in May 1998, Pakistan’s support to cross border terrorism became more blatant, and was based on a security calculation that New Delhi would not react with force even if provoked, due to the nuclear overhang. The attack on a military base in Uri by Pakistan-based JeM (Jaish-e-Mohammed) terrorists on 18 September 2016 was the first time that India reacted aggressively to Pakistan sponsored terror, with the Indian Army carrying out surgical strikes across the LoC at multiple points on 29 September. In a bid to drive the message home, the Indian DGMO held a press conference the next day, announcing to the world, India’s military response.

Pakistan failed to respond and thus its nuclear bluff was called. Henceforth, this was not a ploy which could be used by Pakistan to keep New Delhi cowed down. While this did not, by itself, stop Pakistan from continuing with its policy of providing support to terror groups from within its soil, there were no further major incidents of terror anywhere in India till 2019, when a CRPF convoy was attacked in Pulwama  on 19 February. New Delhi’s response this time was swift and brutal, with an aerial strike carried out on 26 February, deep within Pakistani territory, destroying the main JeM HQ in Balakot. More important than the strike was the political messaging—India will strike at terror perpetrators, even if they are based across India’s borders. This has radically changed the security dynamics in the India-Pak equation. India has also gone into a political and diplomatic offensive against Pakistan, for its state sponsored support to terrorism, which has put Pakistan firmly in the dock. Despite that, Pakistan still poses serious security concerns to India with its use of terror proxies. For the moment, Pakistan is perhaps checked, but not rendered out of the game. In conventional military capability, however, Pakistan is no longer a credible threat to India.

China

The boundary dispute remains the primary stumbling block in normalising the India-China relationship. Another area of concern is increasing Chinese assertiveness in the region, especially with respect to India—a fallout of her desire to achieve preeminence in the region.^[v]

The Modi government attempted to write a new chapter in the relationship, with the Indian Prime Minister inviting his counterpart Xi Jinping to India. The visit took place in September 2014, the two leaders apparently establishing a personal rapport with each other. However, Chinese troop incursions took place in the Chumar area of Ladakh when the visit was on, prompting many analysts to question Chinese motives. Ahead of Air Force Day on 8 October 2014, Air Chief Marshal Arup Raha, the then Chief of Air Staff and Chairman, Chief of Staff Committee, in a press conference made an oblique reference to this during a press meet. When questioned on the recent incursion by Chinese troops in Ladakh, he responded: “It is always mysterious…the way incursions get timed with visits…In diplomacy, there is little signalling done but I am not going to guess. The question that arises is why the incursion took place when the senior-most leader of their country’s hierarchy was here”.^[vi]

The reciprocal summit meeting took place in Wuhan, China in May 2108, which was viewed as an attempt to bring the India-China relationship to a more even keel. This was a growing divergence of views between the two countries on issues on the boundary dispute, China’s Belt and Road Initiative (BRI), Chinese assertion of its influence in India’s periphery, its belligerence in the South China Sea and its opposition to Indian membership to the Nuclear Suppliers Group, amongst others. The Summit was billed as an informal summit, without a formal agenda. While the cordiality of relationships was established, resulting in the term ‘the Wuhan Spirit,’ differences in perception remained.^[vii] The Wuhan Summit was followed by the second informal summit at Mamallapuram, Tamil Nadi in October 2019, but key divergences of views could not be bridged.

The Governments policy towards China has however become more nuanced. There is a push back to every Chinese attempt to unilaterally change the Line of Actual Control (LAC), as witnessed in Doklam in 2017 and more recently in June 2020, in Eastern Ladakh. The latter standoff is still on, with India now linking a peaceful border with normalisation of relations in other sectors. This is a welcome change, indicating to China that unilateral actions by the Chinese will not be accepted.

The Indian Ocean Region

India’s dependence for its energy supplies from the Gulf, makes the Indian Ocean Region (IOR) an area of prime concern to New Delhi. India’s growth to a USD 5 trillion economy is also largely dependent on trade through the sea lanes of communication (SLOCS). Security of the SLOCS is thus of primary concern to India. As China also depends on the Gulf for its energy security, it provides India an opportunity to pose a counter pressure point on China in the Malacca Strait.

In the US discourse, the Pacific Ocean, as part of the US strategic discourse was considered an American lake. China’s rise altered the US discourse. Earlier, the US spoke of the Asia Pacific, which terminology excluded India. Since 2010, the Asia Pacific began being replaced by the Indo-Pacific as a regional framework for US strategic discourse under the Obama administration. By 2017, this had become a key regional term for official US discourse under the Trump administration.^[viii] The change was the result of Chinese assertiveness, as also the fact that global trade was now shifting to this region. Chinese assertiveness was impacting Japan, Australia and India, and thus it became a sensible construct to strengthen the Quad. Prior to 2017, the Quad was a relatively defunct concept, but is now achieving greater coherence, with the leaders of the four Quad holding a virtual summit in March 2021 and also issuing a joint statement.

The Quad has given India a pressure point against China in the Malacca Strait. The present government is accordingly taking steps to strengthen the Navy and modernise ports, which will improve Indian capability in safeguarding its maritime and strategic assets.

Internal Threats

Internally, India faces security challenges from two distinct streams. The first is a mix of separatism and sub national extremism, which has spawned violence in parts of Northeast India, Jammu and Kashmir and in a number of districts afflicted by Naxal violence, now officially referred to Left Wing Extremism (LWE). The second is equally vicious, where a set of people in a bid to derail the smooth functioning of the state, exploit religious and social fissures in Society, through motivated and agenda based campaigns.

Left Wing Extremism

The origin of Naxalism, now also referred to as Maoism or Left Wing Extremism (LWE) is traced to the Naxalbari uprising in 1967. From then till the present times, it has grown to a movement impacting many districts of India. In 2010, the then Prime Minister, Dr Manmohan Singh, described it as the “biggest threat to internal security”.^[ix] At present, LWE impacts some districts in Andhra Pradesh, Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Telangana, Uttar Pradesh and West Bengal, with Chhattisgarh being the worst affected. This geographical stretch is colloquially called the ‘red corridor’.

The Naxals have been successful in executing high profile attacks against the Indian State. In an attack by the CPI Maoists (CPI (M)), on the CRPF in Dantewada in April 2010, 76 CRPF personnel lost their lives. Three years later in 2013, the CPI (M) attacked a convoy of Congress Party leaders in the Darbha Valley in the Sukma district of Chhattisgarh in which 27 people were killed, many of them senior leaders. A Maoist attack  in 2017 and another one in 2019 led to a further loss of lives of CRPF personnel.

While the above is certainly a cause for concern, there has been over the last one decade, a reduction in the area which was under CPI Maoist influence as also a decrease in violent incidents and casualties, as seen in Figure 1. The attack by the CPI (M) in April 2021, which led to the loss of 22 personnel from the security forces, mostly from the CRPF, was perhaps a reassertion by the group, stating that they were still strong and active. When the timeline of major attacks is traced, it becomes clear that these attacks have been largely sporadic in nature and not continuously aggravating or maintaining status quo in its trend. Since 2011 there has been a 41% reduction in violent incidents involving the Naxals and 49% reduction in deaths due to these incidents since 2013. In 2019 alone, the violent incidents reduced by 19% and deaths by 15%. As per the data until March 2020, out of the 58 districts declared as Naxal-affected, violence is now restricted to 30 districts.^[x]

The government’s two-pronged strategy to address LWE is based on Security and Development of the people living in the tribal belt. The initiative has yielded results which has led to a shrinking of the area under CPI (M) control. But weaknesses still exist with respect to the training and leadership of the CRPF, to operate in a counter-insurgency environment. Unless these weaknesses are overcome, the Maoists will continue to have the capacity to hit at selective targets at periodic intervals, as seen in the recent attack in Bijapur in April 2021. Cutting across political lines was the national resolve to address this issue holistically, as seen by the joint statement^[xi] issued by the Union Home Minister Amit Shah, from the BJP, and Chief Minister Bhupesh Baghel, from the Congress Party. LWE needs to be combatted as a national priority, cutting across party lines and this joint statement was a step in the right direction.

Jammu & Kashmir

Pakistan’s desire to wrest Kashmir from India has led to four wars, the last being in Kargil in 1999. In the 1970s, after Pakistan’s humiliating defeat in the 1971 Liberation War, the Pakistani establishment, embarked on a strategy of wording bleeding Indian with a thousand cuts, and terrorism was the instrument to be used. The process of radicalisation in the Kashmir Division of the erstwhile state of J&K, which began sometimes in the 1960s, albeit at a low key, gained impetus over the next two decades, and towards the end of the 1980s, many groups with weapons and a virulent ideology had appeared in the Valley. The genocide of the minority Hindu population took place in the beginning of 1990, culminating in the displacement of about half a million Hindus from their homes, in which their ancestors had lived for thousands of years.

The challenge of putting an end to terrorist violence was the Constitutional protection given to the state under Article 370, which prevented the Centre from acting decisively against terrorism. The fact that certain political parties in the Kashmir Valley too were in touch with the separatists and were following a soft separatist line further complicated the issue.

A doctrinal shift in the government response to terrorism was reflected in the response given to the terror attack on a military base in Uri in 2016 and another attack on a CRPF convoy in Pulwama in 2019. Ceasefire violations by Pakistan were responded to with force, which again marked a shift from earlier policies.^[xii] But the most significant event took place on August 5, 2019, when the Indian Parliament revoked the special status accorded to J&K under Article 370 of the Constitution. Furthermore, the erstwhile borders of J&K were bifurcated into J&K and Ladakh and both were declared as Union Territories. This bold move of the government led by Prime Minister Modi had a significant impact on the security concerns arising from J&K.

A comparative study on the security scenario in J&K in one year before and after the August 5 decision, which also coincides with the second tenure of the union government reveals significant betterment of the security scenario.^[xiii] These statistics have been demonstrated in Figure 2.

The success of the government in normalising the security scenario in J&K has been backed by several key initiatives. Under the UDAAN initiative, nearly 39,000 candidates were trained and were offered jobs in the corporate sector. In a separate program nearly 5000 women were trained in warrior livelihood crafts in the year 2019-2020.^[xiv] Proposals have also been worked upon for establishing educational institutions of national importance.^[xv] Several such initiatives brought in a wave of hope and enthusiasm in the residents of J&K. This has been evident in the result of the District Development Council elections, the first democratic exercise since the scrapping of the special status. The voter-turnout for these elections saw a marginal increase as compared to the turnout for the Lok Sabha election of 2019. Terror infested areas such as Ganderbal, Kulgam and Shopian saw a considerable increase in the voter-turnout with 43.4%, 28.9% and 17.5%, respectively.^[xvi] In the elections, BJP emerged as the single largest party, winning 75 seats, with the ‘Gupkar Alliance’—an alliance of the National Conference (NC), People’s Democratic Party (PDP) and the Congress winning 120 seats (NC-67, PDP-27 and Congress 26). Apni Party, an ally of the BJP, won 12 seats. While the Alliance has won the first election, post abrogation, internal fault-lines became evident when a political party quit the Alliance in January 2021.^[xvii]

Northeast Quadrant of India

India’s eight north eastern states comprise 4 percent of the national population and 8 percent of India’s land mass. 96 percent of the borders of these eight states are international borders with China, Bangladesh, Nepal, and Bhutan. This fact gives to the region, great strategic significance, well beyond its size. The creation of a conducive environment that fosters peace and security in the region is one of the topmost priorities of the Government of India.

During the last seven years of the NDA Government, significant emphasis was laid on strengthening and developing the region through India’s Act East policy. The stability and security of Northeast India is paramount for the economic development of the region. Towards that end, the region has seen substantial improvement in the law-and-order scenario since 2014 as seen in figures 3 and 4, as a result of which the Armed Forces (Special Powers) Act, 1958, (AFSPA) was revoked completely from Tripura, Meghalaya, and several parts of Arunachal Pradesh.^[xviii]

The considerable progress made in the law & order situation in the region is a result of the multi-faceted approach adopted by the Central Government which comprised various components—political, economic and sustained counter insurgency operations agains the groups persisted with violence. Since 2014, a series of Agreements and Accords have been signed by the Union Government with various insurgent groups in North-East region which include a Memorandum of Settlement with ANVC (Achik National Volunteer Council) and ANVC/B of Meghalaya.^[xix] This was followed by the dissolving of these groups in December 2014. In a significant development, a framework agreement was signed with NSCN/IM of Nagaland in 2015.^[xx] A tripartite Memorandum of Settlement was signed in 2019 at New Delhi by the Government of India, Government of Tripura, and National Liberation Front of Twipra led by Sh. Sabir Kumar Debbarma.^[xxi] Following the settlement, 88 cadres surrendered along with their arms. A Memorandum of Settlement was signed with NDFB (Progressive), NDFB (Ranjan Diamary), NDFB (Saoraigwra), United Bodo People’s Organization (UBPO) and All Bodo Students’ Union (ABSU) in 2020 at New Delhi to end 50-year-old Bodo crisis.^[xxii] Following the settlement, 1615 cadres of NDFB surrendered their arms on 30th January 2020.^[xxiii]

To arrive at a permanent solution to a 23-year-old Bru-Reang internally displaced persons (IDP) undergoing human crisis, an agreement was signed between Government of India, Government of Mizoram, Government of Tripura and representatives of Bru IDPs in 2020.^[xxiv] As per agreement, Bru IDPs will be settled in Tripura and would be given financial assistance/aid by the Government of India for their resettlement and all-round development through a package of around Rs. 661 crore.

The security situation in the North-Eastern States has improved on all parameters with only sporadic incidents of violence over the year. Inputs reveal that insurgent groups are facing acute administration and financial crunch due to relentless operations by Security Forces and have been forced to form an umbrella organisation to maintain their capability for orchestrating violent activities. An important factor that has played an important role in the reduction of the insurgent activities in the North-East region is the difficulty faced by the Indian Insurgent Groups (IIGs) to set up camps in the neighbouring countries. This has been achieved through excellent understanding and coordination with  Bangladesh and Myanmar.^[xxv]

Exploiting Social fissures

A major internal fault-line is the ability of certain vested interests to whip-up national hysteria on certain issues, with the prime objective of derailing the government. This was witnessed in the first tenure of the Modi-led NDA government, where a motivated hate agenda was created, of India being an intolerant society. In Modi 2.0, this tactic was amplified with the protests against the Citizens Amendment Act in 2019-2020 and now the present farmers stir against the farm laws.

An effective perception management narrative is the current need of the hour to bring out the truth of what Acts passed by Parliament entail, so that unscrupulous elements cannot exploit gullible people. This is the challenge which the Modi government is confronted with.

Conclusion

India’s ability to achieve stability in its land borders and prevent internal disturbances from going out of hand will be a major factor in propelling the Indian economy to initially a USD 5 trillion mark and thence to a USD 10 trillion economy.

Great hopes rest on the shoulders of India’s Prime Minister, but if the rest of the population do their bit, that burden will be considerably reduced to move India towards the status of a middle income country.

 

Authors Brief Bio: Major General Dhruv C Katoch is Director, India Foundation and Editor, India Foundation Journal and Ms Soumya Chaturvedi is a Senior Research Fellow at India Foundation. A lawyer by education, she holds a postgraduate degree from Jindal School of International Relations and a specialization in Asia Pacific Security from University of Birmingham, UK. Her research interests include internal security, terrorism, peace and conflict studies. She has written articles for academic journals, newspapers and blogs.

^[i] Saleem MM Qureshi, Pakistan: Islamic Ideology and the failed state? in Veena Kukreja and MP Singh (ed), Pakistan: Democracy, Development and Security Issues, (Sage Publications, New Delhi), pp 88, 89.

^[ii]“Bajwa offer on J-K issue: India, Pakistan should resolve it in ‘dignified, peaceful manner’,” The Tribune, February 4, 2021.

^[iii]“Transcript of Virtual Weekly Media Briefing by the Official Spokesperson (February 04, 2021),” Ministry of External Affairs, February 5, 2021.

^[iv]“Any talks with Pak now will only be on PoK: Rajnath Singh,” The Times of India, August 19, 2019.

^[v] Claude Arpi, The Rediff Special, http://www.militaryphotos.net/forums/archive/index.php/t-23648.html

^[vi] “Timing of Chinese incursion with Xi visit a mystery,” Hindustan Times, 04 October 2014, available at https://www.hindustantimes.com/india/timing-of-chinese-incursion-with-xi-visit-a-mystery/story-Y1oTpaBL1YqiSPofVeARpO.html

^[vii] https://www.brookings.edu/blog/up-front/2018/05/23/wuhan-summit-an-important-signal-of-intent-by-india-and-china/

^[viii] David Scot, ‘The Indo-Pacific in US Strategy: Responding to Power Shifts,’  available at https://risingpowersproject.com/quarterly/the-indo-pacific-in-us-strategy-responding-to-power-shifts/

^[ix] “Naxalism biggest threat to internal security: Manmohan”, The Hindu, 24 May 2010, available at https://www.thehindu.com/news/national/Naxalism-biggest-threat-to-internal-security-Manmohan/article16302952.ece.

^[x] Annual Report 2019-2020, Ministry of Home Affairs, Government of India, available at: https://www.mha.gov.in/sites/default/files/AnnualReport_19_20.pdf

^[xi] “Bastar attack: Fight against Naxals will be intensified to end menace, says Amit Shah”, The Indian Express, 05 April 2021, available at: https://indianexpress.com/article/india/amit-shah-chhattisgarh-cm-bhupesh-baghel-pay-tributes-to-soldiers-killed-in-maoist-attack-7259403/.

^[xii] S. Chaturvedi, ‘Four Years after the Surgical Strike’, Chintan India Foundation Blog, 28 September 2020, available at: https://chintan.indiafoundation.in/articles/four-years-after-the-surgical-strike/.

^[xiii] Report of Jammu & Kashmir Security Tracker: A Comparative Analysis of Security Scenario Pre and Post the Removal of the Special Status, India Foundation, available at https://indiafoundation.in/wp-content/uploads/2020/10/JK-Security-Tracker.pdf.

^[xiv] Annual Report 2019-2020, Ministry of Home Affairs, Government of India, available at: https://www.mha.gov.in/sites/default/files/AnnualReport_19_20.pdf.

^[xv] “IIT, IIM, AIIMS to open in J&K soon, part of Rs 80000 crore package sanctioned by Central Government”, TimesNowNews.com, 22 January 2020, available at: https://www.timesnownews.com/education/article/iit-iim-aiims-to-open-at-j-k-part-of-rs-80000-crore-package-sanctioned-by-central-government/543681.

^[xvi] “The Number Theory: Understanding the DDC election results in Jammu and Kashmir”, Hindustan Times, 24 December 2020, available at: https://www.hindustantimes.com/india-news/the-number-theory-understanding-the-ddc-election-results-in-jammu-and-kashmir/story-JjJ6fMjzP2DXcn0LTMpM6H.html.

^[xvii] “Sajad Lone’s Peoples Conference quits Gupkar Alliance, cites ‘breach of trust’ by partners”, The Print, 19 January 2021, available at: https://theprint.in/politics/sajad-lones-peoples-conference-quits-gupkar-alliance-cites-breach-of-trust-by-partners/588485/.

^[xviii] “Revoking AFSPA”, Press Information Bureau, Government of India, available at https://pib.gov.in/PressReleasePage.aspx?PRID=1539889.

^[xix] “Union Home Minister stresses for overall socio-economic development of Meghalaya”, Press Information Bureau, Government of India, available at: https://pib.gov.in/newsite/PrintRelease.aspx?relid=109965.

^[xx] Press Information Bureau, Government of India, available at: https://pib.gov.in/newsite/PrintRelease.aspx?relid=124221.

^[xxi] Press Information Bureau, Government of India, available at: https://pib.gov.in/Pressreleaseshare.aspx?PRID=1581729.

^[xxii] Press Information Bureau, Government of India, available at: https://pib.gov.in/PressReleasePage.aspx?PRID=1600717.

^[xxiii] Press Information Bureau, Government of India, available at: https://pib.gov.in/PressReleseDetailm.aspx?PRID=1605144.

^[xxiv] Report on “Resettlement of Bru Migrants”, Ministry of Home Affairs, Government of India, available at: https://www.mha.gov.in/sites/default/files/NE_Bruscheme_23022021.pdf.

^[xxv] “Year End Review – 2020 Ministry of Defence”, Press Information Bureau, Government of India, available at: https://pib.gov.in/Pressreleaseshare.aspx?PRID=1685437.

Prime Minister Modi has, on many occasions in his victory speeches, publicly credited women as the “silent voters” behind the party’s stupendous electoral wins. “Nari Shakti” (women power) has taken a front row in politics for the first time in Bharat, with political analysts and pollsters all discussing the game-changing vote bank in rural to urban areas alike. Technically, larger number of women have voted for the BJP than for any other political party.

Prime Minister Modi’s image of a leader who is reliable and forward thinking is a refreshing first for the woman voter. He has not only identified out the very basic issues that need to be addressed to allow women in Bharat to lead a life of dignity and freedom, but has also strengthened his policy framework with reforms that have strengthened the faith of the Indian woman voter in the BJP. Even in his Independence Day speech this year in the midst of handling a global pandemic, he did not forget to mention the importance of women’s healthcare. Breaking the taboo of menstruation and the importance of using sanitary pads, a subject that has rarely found a place in the power corridors of Delhi, he announced that in 6000 Jan Aushadi Kendras more than 5 crore sanitary napkins at the cost of Rs 1 have been provided to women. This seemingly low priority, falsely so, women’s monthly issue has never found a place of pride in a national address. However, this is only a small fragment of the vision that the Party led by PM Modi has in mind to truly empower Indian women by changing the narrative entirely around them and the real issues they face.

The larger picture is reflective in the government’s policies that are positively impacting the lives of women with a palpable impact on women’s lives in marginalised communities and backward areas. Of course, the most popular schemes by the Modi-led government that are much talked about and have high implementation rates are Pradhan Mantri Ujwala Yojana, Pradhan Mantri Awas Yojana and “Izzat Ghar” under the Swachh Bharat AbhiyanYojana. But the micro interest that the present dispensation has taken towards the betterment of Indian women’s quality of life is unprecedented. The nomenclature itself used for many of the schemes, for instance “Izzat Ghar” (house of dignity) instead of Shauchalaya (toilets), is reflective of their agenda to create an equitable society. However, what is lesser known is the variety of other schemes that have been launched since 2014 aimed at tackling age old social evils against women, lack of women’s healthcare, to solve issues of access to loans, employability, financial independence, security and safety.

For instance, the government’s initiatives, Stand Up India and the Pradhan Mantri Mudra Yojana (PMMY), have women as their primary beneficiaries. According to the Ministry of Finance led by the Finance Minister Smt. Nirmala Sitharaman, bank loans of Rs 1 lakh to Rs 1 crore are facilitated to at least one scheduled caste or scheduled tribe member and one woman borrower per branch of scheduled commercial banks, out of which over 81% of the account holders were women. The Ministry also detailed that as of 26 February 2021, more than 81 per cent, that is, 91,109 accounts with an amount of Rs 20,749 crore have been sanctioned to women entrepreneurs under the Stand-Up India Scheme.

The PMMY has also been similarly welcomed by women across the country with “about 68 per cent, that is, 19.04 crore accounts with an amount of Rs 6.36 lakh crore have been sanctioned to women entrepreneurs under MUDRA scheme since inception,” as of February 26, 2021. The scheme intends to give upto Rs 10 lakh loans to the non-corporate, non-farm small/micro enterprises classified as Mudra loans given by commercial banks, regional rural banks, small finance banks, micro-finance institutions, and non-banking financial companies.^[i]

Importantly, government procurement from women-owned micro and small enterprises (MSEs) has also hit a record high in FY21 since the launch of the public procurement policy monitoring platform MSME Sambandh in December 2017 by the government. Government departments, organisations, and ministries had already purchased goods and services worth Rs 563.88 crore from 3,622 women-owned MSEs as of March 8, 2021, in the current financial year vis-à-vis Rs 393.43 crore worth procurement in FY20 from 3,655 women MSEs.^[ii]

Meanwhile, the credit guarantee fund trust for micro and small enterprises (CGTMSE), which operates the credit guarantee scheme for micro and small enterprises (MSEs), had accorded guarantee approval to 67,171 loan accounts of women entrepreneurs for an amount of Rs 3,366.63 crore as of December 12, 2020, in the current financial year. This was stated by the MSME Minister, Shri Nitin Gadkari, in a written reply to a question in the Rajya Sabha in February this year. The accounts approved during FY20 for women entrepreneurs under CGTMSE to support their business expansion and growth stood at 1,24,984 involving Rs 5,367.38 crore.^[iii]

In an interaction with 100 beneficiaries, the Prime Minister said: “one of the aims of this scheme is also to increase self-confidence among the people…so far, the conventional thinking has been that employment is generated either in the public sector or in the private sector. This scheme has helped in the development of the ‘personal sector,’ as a means of livelihood and self-employment.”^[iv]

In the interaction was Ms. Kiran Kumari from Bokaro, Jharkhand, who was once a hawker and is now a proud toy-and-gift shop owner after receiving a loan of Rs. 2 lakh.Ms. Munirabanu Shabbir Hussain Malek from Surat who received a Mudra Loan of Rs. 1.77 lakh, took LMV driving training, and is now earning Rs. 25,000 per month, by driving an auto-rickshaw. Ms. Veena Devi, from the Kathua district of Jammu and Kashmir, who worked as a weaver, received a Mudra loan of Rs. 1 lakh and is now one of the leading manufacturers of Pashmina shawls in her area.

The immensely successful Pradhan Mantri Ujwala Yojana also received an extension in this year’s budget with Finance Minister Nirmala Seetharaman announcing an additional 10 million beneficiaries this year to the already staggering 83 million LPG connections that have already been provided. The flagship scheme aims towards equipping every below poverty line household with a free LPG connection. A little less than half of the households in India where women are largely responsible for cooking were still using wood and coal in their kitchens leading to serious health repercussions. The subsidised connection and LPG connection and stove does not only directly improve women’s health but also is far more affordable and environmentally friendly.

The Pradhan Mantri Jan Dhan Yojana, is a mission launched by the Prime Minister to ensure financial inclusion through access to financial services. Through this scheme, a savings account/deposit account can be opened in any bank branch or Bank Mitra outlet by individuals who do not have any other account. Though it is not exclusively aimed at women, the sheer access to financial savings services has seen over 50 percent accounts being held by women.^[v] The Modi led government realises that simplifying processes and making access easier will automatically attract the resilient Indian woman who is known for her financial acumen. However, a more women specific initiative under the popular Beti Bachao Beti Padhao Yojana (BBBP) is the Sukanya Samriddhi Yojana (SSY) launched in 2015. SSY allows parents to plan the financial future of their girl child by opening a savings account in any commercial bank or India post branch. Sukanya Samriddhi Yojana has emerged as one of the most popular schemes owing to the high-interest rate as well as the tax benefits it offers. Under Section 80 C of the Income Tax Act, 1961, individuals can claim tax exemption up to Rs 1.5 lakh from the amount contributed to SSY account.^[vi]

In the budget speech (2017-2018) by the Finance Minister, the launch of Mahila Shakti Kendra was also announced with the aim of extending opportunities to rural and marginalised and backward women. The Mahila Shakti Kendra is a one stop support centre across the country, aimed at providing opportunities for skill development, capacity building, awareness , digital literacy , health and nutrition as well as employment. Women can find out more about their entitlement and avail their dues. The scheme also engages student volunteers to interact with the community to provide assistance to women.

Thepopular Beti Bachao Beti Padhao Yojana (BBBP) was launched in 2015 by the Prime Minister in Haryana. The objective of the scheme was to bring about awareness and sensitisation leading to behavioural change towards the rights of a girl child. In the last six years, the scheme has resulted in the Sex Ratio at Birth (SRB) improving by 16 points from 918 in 2014-15 to 934 in 2019-20. Gross Enrolment Ratio of girls in the schools at secondary level has improved from 77.45 to 81.32. Out of 640 districts covered under BBBP, 422 districts have shown improvement in SRB from 2014-15 to 2018-2019. Some Districts which had very low SRB in 2014-15 have shown huge improvement after implementation of the Scheme such as Mau (Uttar Pradesh) from 694 (2014-15) to 951 (2019-20), Karnal (Haryana) from 758 (2014-15) to 898 (2019-20), Mahendergarh (Haryana) from 791 (2014-15) to 919 (2019-20), Rewari (Haryana) from 803 (2014-15) to 924 (2019-20) and Patiala (Punjab) from 847 (2014-15) to 933 (2019-20).

The health impact has been substantial as well. The percentage of 1st Trimester ANC Registration has shown an improving trend from 61% in 2014-15 to 71% in 2019-20 (As per HMIS, MoH&FW). The percentage of institutional deliveries has shown an improving trend from 87% in 2014-15 to 94% in 2019-20 (As per HMIS, MoH&FW). Gross Enrolment Ratio of girls in the schools at secondary level has improved as well from 77.45 (2014-15) to 81.32 (2018-19-provisional figures) Percentage of schools with functional separate toilets for girls has shown improvement from 92.1% in 2014-15 to 95.1% in 2018-19.^[vii]

However, the most important impact has been to bring focus and awareness towards female infanticide and lack of education due to backward societal mindsets. In an effort to promote safety and security along with creating an essential support system and nationwide environment for women facing gender-based violence (GBV), the government inaugurated the One Stop Centres (OSC) in 2015. The aim of these centres is to provide emergency response and rescue services, Medical assistance, assistance to women in lodging the FIR, Psycho-social support and counselling, legal aid and counselling, shelter, video conferencing facility. According to India Today, out of 654 one-stop centres for women approved all over the country, only 234 OSCs are functional and 1,90,572 women were supported through these centres till now.^[viii]

The Swachh Bharat Abhiyan programme as well has been a land mark programme. Under the programme, the “Izzat Ghar” initiative has found a place of pride. No previous government ever thought of open defecation as an insult to women’s dignity, neither was it seen as a safety issue. But as a reflection of the government’s clear commitment towards the women of India and as well as their understanding of women’s issues in the country, over 11 crore toilets have been built. In 2019, India achieved the unthinkable by becoming open defecation free resulting in a fall in crimes as well as preserving the dignity of women across the country. This was an issue that could have been taken up by the previous governments but it would have required them to have sensitivity and understanding. Importantly, it would have required commitment towards large scare implementation, especially amongst marginalised and backward communities in rural areas and to motivate them towards this end.

In order to fill further gaps in healthcare for women, especially beneficial to women in remote or rural areas of the country who suffer the most due to lack of access to quality healthcare or due to lack of information and education, the Pradhan Mantri Surakshit Matritva Abhiyan was launched by the Ministry of Health & Family Welfare (MoHFW). The agenda of this scheme was to provide ante-natal care to pregnant women on the 9^th of every month. Ante natal care is provided by radiologists, gynaecologists as well as other specialists in both urban and rural government facilities.

Using the principles of a single window system, it is envisaged that a minimum package of investigations and medicines such as calcium supplements amongst other necessary medication would be provided to all pregnant women attending the PMSMA clinics. One of the critical components of the scheme is identification and follow-up of high-risk pregnancies.^[ix]

On the other hand, the government also took modern and bold initiatives by amending the Medical Termination Pregnancy Act of 1971. The Union Cabinet, chaired by Prime Minister Modi, approved the Medical Termination of Pregnancy (Amendment) Bill, 2020 to amend the Medical Termination of Pregnancy Act, 1971. Proposing requirement for opinion of one provider for termination of pregnancy, up to 20 weeks of gestation and introducing the requirement of opinion of two providers for termination of pregnancy of 20-24 weeks of gestation. Further, enhancing the upper gestation limit from 20 to 24 weeks for special categories of women including ‘vulnerable women including survivors of rape, victims of incest and other vulnerable women (like differently-abled women, minors) etc. The amendment also includes the particulars of the women to be kept confidential.^[x] This move would ensure women have access to safe and secure abortion services. According to the PMIndia.Gov website, several petitions were received by the courts to increase the gestational age on grounds of sexual violence or foetal abnormalities. This amendment will ensure dignity, privacy and safety for women who need to terminate pregnancy. In a country that sees around 800,000^[xi] illegal abortions every year, it is a necessity to ensure that women have access to legal and safe provisions of termination of pregnancies.

The government has also set up a task force to consider increasing the marriageable age of girls due to health and safety reasons. Additionally, in the same vein of creating a safer and more supportive environment in order to keep our children safe, progress has been made with the landmark ruling that ensures the death sentence for child rapists.

Taking women’s empowerment to new levels has also shattered the proverbial glass ceiling. Women now have the opportunity to be granted permanent commission (PC) in all 10 branches of the Indian Army.

The Mahila-E-Haat is another initiative in creating financial independence for women. The platform is open to women entrepreneurs over the age of 18, NGO’s as well as Self Help Groups to showcase their products. The portal is said to have attracted lakhs of visitors since its launch and features over 2,000 products and services across more than 18 categories.^[xii] Further, the STEP scheme under the Ministry of Commerce and Industry also aims to provide training, skill development and employability to women over the age of 16 years towards financial independence and employability. It covers an array of industries from agriculture, handicrafts, handlooms, tailoring, computer education, hospitality and even development of skills like spoken English language courses.^[xiii]

The BJP manifesto has also included the intention of passing the much-debated Women’s Reservation Bill. The Bill will allow 33% Lok Sabha seats to be reserved for women. The agenda was set in their manifesto in 2014, a clear indication that the Party intends on creating a more equitable environment for women across the country and across professions.

However, women cannot be expected to take on such demanding work roles without adequate support from their employers. Realising the importance of working women who play multi-faceted roles as homemakers and mothers, the government in 2016 increased maternity leave from 12 weeks to 26 weeks. These benefits were made available to adoptive mothers as well as mothers whose babies had been born via surrogacy.

The government did not shy away from pushing reforms in the Muslim community either, a community seen as more resistant to change and opposed to the Modi government and its initiatives. The shameful and more importantly unconstitutional practice of Instant Triple Talaq was finally criminalised. Additionally, the archaic practice of Muslim women not being allowed to travel for Haj without a male companion was also altered. In 2018, the government amended the Haj policy by allowing women above the age of 45 yrs. to travel without a male companion. Unlike previous dispensations that preferred walking on eggshells with minorities, the Modi-led government cannot be faulted for the bold steps they are willing to take for the future of Indian women irrespective of their religion, caste or creed.

The government has also distributed scooters under the Amma scooter scheme to over one lakh women at subsidised rates; they have distributed homes in Gujarat to women under the Pradhan Mantri Awas Yojana and have also launched the “Working Women Hostel Scheme” which include day care facilities and is open to single or widowed women, women with children, women from below poverty line households, handicapped women, as well as women undergoing training.^[xiv]

However, it was during the pandemic that one saw the sensitivity of the Modi led government towards the needs of women in the country. During the first relief package announced by the Finance Minister it was evident that they knew that if women were taken care of, the entire family would benefit. To that end, 20 crore women with Jan Dhan accounts received Rs 500 per month for the next three months of the lockdown. Under the Ujwala Yojana 8.3 crore BPL families got free gas cylinders, Rs 1000 was credited via Direct Benefit Transfer for poor widows along with the elderly and disabled, Rs 50 lakh insurance coverage was extended to Accredited Social Health Care Activists nurses (all women) amongst other healthcare and frontline workers. 5 crore families beneficiaries of the Mahatma Gandhi National Rural Employment Act (MNREGA) which also largely attracts women received Rs 2000 increment and minimum wage was increased from Rs 182 to Rs 202.

The Modi led Government has broken barriers with their women-centric model of governance, with their ability to comprehend that mere tokenism is an insult to the skill, ability, resilience and power of the Indian woman. They have understood that the approach to truly exploring the full potential of women, a single pronged approach is futile and the key changes that every woman in India envisions will only come to a fruition with a multi-pronged approach, not limited to petty handouts but through a change in the entire ecosystem in which she functions. To this end, the Prime Minister has used his immense outreach to strategically break taboos and has used the power of messaging in order to bring a societal mindset change. His government has aimed at financial independence, education, employability backed by creating an environment of freedom and safety.

Much has been achieved in the last six years. Today, the Indian woman has renewed hope that from here on, the status of women will continue to rise with each passing day.

Author Brief Bio: Rami Niranjan Desai is a NE India Specialist, as founding director of the North East Policy Institute, Guwahati she worked extensively in the area publishing on Insurgency and conflict, religion & social movements. She is presently Director of Pathfinder India Consultancy, an organisation that undertakes research and analysis. She has completed her higher education from King’ College in Theology and Anthropology of Religion. Her media outreach is available on India’s leading channels.

^[i] https://www.financialexpress.com/industry/sme/msme-fin-womens-day-2021-women-entrepreneurs-biggest-beneficiaries-of-pm-modis-stand-up-india-mudra-schemes/2208727/

^[ii] https://www.financialexpress.com/industry/sme/msme-fin-womens-day-2021-women-entrepreneurs-biggest-beneficiaries-of-pm-modis-stand-up-india-mudra-schemes/2208727/

^[iii] https://www.financialexpress.com/industry/sme/msme-fin-womens-day-2021-women-entrepreneurs-biggest-beneficiaries-of-pm-modis-stand-up-india-mudra-schemes/2208727/

^[iv] https://www.pmindia.gov.in/en/news_updates/beneficiaries-of-pradhan-mantri-mudra-yojana-share-their-success-stories-during-interaction-with-pm/

^[v] https://www.thehindu.com/business/Economy/pradhan-mantri-jan-dhan-yojana-women-hold-more-than-50-per-cent-of-the-accounts/article32886186.ece

^[vi] https://groww.in/calculators/sukanya-samriddhi-yojana-calculator/

^[vii] https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1691725#:~:text=SRB%20has%20improved%20by%2016,%2D15%20to%202018%2D2019.

^[viii] https://www.indiatoday.in/education-today/gk-current-affairs/story/-234-one-stop-centres-opened-for-women-here-is-how-to-access-1410015-2018-12-15

^[ix] https://nhm.gov.in/index1.php?lang=1&level=3&sublinkid=1308&lid=689#:~:text=Pradhan%20Mantri%20Surakshit%20Matritva%20Abhiyan%20(PMSMA)%20was%20launched%20to%20provide,the%209th%20of%20every%20month.

^[x] https://www.pmindia.gov.in/en/news_updates/cabinet-approves-the-medical-termination-of-pregnancy-amendment-bill-2020/

^[xi] https://www.thehindu.com/opinion/editorial/a-small-step-the-hindu-editorial-on-medical-termination-of-pregnancy-law-amendments/article34313523.ece

^[xii] https://www.dnaindia.com/analysis/report-being-a-woman-in-modi-s-new-india-2837977

^[xiii] https://www.startupindia.gov.in/content/sih/en/government-schemes/support_to_training_and_employment_programme.html

^[xiv] https://www.pradhanmantriyojana.co.in/working-women-hostel-scheme/

Development of nations, advancement of societies and progress of mankind is often weighed quantitively through the parameters of infrastructural development. Be it the signs of globalisation or mapping governance priorities, the visual impacts are often in terms of buildings built, roads laid, operational airports, with contemporary indicators like pipeline network laid, digital connectivity infrastructure amongst many others.

As the Narendra Modi led government was sworn in for its second consecutive term in office in 2019, a clear emphasis amongst a multitude of priorities was on turning India into a USD 5 trillion economy. For India to achieve this goal, the key lies in re-aligning priorities and ensuring the development and governance of robust infrastructure. To ensure holistic and multi-sectoral development, India needs to ensure supply side reforms. Not just upgrading the existing facilities but creating new ones which will drive both the supply and domestic demand side of India’s development story.

As per an estimate, a global investment of USD 94 trillion is needed to meet the infrastructure requirement of the world between 2016 and 2040^[i]. Of this, 50% of the requirement is in Asia. Major areas of investments are expected to be water and energy. It is to further this agenda that the Government of India under its National Infrastructure Pipeline has made a commitment to invest INR 100 lakh crore to develop infrastructure in the country.

The National Infrastructure Pipeline (NIP) is an ambitious whole-of-government project rolled out by the Government of India for fiscal 2019-25 to mobilise investments for infrastructural development in India. The project aims to capture the information of all projects (Brownfield, Greenfield, Under Development, Under Implementation or Under Conceptualisation) worth Rs 100 crore or more.

The first term of the NDA Government rode high on numbers in terms of expansion of road network, railway lines, upgrading existing infrastructure, development of ports, laying of pipelines for gas transmission, ensuring availability of cleaner fuel, electrifying the nation and expansion of airports. The second term so far has been more focussed on a qualitative upgradation and build-up of such facilities. The NIP, through its six priority areas, clearly defines the Government’s vision of an infra-structurally developed India of 2025.

TRANSPORT INFRASTRUCTURE

The bedrock of any nation’s progress lies in its network of connectivity. A nation progresses when it moves, and it moves when the country is connected internally through a network of accessible and robust network of roadways, railways, airways and waterways. Keeping in mind the idea of a New India, transportation sector has been one of the key sectors for priority development and investments for the NDA Government in its second term.

Roads

The pace of construction of roads touched an all-time high of 10,237 kms of highways constructed in 2019-20 alone^[ii] with an ambitious target of increasing this to 12,000 kms a year. But constructing highways by itself is not enough. There is a need to develop feeder roads, ring roads, and arterial roads around these highways to ensure decongestion and last mile connectivity. In order to fill this gap, the Bharatmala Pariyojana was implemented by Government of India with the vision of constructing greater lengths of highway roads, upgrading the existing ones and bridging critical infrastructure gaps to ensure a more efficient and effective utilisation of resources. Under this programme, special attention is being paid towards ensuring connectivity with ports and loading docks, backward and tribal areas, areas with high economic activity, places of religious and tourist interests and connectivity with neighbouring countries, wherever applicable.

The programme, which is also the flagship programme of the Ministry of Road, Transport and Highways (MORTH), was approved in 2017 with an initial corpus of INR 5,35,000 crore and a target of upgrading/constructing 34,800 km of highways by 2022. As per official statistics, projects for about 13,000 km have already been awarded with 2,587 km worth of project under bidding and another 13,000 kms under feasibility study. In terms of its economic benefits, the programme under its various phases will focus more on creating affordable infrastructure following the principles of shortest distance green project development wherever applicable instead of redevelopment of brown field projects while creating 35 crore man days of employment.

Tapping of the potential unleashed by private sector participation has acted as an enabler in achieving the speed at which roadways have developed in the country. However, there is still scope for greater cooperation between the private and public players to ensure timely delivery of projects. Greater digitisation of services like use of FASTags for toll collection, use of artificial intelligence for surveillance and traffic management, etc, have ensured better compliance and easier governance in case of violations. Penetration of deeper technological innovations for improved safety is a pillar of the Government’s vision for the road sector in 2025.

Railways

Indian railways form the lifeline of India’s transportation sector with an operational track network of over 1,00,000 km and a daily passenger movement of about 1.1 million people^[iii]. The upgradation of the railways under Modi 2.0 has essentially been based on three broad pillars: Development and upgradation of hard infrastructure, betterment of passenger amenities and adaptation of new technology to keep up with the pace of national development.

The development and enhancement of existing rail infrastructure has had multiple benefits. In 2019, Indian railways has reported zero passenger fatalities. This success comes in the backdrop of reforms like upgradation of 96% of the signalling equipment from primitive ones to modern ones, and electrification of a majority of broad-gauge rail routes with a target of electrifying the remaining 28,000 km by December 2023^[iv]. Investments have also been channelised to upgrade locomotives, betterment of the condition of tracks and skilling of personnel.

The second aspect of development of rail infrastructure in India is the modernisation of passenger amenities. Railways under Modi 2.0 has received a digital push with greater use of technology in passenger services like rail ticket booking, rail enquiry and other such allied services. A major modernisation drive was undertaken to upgrade the existing railway stations and equip them with essential conveniences like lifts and escalators. Keeping with its commitment to make development eco-friendly and in line with Sustainable Development Goals (SDGs), the government introduced services of bio-toilets and solar panel installation for lighting the railway tracks.

To keep with the pace of development and ensuring that railways is not left behind plans have been put in place to ensure the development of Dedicated Freight Corridors (DFCs). The development of Eastern and Western DFCs is being looked at as a move towards reducing the logistics costs and thus in turn give a push to the Make in India campaign.

The sector however still faces its share of challenges with trains running at frequent delays because of overlapping in high density corridors. Though there has been a massive improvement in passenger amenities, these are still limited to a few special trains with a lot of scope for improvement. While national railway has started to see its share of good days, the suburban trains are still running at overcapacity and are in need for massive decongestion.

It is to meet these challenges, that the Government proposes to invest a sum of about 13.7 lakh crores over five years through the NIP towards building of the DFCs, high speed rails and making railways more reliable and safer. Private participation is also being encouraged with two stations of Gandhinagar and Habibganj being developed on PPP basis.

Airways

With an annual growth rate of over 10% since 2008-09, the Indian aviation market ranks as the fastest growing domestic aviation market in the world. It also ranks 9^th globally in terms of civil aviation. As per an estimate by the Airports Authority of India, Indian airports will be handling a passenger movement of about 400 million by 2024-2025.

When the Narendra Modi led NDA Government took to helm of affairs there were a total of 65 operational airports in the country which has now increased to 125 operational airports. Under the Regional Connectivity Scheme – Ude Desh ka Aam Nagrik (RCS-UDAN) launched by the Government, 57 unserved/under-served airports have been operationalised with 347 new routes offered by 11 operators^[v]. The newly added airports have cumulatively served over 6 million passengers and have received a viability gap funding in excess of INR 1000 crore.

Private potential too has been thoroughly tapped in the maintenance and operation of brownfield and greenfield airports across the country. The expertise of private players in passenger amenity facilitation and service provision has played a big role in ensuring a Compound Annual Growth Rate (CAGR) of 12.4% in the immediate 5 years preceding the covid era^[vi].

In terms of fleet management the Indian aviation operators rank better than the average with over 70% of the fleet being on lease basis against a global average of about 50%. Additionally, civil aviation in India is being made more efficient by involving the Indian Air Force in route management of commercial flights to ensure efficient use of the airspace while charting shortest possible routes with lowest fuel consumption.

While the aviation sector has seen a healthy growth, It has its share of challenges. Many of the airports in India are still operating at over 100% of their capacity, leading to longer lean times in passenger management, manual surveillance leads to delays in boarding and thus the use of artificial intelligence (AI) is being proposed to de-clutter the boarding process.

Ports

Revival of the use of inland waterways for maritime transportation has been a priority area for the Narendra Modi led NDA Government since its first tryst with power in 2014. The Government has taken several steps to ensure the mainstreaming of maritime routes as preferred means of transportation for commercial and non-commercial purposes. As per an estimate by the Ministry of Ports, Shipping and Waterways of the Government of India, approximately 95% of the country’s trade by volume and 68% by value happens through waterways. With a long coastline of 7,517 km marked by 12 major and 200 non-major ports, the Indian shipping industry plays a crucial role in supporting domestic and foreign trade^[vii].

In order to develop new ports and work on modernisation of the existing ones, the Indian government has rolled out the Sagarmala Project. Besides port building and modernisation, resources sanctioned for the project are being diverted towards enhancement in capacity utilisation. At present, most of the ports in India are operating with basic to minimal technological intervention and thus are plagued with operational inefficiencies like higher turnaround time and under-utilisation of capacity. The aim of the Sagarmala project is to ensure holistic development of shipping ports. Project feasibility studies have also been conducted to develop coastal industrial zones around busy ports to reduce logistics cost to the extent possible. Beginning from 2015, over 500 projects with a total estimated cost of INR 3.59 lakh crore have been identified for implementation by 2035^[viii].

Apart from commercial exploitation of maritime trade routes, Sagarmala project also deploys resources for development of coastal tourism, lighthouse tourism, skill development and building of new technology centres. A phased and quick adaptation of technology in the shipping sector will lead to better capacity utilisation of the existing and upgraded infrastructure coupled with reduction in logistics costs. Under this ambitious program, the government aims to increase the port capacity utilisation to 65% of the total available capacity.

Energy Infrastructure

Amongst the various pillars on which the NDA government is envisioning India’s progress, energy security has been given a high priority. The Prime Minister aspires to create a self-reliant and energy surplus nation by 2025. Connecting the length and breadth of the country with accessible sources of power which are not just affordable but provide for generation of clean energy is a priority goal for the Government.

As per the statistics released by the Ministry of New and Renewable Energy, India has a total renewable energy production of 94.43 GW with a well-placed target of increasing this to 175 GW by 2022. Moving towards alternate sources of renewable energy production, the Government is also pitching natural gas to be the wonder fuel of the future. Plans are being laid out to increase the share of gas in the national energy consumption mix from 6% to 15% by 2030.

Infrastructural developments in terms of laying over 16,000 km of gas pipeline across the country and approval for an additional 16,000 are on the anvil. Bidding has successfully been concluded for the tenth round of City Gas Distribution Network (CGDN) which affects 70% of the country’s population across 53% of the total geographical areas. This will ensure the availability of clean energy in 229 Geographical areas (GAs) benefitting 400 districts in total^[ix].

To fuel vehicles, infrastructure has been adequately upgraded with 1906 CNG stations functional across the country to fuel 35.17 lakh vehicles on Indian roads^[x]. Apart from building up the gas infrastructure, milestones have been achieved in the exploration of oil and gas as well. The national kitty of solar energy too has expanded with 40.09 GW of the 94.43 GW of total renewable energy being solar in nature^[xi].

At the policy level, important reforms like replacement of the production sharing contract Open Acreage Licensing Policy (OALP) with the revenue sharing contract Hydrocarbon Exploration and Licensing Policy (HELP) has been welcomed by the industry and is being seen as a big step towards attracting greater investments for future exploration and production opportunities. While great inroads have been made in the energy infrastructure under the NDA government lacunae still exist in better use of technology to minimise AT&C losses, smart metering and user management services.

Digital Infrastructure

Modi 1.0 kick started the sprint of digital upgradation of India with the roll out of its much celebrated ‘Digital India’ campaign. The campaign was aimed at making the most of technology by adopting various digital and technological tools to ensure ease of living for the common man. Successful attempts were made at digitising governance and doing away with unnecessary paper trails, large scale digitisation of records took place, banking was reformed with the opening of bank accounts for every Indian along with digital banking services and linking with Aadhar, subsidy refunds were changed to digital transaction to plug leakages.

The fruits of this mammoth digitisation exercise reaped benefits in the COVID era with the availability of JAM trinity ensuring Direct Benefit Transfer (DBT) payments under various central government and centrally sponsored schemes. A transaction of over INR 27,000 crore was made to 11.42 crore beneficiaries even when the whole nation was in a state of lockdown^[xii]. A digitally connected India also ensured the availability of all essential services through various e-platforms during the unusual circumstances of the global pandemic. Availability of not just services but goods through e-commerce served the twin purposes of catering to both the demand and supply side of the equation.

In terms of hard digital infrastructure, India today boasts of 119 crore mobile subscribers, an internet penetration of 40%, 1 lakh gram panchayats connected through Bharat Net, 796 Digital Villages, 128.99 crore enrolments for Aadhar, over 4 crore financial transaction through Unified Payment Interface (UPI) and 4.69 crore digitally literate beneficiaries^[xiii].

However, challenges for building a digitally connected New India still lie in terms of increasing the penetration of internet connectivity in the rural belt. The Government has set for itself a target of increasing this to 80% by 2025. A complete roll out of 5G network to ensure better adaptation towards emerging technologies like cloud computing, e-Healthcare, Internet of Things, advancing Fintech and artificial intelligence will further give a boost to an already accelerating Digital India program.

Conclusion

The Narendra Modi led NDA Government came to power for the first time in 2014, riding on the promise of ‘Development For All’. The second term too was won on the strong foundational development work done between 2014-2019. Continuing on its commitment of ensuring an infrastructurally advanced India, the first two years of Modi 2.0 were about delivering promises made.

Former President of India Dr APJ Abdul Kalam in his much-celebrated work ‘India 2020’ had laid a comprehensive vision of how the India of 2020 will look like. He was optimistic of India and Indians being more forward looking and closer to being a developed nation. His idea of an India of 2020 was that of a more self-reliant nation, not just economically but in terms of ensuring national security, technological superiority, agricultural productivity, energy availability, literacy, and higher standards of living for its people.

While India might still be a little farther away from Dr Kalam’s vision of an India in 2020, the government has shown steadfastness in its commitment to reach there. Self-reliance of various kinds is being ensured through targeted reforms under the Atmanirbhar Bharat program, rolled out to inject life in an economy crippled by the ensuing pandemic.

The government remains committed to its promise of good governance, by ensuring holistic development of the country across all sectors from education to health, space to agriculture, and social to commerce.  However, challenges lie ahead not in envisioning this progress but in execution of the vision with equal coherence.

Author Brief Bio: Deeksha Goel is currently working as a Senior Research Fellow at India Foundation. Her research interests include studying the Geopolitics of Indian Ocean Region. Deeksha graduated as an Engineer specialising in Electronics and Communication and has an MBA in Finance.

[i] Global Infrastructure Outlook 2017

[ii]https://morth.nic.in/sites/default/files/Annual%20Report%20-%202021%20(English)_compressed.pdf

[iii] Data Source: Indian Railways

[iv]https://www.narendramodi.in/vikasyatra/articledetail/infra-for-growth/building-infrastructure-for-building-a-new-india-549939

[v] Data Source: Ministry of Civil Aviation, Government of India

[vi]http://164.100.47.194/Loksabha/Questions/QResult15.aspx?qref=24059&lsno=17

[vii]http://shipmin.gov.in/sites/default/files/Shipping%20Annual%20Report%20English_compressed.pdf

[viii]http://164.100.47.194/Loksabha/Questions/QResult15.aspx?qref=23963&lsno=17

[ix] Press Release: Distribution of Letter of Intent for 50 Geographical Areas under the 10thCGD Bidding Round”; Petroleum and Natural gas Regulatory Board, Ministry of Petroleum and Natural Gas; March 1, 2019

[x]https://evreporter.com/lng-for-heavy-commercial-vehicles/

[xi]https://mnre.gov.in/img/documents/uploads/file_f-1618481027521.pdf

[xii]https://www.nic.in/blogs/direct-benefit-transfer-a-blessing-during-the-time-of-pandemic/

[xiii] Data Source: Ministry of Electronics and Information Technology, Government of India

Keeping the fundamental principle of Antyodaya in mind, the Modi government enthused technological advancement in all the policies and programs and ensured leakage-free delivery for all in general and marginalised in particular. The governance framework prepared by Prime Minister Narendra Modi has paid well during the pandemic that has emerged as a primary battleground in his second term.

“The voters in this country did not care about Congress schemes. Very few benefitted from the schemes of Congress governments. This time they got gas cylinder and Rs 1.5 lakh for house. We were looking for the evidence to the contrary but we could not find it. We even peaked inside houses and found gas cylinders. The government gave funds through Direct Benefit Transfer (DBT). They used JAM trinity – Jan Dhan, Aadhar and Mobile. Initially, I thought that MUDRA loans are rubbish and fake but I have recorded videos. Shobha Lal, sitting 50 km away from Azamgarh, is a Dalit who got Rs 50,000 as MUDRA loan. I came back and checked the MUDRA loan data where 4.81 crore people had got loans and Rs 2.1 lakh crore had been dispersed. This is a big change. This is a big governance exercise.”^[i]

These were the views shard by senior journalist Shekhar Gupta during a program after the election results were announced in 2019, where he recounted the reasons for BJP’s victory. This was a programme where panelists and audience members were not supporters of Prime Minister Narendra Modi; however, at this point, even they could not deny the glaring reality.

In the 2019 general election, Narendra Modi again formed government with even more votes and seats than before. He had promised a transparent, accountable and corruption-free government at the Centre in 2014 and he hadfulfilled most of his promises over the next five years. As a result, people showed even more faith in him and the BJP won 303 seats and 38% votes. There were more than 200 Lok Sabha seats that the BJP won with more than 50% votes.^[ii]

Now, Modi government has completed seven years at the Centre and the personal popularity of Prime Minister Narendra Modi has only increased in these many years-even during the time of pandemic.^[iii] The framework designed by the government in the initial years is now reaping benefits for common people. The governance principles of the Modi government have been clear since the day one in office. On one side, he was inspired by the ideology of Antyodaya propounded by the Jana Sangh ideologue and founder, Deen Dayal Upadhyay, and on the other hand, he enthused technology to ensure delivery with minimum leakage and pilferage. While doing so, his government never forgot unhindered and easy delivery to those who have been unattended since long and have been waiting at the end of the queue.

This is politics of ‘welfare of all’ where governance and justice enthused with technology are an integral part of the core agenda of Modi government. Any individual or political party wanting to win elections, now has to come up with certain policies, proposals and programs that directly target and benefit the people. These are different from the perfunctory face saving schemes of the past as any schemes now are spoken of in terms of deliverables, deadlines and achievements. The blanket and vague slogan of ‘Garibi Hatao’ (Eradicate Poverty) does not work anymore; people expect political aspirants to provide effective solutions with visible benefits for the last women standing in the line. The schemes are also not bureaucratic tools anymore; they have a political face and hence answerability. With an outcome based approach entering politics under Modi government, the discourse around politics of welfare and governance seems to have completed a full circle. Under this approach, there is no negation of foreign investment, or profit making by the corporates but at the same time the revenue earned by the state has to be utilised for the vulnerable, poor and downtrodden without any leakage and pilferage to bridge the socio-economic divide in the country.

As the Chief Minister of Gujarat for 13 years and then as the Prime Minister of India, Narendra Modi has directed his efforts at bridging the socio-economic divide through the intervention of state policies and people’s participation. The objective of his policies is always clear in terms of people it aims to reach. It naturally follows then that the impact is huge and closely monitored implementation leads to time-bound deliveries. He wrote in a letter to the people of India after the completion of one year of Modi 2.0, “The people of the country voted for a substantial transformation. The nation saw how the administrative apparatus broke itself free of status quo and from the swamp of corruption as well as mis-governance. True to the spirit of ‘Antyodaya’ the lives of millions have been transformed.”^[iv]

Given the size of the Indian populace, each of Modi’s schemes takes a comprehensive approach where every aspect of application is considered. The policies are clear about targets, benefits, and how these will reach where intended. The policies are designed in a way that there is minimum leakage and pilferage. The focus remains on the skill, scale, and speed for any program, policy, or campaign. The ‘Welfare of All’ approach under Prime Minister Modi has seen three key aspects: use of technology, corruption free government and Antyodaya.

Technology and Transparency

Technology has emerged as a great enabler in this process by delivering democracy and governance. For a country like India where democratic traditions are part of a vibrant cultural system, technology has become a crucial catalyst. Technology is today a partner in democracy in all these senses. It allows reach, access, dissent, diversity and justice. It has changed the face of governance through innovation and enhanced public participation and response. Long before Narendra Modi became the Prime Minister, he understood the power that technology could lend to implementation and governance. As the Chief Minister of Gujarat in 2013, he said during a Google chat show, “Internet is a game changer. Common citizens can now directly engage in policy making process. Internet has empowered people and made communication with leaders and the government a two-way process.”^[v] After forming government in 2014, one of the mega campaigns launched by Modi was Digital India. It created awareness towards improved online infrastructure and electronic availability of services. With this, the country decisively stepped towards e-governance where the Information and Communication Technology (ICT) was used to deliver government services, exchange information, integrate systems and services and manage interactions within the government system. The aim of this campaign now is to connect rural areas with high-speed internet and create universal digital literacy.^[vi]

JAM Trinity

In the development and governance sector, the government has turned to the technological trinity of Jan Dhan-Aadhar-Mobile (J-A-M) to make the system more effective, accountable and transparent. The biggest single achievement of this trinity has been cutting out middlemen, and gradually putting more than 350 schemes from 51 ministries into the Direct Benefit Transfer (DBT) programme which saved Rs 1.70 lakh crore while disbursing Rs 13 lakh crore in the first six years of the government.^[vii] These three factors have worked in tandem to ensure ease of operation. The absence of one would have led to the failure of other, hence their appearance as a trinity. First, Jan Dhan accounts ensured financial inclusion of the entire population. Then Aadhaar number brought in a secure identification system to prevent misuse, duplication or pilferage. Mobile phones further completed the circle of online and mobile transactions and verification.

Jan Dhan is now the world’s biggest program of financial inclusion. It was launched on 28 August 2014. More than 42 crore bank accounts have been opened by April 2021 under Jan Dhan scheme where a balance of 147,000 crore is there in beneficiary accounts with the help of 1.26 lakh Bank Mitras delivering branchless banking services in Sub-Service Areas.^[viii] Today, people don’t have to run from pillar to post to get scholarships, pensions, subsidies, MNREGA payment, funds for housing or toilets. Once approved, these funds, subsidies or scholarships directly reach the account of the beneficiaries.

Government E-Market

While JAM is sweeping in its reach and impact, several other systemic changes were also introduced to incorporate technology. Take for example, the Govt E-Market or GEM. GEM is a dedicated e-market tool for goods and services procured by government organisations, departments and public sector units. It uses technology to automate procurement processes and systems, introducing greater accountability in public procurement. A small entrepreneur can now register on the Government e-Marketplace (GEM), and bid competitively for supply of goods to the Government. As he expands his business, he also contributes to lowering the cost of procurement for the government. This leads to increased efficiency and greater value for public money. The platform has a network of around 13 lakh sellers and service providers. The cumulative transaction value of goods and services procured from GeM by state and central government organisations grew from Rs 51,200 crore a year ago to Rs 1.1 lakh crore by the end of March 2021. ^[ix]

Corruption-free Government

A prerequisite to the ‘welfare of all’ approach is corruption-free government. Elimination of corruption is also the cornerstone for Antyodaya as the benefits meant for the last person in the queue cannot possibly reach her in a corrupt system. Here also, technology assumes a key role. The recent advancement of technology is not only because of its benefits in terms of enhanced output but also because it assures a system that is not vulnerable to human corruption. It provides transparency and adherence to a pre-approved set of rules with no exceptions. The extensive use of technology for governance in the last seven years has reaped rich dividends.

Over the span of seven years, there was not a single case of political corruption against the Modi government. It seems we have come a long way since the time of former Prime Minister Rajiv Gandhi, who had said that out of every single rupee sent by the Centre, only 15 paise reaches at the village level. When corruption takes place, the pilferage and leakage eats into the funds meant for the poor. Understanding this, the Narendra Modi government tried to minimise pilferage and leakage of funds at different level by using different technological tools. Today, various weaker and vulnerable sections are getting benefits of this technological disruption in welfare schemes, policies and programs.

Geo-tagging

The practice of geo-tagging is an example of how technology has been used to check corrupt practices. Modi government started monitoring important schemes through apps and dashboards in which posting of geo-tagged pictures of the beneficiaries or the work done by the ground-level government official became mandatory. This was not a small change; a geo-tagged picture shows the date and time of the picture apart from the picture of the beneficiary or the work done. It takes just seven clicks on your computer to find rural development projects, including the names and details of the projects or the individual beneficiaries, right up to the village level. For example, on the AwaasApp one can find out how many houses have been built say in Andaman and Nicobar under Pradhan Mantri Aawas Yojana with details and pictures of the beneficiaries with their new homes.^[x] There is a proof of every home and toilet made under the scheme. This has helped put a stop to pilferage of government money in the name of bogus work. Now, the said assets have to be imaged, geotagged and digitally documented, deterring corrupt practices and ensuring optimum utilisation of funds.

Social Justice and Governance

Politics can be understood as authoritative allocation of values. The existence of such practices for a substantive time results in a just society taking shape and politics becoming a tool of social transformation. On the other hand, take a simple definition of justice – treat equal equally, unequal unequally. When we club both the definitions of politics and justice, then the idea of social justice begins to emerge. Justice can be understood at two levels – procedural and distributive. Governments normally focus on distributive justice when policies and programs are framed for the public. They don’t think how these will reach people in different parts of the country living in vastly different conditions. The result is leakage and pilferage at different levels. Hence, considering procedural justice along with distributive justice becomes a prerequisite for the success of any scheme or policy. In the last 7 years, Modi government ensured that both distributive and procedural justice come into play. Schemes were designed to ensure people’s participation and maximum benefit.

This government is totally aware and committed for the upliftment of poor, vulnerable and excluded and introduced many policies ensuring affirmative action in different ways. Since independence, reservation in jobs was considered as the only way of affirmative action which was very much required and if the task was accomplished with full sincerity then the scenario might have been different today. Modi government is ensuring backlog vacancies to be filled on one hand and on the other coming up with many innovative ways of ensuring affirmative action. Today when millions of youth are passing out from higher eduction institutions every year so this is not possible to give job to everyone. Modi government has created an ecosystem for entrepreneurship for everyone especially the weaker section. The government has redefined the whole idea which is now – Political change to economic change and development to social change.

We have always considered caste as the parameter for backwardness and formulated program and policies. Modi government is continuing with this but also serving new parameters for empowerment of vulnerable, weak and backwards. In one of his new approach Prime Minister Modi has taken district as the centre. If the district would be backward and disconnected, then every individual living in that area would be backward in comparison with others. So, 115 districts of the country have been identified which are most backwards and they are now named as aspirational districts.^[xi] A new roadmap for their overall development is being prepared. Finally, Modi government has tried to connect governance with social justice and ensured welfare of all in the society.

Modi government ensured leakage proof disbursal of benefits through technology. Many schemes had been in existence before, but due to bad governance, funds were under-utilised, un-utilised or misdirected. Under the transformed set up, the list of beneficiaries includes people from all walks of life – farmers to pensioners and students to businessmen. For example, the Dalit Venture Capitalist Fund was set up to boost entrepreneurship among the scheduled castes. Under the Stand Up Scheme, loans up to Rs 1 crore were given to the youth of the community.^[xii]

Under the Prime Minister Micro Units Development Refinance Agency (MUDRA), Dalits, Backwards and EBC are being given preference, and 62% beneficiaries are from these communities. Earlier, the scholarship of Dalit and backward students was either not disbursed or there was a delay. The HRD Ministry has given total fee concession to the Dalit, Tribal and Divyang students and all students whose annual income is less than one lakh. The numbers of National Fellowship for the students of OBC community has increased multifold. 100% increase has been done in the construction of hostels for OBC students. The number of beneficiaries under Dr Ambedkar Educational loan for OBC students has been increased. Stringent SC-ST Act to stop atrocities against Dalits has been formulated and Constitutional status to National Commission for Backward Classes was given in 2019. New policy for senior citizens was announced where the changing socio-economic concerns were kept in mind. As the numbers of senior citizens are increasing so the funds have been increased upto 80% for their welfare schemes. For the first time in the history of independent India, nomadic tribes were taken into policy framework and a new Board has been set up. Hostels for nomadic tribes were started in the name of Bharat Ratna Nanaji Deshmukh. Another target group where no one paid enough attention before was the disabled. Prime Minister brought them in focus and called them Divyanags. Social Justice Ministry has organised more than 2000 programs and 100 mega camps of artificial limbs, hearing aid and tricycle distribution.

Women have been at the forefront of nearly all of Modi’s schemes ever since 2014. Nearly 8 crore women living below poverty line got benefits of Ujjwala scheme that provided gas cylinder for cooking. Under the Sukanya Samridhi Yojana, small deposits supported by the Government of India were made for female children. The campaign Beti Padhao, Beti Bachao had a successful run on social media to improve the sex ratio and social condition of women. A cash incentive of Rs 6,000 was given to pregnant mothers and more than 50 lakh women are getting benefitted every year from this scheme. Maternity leave was also extended up to six months for working women.

Another major beneficiary group has been of farmers. The PM Irrigation scheme, PM Crop Insurance Scheme, PM Kisan Samman Nidhi where 6000 Rs every year was given to every Kisan. Earlier, this scheme was for farmers who had cultivated land below two acres, but it was extended to all the farmers after Narendra Modi won election for the second time. The recent farms reforms are being opposed by some rich farmers but these will only help the farmer community in increasing their income. The Prime Minister has also started Ayushman Bharat scheme which is the world’s largest health insurance scheme under which 50 crore people have been provided a cover of up to 5 lakhs. More than 10 crore are now registered and 1.77 crore have been admitted under this scheme.^[xiii]

Tackling the Pandemic

The second term of Modi government kick started with the resolve of taking a great leap forward and making India a 5-trillion economy. Besides effectively continuing the schemes of the first term, Modi government also took many landmark decisions that are bound to have a positive impact in long run. Among these watershed moments was the abolition of Triple Talaq and revocation of Article 370 in Jammu and Kashmir in August 2019. A new pension scheme was announced for traders and shopkeepers helping 3 crore people. Ushering the next phase of Swachch Bharat Abhiyan, the Prime Minister started a campaign to make India plastic free by 2022. More than 90 lakhs houses were sanctioned under the Pradhan Mantri Awas Yojana Urban. E-gram Swaraj and Swamitva Yojana was launched by the Prime Minister to give a push growth in villages. But in March 2020, the government was forced to announce a lockdown to save lives in the wake of the deadly Covid-19 virus. Following this, various quick steps were taken by the Modi government to protect life and living of common people. Under the Vande Bharat mission, 28,000 Indians stuck abroad were brought back to the country. The government set up robust health infrastructure for Covid-19 that saved life of millions of people. The fatality rate in India was the lowest in the world. Union government launched ‘Aarogya Setu’ app to facilitate easy tracking of the risk of the virus. Lockdown announced by the Modi government reduced the intensity of Covid-19 spread by more than 60%. India became second biggest producer of PPE kits and N95 masks in the world where the production was almost zero in February 2020.

After assessing the problems faced by fellow countrymen, the Modi government announced an economic package of Rs 20 lakh crore and gave a bold call for Aatmanirbhar Bharat Abhiyan (Self-reliant India). He outlined five pillars for this – Economy, Infrastructure, Technology, System, Demand. Massive relief package of Rs 3 lakh crore was allocated for the MSME sector. Key measures for strengthening agricultural infrastructure logistics, capacity building, governance and administrative reforms for agriculture, fisheries and food processing sectors were announced. Infrastructure reforms in eight sectors – coal, defence, rural development, corporate, finance, public health, public sector enterprises and business were also announced.  Just after the announcement of the lockdown by the Prime Minister, a relief package of Rs 1.70 lakh crore was announced to give instant help to the distressed people belonging to marginalised sections of the society. It was ensured that 80 crore poor get 5 kg wheat or rice and 1 kg pulses for free for the next few months. MGNREGA wages were increased from Rs 182 to Rs 202 per day which benefited 13.62 crore families.

In the midst of the raging pandemic, the Modi government has completed its second year. The pandemic, however, shows no sign of receding. In this scenario, besides the continuation of pro-poor pro-marginalised schemes, the government has come up with a vaccine which is in the market now and more than 13 crore people had already been vaccinated by April 2021.^[xiv]As the second wave of virus broke across the country, the government opened the vaccination program for all above the age of 18 years, making the Indian vaccination drive the largest in the world.

In the two years of its second term, the Modi government has safely navigated the Indian ship through difficult seas. The challenge that has presented itself in the form of Coronavirus is not a small one. It has affected all corners of the world and has managed to destabilise countries and their projections. In India, the government has managed to steer a very large population through this unforgiving virus, and in this sense, its achievement is tremendous. Modi government has taken care of those who needed it the most. The future, however, is not clear yet as further mutations and waves of the virus are expected. The journey hence is expected to be long and arduous. In the coming months, the government will not only have to further safeguard the life of its citizens but also restore their livelihoods that have been inevitably affected by the pandemic. The government will once again have to kick-start the economy and put it on the right track, while remaining cautious of the ever-changing virus and its vagaries. Given the past record of Prime Minister Narendra Modi and projections by the international agencies, it seems India will overcome these uncertain times.

(Author Brief Bio: Dr Swadesh Singh teaches Political Science in Satyawati College of Delhi University)

References

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Covid-19 vaccination: How is India’s inoculation drive going https://www.bbc.com/news/world-asia-india-56345591 (Accessed on 20 April, 2021)

Ghidiyal, Subodh, Centre plans 1,000 Dalit startups over 3 years https://timesofindia.indiatimes.com/business/india-business/centre-plans-1000-dalit-startups-over-3-years/articleshow/78341975.cms (Accessed on 10 April, 2021)

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Mahurkar, Uday,‘Drones, geo-tagging, big data: Narendra Modi’s governance is tech-friendly’ https://www.indiatoday.in/magazine/from-india-today-magazine/story/20170814-narendra-modi-technology-government-monitor-rural-development-1027731-2017-08-04 (Accessed on 5 April. 2021)

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Pradhan Mantri Jan Dhan Yojana https://pmjdy.gov.in/  (Accesses on 18 April, 2021)

Prime Minister Narendra Modi’s letter to the people of India: A year after the start of his second term in office https://economictimes.indiatimes.com/news/politics-and-nation/pm-modis-letter-to-the-people-of-india-a-year-after-the-start-of-his-second-term-in-office/articleshow/76098495.cms?from=mdr (Accessed on 2 April, 2021)

Prime Minister Jan Arogya Yojana https://pmjay.gov.in/ (Accessed on 20 April, 2021)

Public procurement from GeM portal crosses Rs 1 lakh cr: CEO Talleen Kumar https://economictimes.indiatimes.com/news/economy/finance/public-procurement-from-gem-portal-crosses-rs-1-lakh-cr-ceo-talleen-kumar/articleshow/81733835.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst (Accessed on 5 April, 2021)

Sahasrabuddhe, Vinay, Dheeraj Nayyar (2018) ‘The Innovation Republic: Governance Innovations in India Under Narendra Modi’, Wisdom Tree: New Delhi

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^[i]Shekhar Gupta, ‘How India Voted: Making Sense of the 2019 General Election’ https://www.youtube.com/watch?v=hwnnn1M-T5U (Accessed on 1 April, 2021)

^[ii]Devesh Pandey, ’50% vote share for BJP in 200 seats’ https://www.thehindu.com/elections/lok-sabha-2019/50-vote-share-for-bjp-in-200-seats/article27226514.ece (Accessed on 1 April, 2021)

^[iii]India Today Mood of the Nation Survey January 2021 https://www.indiatoday.in/mood-of-the-nation-survey-2021 (Accessed on 2 April, 2021)

^[iv]Prime Minister Narendra Modi’s letter to the people of India: A year after the start of his second term in office https://economictimes.indiatimes.com/news/politics-and-nation/pm-modis-letter-to-the-people-of-india-a-year-after-the-start-of-his-second-term-in-office/articleshow/76098495.cms?from=mdr (Accessed on 2 April, 2021)

^[v]Internet is the Game-changer in Today’s World: Modi at Google Conference https://www.firstpost.com/tech/news-analysis/internet-is-the-game-changer-in-todays-world-modi-at-google-conference-2-3622227.html (Accessed on 2 April, 2021)

^[vi]Amit Sharma, Digital India: Making Village ‘Smart’  https://telecom.economictimes.indiatimes.com/tele-talk/digital-india-making-villages-smart/719 (Accessed on 2 April, 2021)

^[vii]How 351 Modi Government Schemes Saved 1.70 Lakh Crore https://economictimes.indiatimes.com/news/economy/policy/how-351-modi-government-schemes-saved-rs-1-70-lakh-crore/articleshow/78954779.cms?from=mdr (Accessed on 3 April, 2021)

^[viii]Pradhan Mantri Jan Dhan Yojana https://pmjdy.gov.in/ (Accesses on 18 April, 2021)

^[ix]Public procurement from GeM portal crosses Rs 1 lakh cr: CEO Talleen Kumar https://economictimes.indiatimes.com/news/economy/finance/public-procurement-from-gem-portal-crosses-rs-1-lakh-cr-ceo-talleen-kumar/articleshow/81733835.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst (Accessed on 5 April, 2021)

^[x] Uday Mahurkar, ‘Drones, geo-tagging, big data: Narendra Modi’s governance is tech-friendly’ https://www.indiatoday.in/magazine/from-india-today-magazine/story/20170814-narendra-modi-technology-government-monitor-rural-development-1027731-2017-08-04 (Accessed on 5 April. 2021)

^[xi]About The Aspirational Districts Programme http://niti.gov.in/about-aspirational-districts-programme (Accessed on 6 April, 2021)

^[xii]Subodh Ghidiyal, Centre plans 1,000 Dalit startups over 3 years https://timesofindia.indiatimes.com/business/india-business/centre-plans-1000-dalit-startups-over-3-years/articleshow/78341975.cms (Accessed on 10 April, 2021)

^[xiii]Prime Minister Jan Arogya Yojana https://pmjay.gov.in/ (Accessed on 20 April, 2021)

^[xiv]Covid-19 vaccination: How is India’s inoculation drive going https://www.bbc.com/news/world-asia-india-56345591 (Accessed on 20 April, 2021)

Abstract:

The Modi Government, if one includes its first term since 2014, is on the verge of celebrating its seventh year in office. During its entire tenure since its historic mandate in 2014, the government has taken important policy measures to meet its core social agenda and fulfil poll promises. On the economic front; however, its performance has been a mixed bag, partly due to systemic flaws of the Indian economy, which need to be overcome. Implementation of the GST is one of the biggest economic reforms this Government has taken. Additional reform measures which have now been undertaken need to be supplemented by a concerted push towards unlocking India’s manufacturing potential, which will be its gateway to a high growth trajectory. This article highlights the significant achievements of the Modi Government in making India a major manufacturing hub as also draws attention to the sectors which need greater attention. The ongoing agenda of ‘Make in India’ needs a booster shot of policy measures and a clear vision.

One of the biggest problems plaguing Indian manufacturing has been an extraordinary, almost excessive, push towards the services sector. The growth in services exports has been so rapid – much higher than some of the other Asian economies—which now account for 35 percent of total exports – it almost made it unnecessary for policymakers to focus on manufacturing. This has been a major impediment to manufacturing not getting its due share in policy making, almost robbing it of its potential and importance. Not enough investments come into this space, thus not enough policy intervention takes place, reinforcing the trend of suboptimal investment, making it a vicious cycle. The present government has tried to undo some of this, with a slew of measures aimed to make India an attractive investment destination. Some of them, including the quantum jump in India’s ranking in World Bank’s Ease of Doing Business ratings are notable achievements. From a dismal 142 in 2014 when PM Modi took office to an impressive 63^rd position in 2020, India has climbed a remarkable 79 points^[i] in a short span of time. World Bank ranks countries on a number of parameters to highlight how easy/tough it is to start a business.

The most significant reforms undertaken by the government in its second term have been on the contentious issue of labour reforms and lowering of tax rates for companies to set up a manufacturing base in India. Changes in labour laws, long considered to be one of the most stifling aspects of India’s maze of rules that govern industry, were long overdue. It is heartening to see the PM unafraid of displaying his hand to back tough, even politically unpopular, reforms. The new labour code, which was originally meant to be implemented from 1^st of April 2021, has been pushed ahead due to a delay on the part of States. Irrespective of when it is rolled out, the new labour laws will allow greater flexibility to employers in laying off workers. Among other changes, the threshold limit for firing workers without government approval has been hiked three times (from a company having 100 workers to one employing 300 workers)^[ii]. Earlier labour laws – which were based on the size of the enterprise – incentivised factories to remain small, thereby stunting growth potential. Equally important is the expansive scope of the new labour code. Unlike the earlier laws; gig and platform workers, food and grocery delivery, content & media, ride sharing services and e-marketplace is covered, ensuring workers in these sectors are brought under the ambit of regulation. Since labour is an issue that falls in the concurrent list, allowing both Centre and States to have an equal say, the implementation of these laws will decide their success. Needless to say, states that will adapt to these changes faster will be viewed more positively by investors^[iii].

Apart from labour laws, what stands out in the government’s big bang reform agenda is the slashing of the corporate tax rate in 2019, to make Indian rates competitive with other Asian destinations. On 20 September 2019, less than four months into the Modi government’s second term, in a bold and surprising move, the government cut corporate taxes. Much before the pandemic struck in 2020, Indian economy had slowed down considerably. As the slowdown led to a clamour for ‘out-of-the-box’ measures, Finance Minister Sitharaman cut corporate taxes from 30 percent to 22 percent for domestic companies^[iv]. This was the biggest tax cut in 28 years. To boost manufacturing and invite foreign investments, the FM lowered tax rates even further. From the earlier 25 per cent tax slab, new companies incorporated on or after October 1, 2019 which invested in manufacturing, were to be taxed at 15 per cent. Taking into account surcharge and cess, the effective tax rate for new companies stood at 17 per cent^[v]. Post the rate cut, Indian tax slabs were in line with Asian peers. Hong Kong – mired with its own set of far bigger problems – has the lowest corporate tax rate of 16.5 per cent. Singapore has a 17 per cent rate, while both Thailand and Vietnam levy 20 per cent tax on companies.

The third and most compelling reform undertaken by the present dispensation has been the demonstration of its desire to pare losses of sick Public Sector Undertakings (PSU) and to exit government-backed ventures that are eating away precious state resources^[vi]. Unprofitable PSUs – which are money guzzlers – have been a major bone of contention for successive governments, which continued to put good money behind bad money. PM Modi’s Government – which has enough political capital – has shown intent to divest stake or to completely privatise. The decision to privatise PSUs and stay invested only in a few strategic sectors is welcome, since state machinery is highly inefficient and corrupt. Though, selling entities like Air India sounds easier said than done (due to failure of multiple efforts), a clear intent to do so indicates a more welcoming attitude towards business in general. This marks a departure from the Prime Minister’s earlier position of being wary of being perceived to be ‘too business friendly’. The decisive shift began after the PM termed businesses as wealth creators in his Independence Day speech^[vii].

But the question to ask is, despite such important decisions, why has India not been able to substantially move the needle on manufacturing? Despite a sharp jump in India’s rankings – which signify the growing ease with which business is conducted – why are foreign investors not making a beeline to invest? Easier labour laws should pave the way for big ticket investments, but what is stopping the same to materialise? The answer to all these questions lies in creating a favourable investment climate which is a combination of several inter-related factors. For instance, simplification of labour laws is a very important step towards creating a viable ecosystem, since it reduces compliance burden on companies. But flexibility in hiring and firing is, obviously, not enough to improve the anaemic growth in Indian manufacturing. Likewise, after the 2019 corporate tax cut; Japan, Malaysia, South Korea and Indonesia now have higher rates but that has not translated into a quantum jump in India’s investments vis-à-vis these countries.

Clearly, more needs to be done.

It is now a well acknowledged fact that no matter how rapid the growth rates may be in the services sector, it cannot keep pace with the number of new entrants in India’s work force. More so, since in India, the services sector contributes nearly 50 percent to the GDP, but only 35 percent to jobs. This is lower than the average of other countries where services sector contributes equally to GDP and job creation. Given India’s demographics, management consultancy firm McKinsey has predicted that in the decade 2020-2030, India will need to create 90 million new non-agricultural jobs. This is needed to absorb the 60 million new entrants joining the labour force and another 30 million for those who will move out of the less productive farm sector to industry^[viii]. This kind of job creation is possible only through a vibrant manufacturing sector. The services sector, can at best, play only a supporting role to catapult India into the next league of economic superiority.

However, the manufacturing sector will also need to undergo a paradigm shift to cater to the socio-economic needs of India, which are a derivative of its high population and favourable demographics. At present, manufacturing contributes 15 per cent to India’s GDP, has a 16 percent share in the Indian economy, but just 11 percent in job creation. From fiscal year 2006 to fiscal year 2012, India’s manufacturing-sector GDP grew by an average of 9.5 per cent per year. However, due to the overhang of policy paralysis, scams and other factors, this slowed to 7.4 percent during the next six years – from 2012 to 2018.

In fiscal year 2020, manufacturing generated 17.4 per cent of India’s GDP, little more than the 15.3 per cent it had contributed in 2000. (By comparison, Vietnam’s manufacturing sector more than doubled its share of GDP during the same interval.) The ‘Make In India’ program – which was launched in September 2014 with much fanfare – had envisaged share of manufacturing to rise to 25 percent by 2022. Though ambitious from the very beginning, the program looked almost unachievable even prior to the pandemic due to the economy’s slowing growth in FY19 and FY20.

Post the outbreak of the pandemic, there has been a fresh focus towards manufacturing, led by the Prime Minister’s clarion call in May 2020 for ‘Atmanirbhar Bharat’.^[ix]Since then, there has been a renewed effort to boost Indian manufacturing capabilities. The Production Linked Incentive (PLI) scheme—which identified 13 key sectors in January 2021—is a measure that can contribute significantly to India’s aspirations to be a manufacturing hub. Under this scheme, the government’s commitment will be Rs 1.97 lakh crore spread over five years, starting from FY 22. As the name indicates, the scheme proposes to provide incentives on incremental sales for a five-year period, which could be from 4-6 percent. Besides providing a fresh impetus to manufacturing, it will spur growth in exports – the one area which has been a disappointment for most of the seven years. (In 2014, the Modi Govt had set a target of Indian exports forming 5 per cent of world exports. However, seven years on, Indian exports continue to be at the same level- hovering in the 1.6-1.7 percent range, not even touching the 2 per cent mark.)

From 1April 2021, the PLI scheme for white goods will be rolled out after the expenditure finance committee cleared the proposal of Department for Promotion of Industry and Internal Trade (DPIIT) for investing in AC and LED segments. This would entail an investment of Rs 6,238 crore by the government. DPIIT has estimated the scheme would lead to additional exports of Rs 64,000 crore, and an additional GST collection of Rs.38,000 crore over a five-year period^[x]. This segment can witness global players making sizeable investments.

The mobile handset manufacturing has been one of the few success stories in Make-in-India. From two units in 2014, the segment witnessed 200 units being set up, with production increasing from 60 million to 290 million. The value of handset production increased from USD 3 billion to USD 30 billion, all along catering to the domestic market. The next phase of growth will require the mobile handset cluster to become globally competitive and capture more than just the domestic Indian market. In the process, it will also test the efficacy of the PLI scheme – which skeptics say may not realise its stated objective due to the stiff targets for eligibility of incentives.

Beyond PLI, the solution to fixing India’s manufacturing woes requires action on five fronts – providing better infrastructure, creating efficient and predictable regulation, developing customer and supplier linkages, ensuring access to credit and solving the biggest conundrum of land acquisition.

Infrastructure bottlenecks are being addressed by the Government, but a combination of port connectivity and creating world-class manufacturing zones is the need of the hour. Seven out of the ten biggest ports in the world are in China; including the biggest – which is the Shanghai port. It is time Indian ports are upgraded on a war-footing. Though China’s economic model – with its focus on heavily subsidised state-owned enterprises and lack of any individual liberty – is incomparable with democracies, there are important lessons from its economic success. China opened six economic zones in 1979, followed by export processing zones across its coastal cities. As the largest recipient of foreign direct investment among developing nations (over 40 per cent), China saw total FDI inflows of USD 128.1 billion between 1979 and 1995. The distribution of this FDI highlights the role integrated infrastructure development (port linkages, better road/rail connectivity for cargo) plays in the growth of any economy. The coastal areas accounted for over 90% of all FDI China received during this period. Among coastal regions, Guangdong, Fujian, Shanghai and Jiangsu attracted substantial amounts of FDI, with Guangdong topping the list. About 60 % of the total FDI in the first decade of China’s SEZ policy flowed into Guangdong[xi]. This indicates how important it is to have large manufacturing clusters with back-end linkages. The corrupt, inefficient SEZ policy under the UPA-era needs to be replaced by an integrated plan to create top-end manufacturing zones with world-class infrastructure.

Creation of large manufacturing zones would also solve another issue that plagues this sector – which is of size, or the lack of it. Indian manufacturing landscape is dominated by ‘dwarfs’ or companies that should have scaled up but did not. Despite dwarfs making up almost half of organised manufacturing, their contribution in employment is a meagre 14 per cent and in value added is just 8 per cent. So, to be globally competitive and to provide jobs, Indian factories need to be scalable – which will be achieved through a combination of factors – technological evolution, better skills and access to credit on easier terms. In the past 13 years, India’s manufacturing-sector share of employment has risen by just one percentage point, as against a five-point increase for the services sector^[xii]. This anomaly can be addressed only after addressing the dwarf problem.

Defence manufacturing – where government allowed FDI upto 74 percent via the automatic route in September 2020 – could be the next big growth frontier for India^[xiii]. India imports about 65 percent of its arms needs and is hardly a global exporter (0.2percent as per SIPRI). Technology transfer via joint ventures with global companies, identifying goods that are in ‘negative list’ and India’s own growing security needs will act as the real catalyst to growth in this sector.^[xiv]

India’s path to manufacturing should take two complimentary routes – one, driven by cost factors where it will have to compete with other low-cost destinations like Bangladesh or Sri Lanka in low-end goods, and two, based on innovation and R&D. What India lacks in terms of global supply chain linkages and economies of scale, it can make up by leveraging its strengths as an IT superpower. By developing niche areas of industrial research, domain expertise in industrial innovation can be created. This can be achieved through close collaborations with German, American, Swedish, Swiss and Japanese industries. These are countries that have been rated at the top of World Economic Forum’s global competitiveness index. With the help of tie-ups and sector-specific approach, India can identify its distinct edge and superiority in industrial innovation. This will be a key driver of future growth.

The Modi government needs to push the pedal on manufacturing since it is not just about economics but also about geo-economics and geo-politics. China’s strength in world affairs is due to its economic heft. China’s muscular geopolitical stance – both in Asia and beyond; and on its land border with New Delhi – has to be viewed alongside its economic lead and superiority over its principal rival in Asia- India. Unless India is able to address some of the inherent weaknesses in our economic system, China’s hegemonist designs are unlikely to be tamed. Beijing’s ability to pour money in economically unviable projects in India’s neighbouring countries, build more infrastructure on its borders with New Delhi in acts of intimidation and continued military upgradation are all derivatives of a stronger economy. For India to respond effectively to all these acts, it first needs to get its economy into a high-growth orbit. And for that it needs to usher in the next wave of economic reforms.

Post the pandemic, global companies can, and will exit China, if not fully then partially. It is up to the present dispensation to decide if India will be their next destination.

Author Brief Bio: Gaurie Dwivedi is a Senior Journalist covering economy, policy and politics. She is also a Visiting Fellow at USI.

^[i]https://economictimes.indiatimes.com/news/economy/indicators/india-jumps-to-63rd-position-in-world-banks-doing-business-2020-report/articleshow/71731589.cms

^[ii]https://labour.gov.in/sites/default/files/IR_Gazette_of_India.pdf

^[iii]https://www.financialexpress.com/opinion/new-labour-codes-are-welcome-but-for-real-labour-reforms-laws-have-to-ease-at-the-state-level/2110335/

^[iv]https://www.pwc.com/mu/en/services/india-desk/corporate-tax.html

^[v]https://www.thehindubusinessline.com/economy/fm-slashes-corporate-tax-rate-heres-what-it-means-for-india-inc/article29466477.ece

^[vi]https://www.financialexpress.com/opinion/narendra-modis-talk-of-privatisation-implies-means-big-reforms/2202084/

^[vii]https://www.livemint.com/news/india/at-red-fort-pm-lauds-india-inc-says-wealth-creation-is-a-national-service-1565890969533.html

^[viii]https://www.mckinsey.com/featured-insights/india/indias-turning-point-an-economic-agenda-to-spur-growth-and-jobs

^[ix]https://pib.gov.in/PressReleasePage.aspx?PRID=1623391

^[x]https://www.financialexpress.com/industry/white-goods-pli-scheme-to-be-launched-on-april-1/2189033/

^{[xi] AU  – Ota, Tatsuyuki, 2003/01/01, The Role of Special Economic Zones in China’s EconomicDevelopment As Compared with Asian Export Processing Zones : 1979 – 1995}

^[xii]https://www.mckinsey.com/industries/advanced-electronics/our-insights/a-new-growth-formula-for-manufacturing-in-india

^[xiii]https://www.thehindubusinessline.com/news/finmin-nod-for-74-fdi-in-defence-sector-under-automatic-route/article33288079.ece

^[xiv]https://www.hindustantimes.com/india-news/how-india-aims-to-boost-its-indigenous-defence-capabilities-in-two-years-101617358023279.html

When the Central government was re-elected for its second term in 2019, it was clear that economic reforms would be at the top of its agenda. Its first term was marked by a number of socio-economic measures, including the Pradhan Mantri Jan Dhan Yojana and the Pradhan Mantri Mudra Yojana. It pushed for reforms with its ‘Make in India’ initiative and the opening up of FDI in several sectors. Among its bolder initiatives were GST, demonetisation, and the overhaul of our antiquated labor laws. There are several notable achievements that really transformed the macroeconomic environment and improved socio-economic indicators.

Government has taken several initiatives to create right enablers and stability for the economy. These reforms are inextricably intertwined with financial sector.

• Adoption of GST: It was a herculean task to bring a pan-India structural tax reform that is so encompassing and transformative from Day 1. Under the adept leadership of the then finance minister Mr Arun Jaitley, these reforms could see the light of the day. The enabling mechanism was provided by the enactment of the Constitution (One Hundred and First Amendment) Act, following which Parliament enacted four Central laws. Further, all the 29 States enacted enabling laws in their Assemblies, while the Centre notified it for all the seven Union Territories. The GST replaces eight Central taxes and nine State taxes. The subsequent refinements in the GST rules and delivery mechanisms have really enabled enterprises of all levels to reap the dividends in the long term.
• Reduction of Corporate Tax: One of the first measures taken by the government in its second term was to slash corporate tax by almost 10%. The concession in tax rates is expected to provide fillip to the Make in India campaign, boost employment, and attract more investments^[i]. Its current tax rates also puts India at par with its Asian peers.
• One of the signature reforms of the Central government in its first term was in amending insolvency laws in 2016. This bold step was long-needed to modify India’s often brutal and impractical bankruptcy regime. The Insolvency and Bankruptcy Code (IBC) aims to consolidate and amend the laws relating to reorganisation and insolvency resolution in a time-bound manner. According to the World Bank, against the 2016 world average of 2.5 years to resolve insolvency, it took Japan 0.6 years, Singapore and Canada 0.8 years, the US 1.5 years and China 1.7 years. The figure for India: 4.3 years. IBC will help address this disparity and bring swiftness in handling the battered companies.
• On ease of doing business, several initiatives have already been taken by the Government, which has helped India went up by 14 points in the World Bank’s Ease of Doing Business 2020 survey to be placed at 63rd position among the 190 countries. It is certainly indicative of the Centre’s relentless efforts to create a more investor and business-friendly environment in the country in its first term in power. Other than simplifying the tax regime through the revolutionary GST, the government has also made the tax structure more conducive to growth. For tax disputes and litigations, the government launched ‘Vivad Se Vishwas’ scheme. It is expected to aid direct tax collection by providing an avenue to address any disputes. The other significant measure in this endeavour has been the hike in FDI across different sectors. It has opened up investments, infusing capital and increasing the competition in the market.

The Government’s second term promised to continue with its bold reformist legacy. In his second term, Prime Minister has set a very ambitious goal to reach 5 trillion dollar economy by 2024. However, the pandemic has thrown a spanner in the works, forcing the government to focus on immediacy. The economy now needs a real push to catapult itself to the desired growth path at this critical juncture that is slated to be the defining moment of the Indian economy. However, a set of measures in financial sector across five key areas – “Financing Infrastructure”, “Continued focus on banking sector reforms”, “Strengthening Financial Intermediation with Aadhar, UPI and PMJDY”, ‘Promoting Fintech”, and “Realising the full potential of agriculture sector reforms” – will be critical for growth.

Financing Infrastructure

In line with the announcement made by the Prime Minister in his 2019 Independence Day speech, the Finance Minister, in her press conference on December 2019, announced a major push in the infrastructure spending for over Rs. 102 lakh crore over the current 5 year term. One can’t underscore the importance of the role of financial lenders and institutions in enabling the long-term growth in these projects. While physical capital creation through capital expenditure (or capex) enhances the total factor productivity (TFP), there is empirical evidence of physical infrastructure enhancing the overall business environment and competitiveness of an economy.

The Union Budget 2021-22 of the Government of India proposed the setting up of a new Development Finance Institution (DFI). In keeping with this, the Budget Session of Parliament will now consider a new bill titled, “The National Bank for Financing Infrastructure and Development (NaBFID) Bill, 2021,” to set up a Development Financial Institution (DFI) for the purpose of funding infrastructure projects and their entire ecosystem across their lifespan. In line with the other sector-specific DFIs such as NABARD, EXIM Bank, SIDBI, REC, the current DFI should help provide the capital expenditure for the infrastructure spree that our nation intends to follow for the next several years. To promote investment in the infrastructure projects:

• The need is for liberalised financial markets, deepening and widening of local markets, wider use of risk management and other financial products. There is a need to have a more robust yield curve across different tenors. This will entail not only developing the term money market but also secondary trading in long term bond market. This can help create derivatives for hedging across different maturity periods, and also improve monetary transmission in India.
• Strengthen legal frameworks and accounting standards with the usage of new and alternate structures. For example, with the Bilateral Netting of Qualified Financial Contracts Act, 2020, to enforce close-out netting for bilateral financial contracts in India. This will help in development of the over-the-counter (OTC) derivatives market. This will lead to efficient margining system for such OTC derivatives and facilitate productive use of bank funds. It will also act as a catalyst for corporate bond market by wider acceptance of the credit default swap market.
• Tap institutional sources, such as pension, provident and insurance funds that have the advantage of providing a better maturity match for infrastructure financing. These funds could also be allowed to deposit in banks for long periods, subject to banks using them exclusively for infrastructure financing. Further, banks should be permitted to float 10 to 15-year tax-free bonds. With the right framework, large banks with strong balance sheet should be allowed even to float over 30-year bonds.
• Conditions should be created whereby savers are attracted towards investing in long-term debt instruments. In the absence of secondary market, most instruments are currently held to maturity. This keeps many investors away such as retail investors. In addition to development of secondary markets, government should asses issuance of bonds which can provide part or near-full inflation hedges.
• Opening up FDI in the insurance sector to meet dual objective of infra financing and enhanced customer penetration. It allowed up to 74% FDI in the insurance under the automatic route, up from the previous cap at 49%. This should go in tandem with Insurance Regulatory and Development Authority (IRDAI) driving policies that can help drive more investments in long term assets while providing the right safeguards for hedging of market risks linked to such investments
• The proposed DFIs should be able to reduce complexities associated with the large-scale capital expenditures and should create structures which can help propel an otherwise struck project. The instrument of take-out financing be leveraged adequately while working in conjunction with banks and other financial institutions, who may have appetite to lend for 3-5 years as against the requirement of 15 years for infrastructure.

Continued focus on banking sector reforms

• On 30 August 2019, the government announced a key decision to merge ten banks into four entities. The objective here is to improve the operational efficiency and upgrade the health and financial soundness of the Indian banks, especially Public Sector Banks (PSBs). Further to building transparency and improving accountability, while presenting the Union Budget, Finance Minister Nirmala Sitharaman had announced the privatisation of two public sector banks (PSBs) and one general insurance firm by 2021-22. This should reduce the drag on the government coffers in the form of infusion for bank recapitalisation, which is expected to be Rs. 20,000 crore in FY 2021-22. As the Government has intended to reduce its stake to 33% in public sector banks, it will further add to private investments in the banking sector and will help drive the agility and efficiency which is required for the new-age banks.
• After the Banking Regulation (Amendment) Bill, 2020, the chances to have occurrences of frauds seen in the case of PMC Bank is significantly mitigated. In the absence of the current bill, it was allowed that cooperative banks, without the oversight of RBI, could use the same banks to solicit deposits from the customers. The new law makes a concerted attempt at bringing such banks under the regulatory oversight of the RBI. The Central Bank will now have the right to approve the appointment of auditors and recommend removal of auditors to these cooperative banks with the intention of improving their governance and also timely identification of any financial vulnerabilities to prevent a future crisis. RBI should continue to act as a legal guardian of fair play in such situations. The prompt action from RBI will go a long way in signalling the stability of banking sector, as is the case with commercial bank, Yes Bank, in which the functioning was restored without loss of depositor’s money after the management changes and other corrective actions were taken promptly.
• The issue of NPA management is not only for the sake of strengthening a particular bank, but also for ensuring the NPA overhang doesn’t stop the flow of credit in sectors that imminently require. The recent Budget has proposed setting up a ‘bad bank’ to help process the NPAs out of the balance sheet of banks. A bad bank will help streamline the operations of the primary bank by buying NPAs at deep discounts. The banks should be equipped with NPA management capabilities by applying the right regulatory and procedural strategies at their disposal. With a tepid credit offtake in industry and services sector, and strong growth in deposits, the banking sector seems to be in a state of abundant liquidity, while this liquidity is not translated in the commensurate credit growth. And in the absence of setting up of such ‘bad banks,’ there will be overhang of NPAs that will stress inflows, thereby leading to solvency risk. It is the opportune time to provide allowance in capital adequacy norms and allow space for banks to clean up.

Strengthening Financial Intermediation with Aadhar, UPI and PMJDY

The reforms have little meaning if they don’t touch the lives of people who, perhaps, need the most. Though, there are numerous initiatives which have helped deepen financial inclusion, there are three of them which has created the right enabler for drive revolution in financial inclusion. These are linked to adoption of Aadhar, UPI and Pradhan Mantri Jan Dhan Yojana (PMJDY). Government should continue to provide opportunities for private sector to use these enablers for a deep-rooted financial inclusion in India.

• To help identify the targeted beneficiaries for wealth distributive policies and social security schemes, Central Government enacted the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act. Today, Aadhaar has become India’s most credible identity currency. It is effectively used in linking direct benefits such as the public distribution system, employment guarantee schemes, etc. For the lower income segments, the data on direct benefits can be used to provide better financial inclusion, such as offering credit and insurance products.
• Within the first few months into the term, Government started with a major financial inclusion program—Pradhan Mantri Jan Dhan Yojana—to bring millions of underbanked and unbanked customers within the financial inclusion ambit, empowering them to avail services like DBT (Direct Benefit Transfer), social security schemes like insurance and pension. Under this scheme, 15 million bank accounts were opened on inauguration day, a global record for the most bank accounts opened in one week as a part of the financial inclusion campaign. As Government embarks on this journey, there is a need for more formalisation in the unorganised sector especially in rural areas where schemes such as Jan-Dhan Yojana are popular. This has helped raise awareness of new banking products. More importantly, this should be promoted for banks and emerging fintech companies to offer products such as unsecured personal loan, supply chain financing, life and health insurance, etc.
• The world can be divided into two types of people – type 1 who have used UPI and type 2 who have not. Though, in this era of data and technology, as many minor and major innovations happened, UPI was a trailblazer. The scale of UPI impact has been gargantuan. UPI has revolutionised the payments system completely inter-operable across all payment systems removing simplicity arbitrage by enabling one click two factor authentications. It has catalysed high volume, low-cost payments, creating a new ecosystem that billers/billers may adopt without needing a Point of Sale (POS) systems at millions of merchants. UPI recorded^[ii]73 billion transactions in March 2021 and the value of transaction has surpassed the 5 lakh crore mark. Several large global financial houses have applauded the strong foundation created by UPI upon which private players can ensure innovation. And after the fabulous success of UPI, we now have a highly modernised payments infrastructure that has helped us achieve greater financial inclusion than those achieved by the other developing economies. The appreciation towards the modern Indian payment infrastructure has even been echoed by leading technologists and large billion-dollar enterprises’ CEOs. Moreover, several central banks in the southeast Asia and other parts of the world are taking inspiration and drawing up plans to build a payment infrastructure as robust as UPI by working with the technocrats of National Payments Corporation of India (NPCI) and UIDAI.

Promoting Fintechs

Silently, yet not surreptitiously, a new breed of companies started calling the shots, unerringly and harmlessly named Fintech – a broad brushstroke of FINance and TECHnology. They are adorned with Machine Learning and Artificial Learning techniques. Though, their lofty over-usage has cheapened the anchorage of these words, though every day they bring new tidings and death-knell for old form of retail banking. James Baldwin, once talking about power of dialects and patois, said,

To open your mouth in England is to ‘put your business in the street’: you have confessed your parents, your youth, your school, your salary, your self-esteem, and, alas, your future.

Perhaps the same can be said about the power of “digital footprint”, with much higher intensity and much better precision. Unlike Fintech, traditional banks had been both timid and tentative in using data. The soft pleasure of meeting the customer before granting loan, seeing them from head to toe with disbelief comes naturally to Indian senses. Packed with data from everywhere – bureau, social media, digital footprint, mobile, self-declared, purchase data, data of associates, sometimes associate’s associate, etc. – Fintech are increasing becoming wiser. They use whole host of data models – credit risk model, propensity for pricing model, loyalty model, etc. using variables tested and developed with experience.

For now, fintech are driving innovation in almost all areas of finance – lending, saving product, protection needs in the form of life insurance, health and general insurance, micro-payments, transaction services, etc. With over 400 million internet users and over 1.1 billion mobile phones, reforms are required that bring in more transparency and usage of advanced tools and technologies. The aim should be to provide the end-user with a superior experience with greater convenience, and enhanced security. To promote, the fintech industry, the three things which are critical is availability of risk capital, presence of public infrastructure, and ease of doing business.

• On availability of capital, there is a need to create the right market mechanism. This will involve an automatic route approval in fintech and linked companies. Government should assess having an 100% FDI norm for fintech with investments of less than Rs. 500 crore. Currently, the market for debt funding is invariably non-existent for small fintech. Government should set-up the framework for more capital flow directly as debt to fintech or through a market mechanism such as venture debt framework. For this purpose, Government can also consider setting up a Rs. 5000 crore fund for providing venture debt for emerging fintech.
• Simplification and digitisation of know-your-customer (KYC) norms will help start-ups offer their services across geographies. They can cater to diffused demand due to the inherent anytime-anywhere-accessible nature of online systems. Further, for financial inclusion, framework for paperless and presence-less onboarding should be developed. To avail the full benefit of Aadhar, UPI and bank account, Government should ease the norms for KYC, while working in conjunction with RBI for a wider coverage digitally. With the new remote customer authentication option, the service providers need not physically reach out to customers in remote locations aiding in cutting down the costs significantly, and KYC norms should be achieved using face-matching software and AI.
• A separate regulator for fintech should be assessed. With varied product offerings and heavy usage of data, the need for compliance and regulations cannot be emphasised much. A specialised body under RBI to regulate fintech could not only help operate efficiently in a more organised manner and meet compliances more easily, but could also significantly aid innovation and experimentation. It will also check for potential instabilities on account of unbridled growth, and can avoid illegal practices such as the recent online loan scam. It will contribute significantly on addressing customer grievances too.
• Government should also evaluate emerging themes such as regulation of cryptocurrency and comprehensive outlook on crypto trading. This is critical for ensuring any potential instability coming from alternate monetary units are well managed
• In terms of addition benefits to the industry, there are a series of measures which can be deliberated before translating into policy. For example,
  • the abolition of Long Term Capital Gain (LTCG) tax can help remove the deterrent which low to mid income households face in investing in equities.
  • Relaxation under FEMA to help fintech offer products to people outside India. This should cater not only to people of Indian origin or Indians staying abroad but even the global customers who may have interest in Indian products
  • Support with digitisation of banks, particularly regional banks and cooperative banks which can help partner with fintech better

Realising the full potential of Agri sector Reforms

The boldest reform by the government is undoubtedly the agricultural reforms it introduced in May last year. The long-overdue reforms, aimed at agriculture and allied sectors, will benefit both the farmers and the consumers. Among the slew of measures, the three most important steps were the announcement of an outlay of INR 1.63 lakh crore, amending the stringent Essential Commodities Act (ESA), and offering farmers the freedom to sell their products at any market of their choice^[iii].

The farm laws removed inter-state trade barriers and allowed for e-trading in agricultural produce. They have the potential of revolutionising the agricultural sector by removing the hegemony of regional mandis. It also opens up the market to participation by the private sector, providing an immense opportunity for farmers to tie up with private players. The relaxation of ESA also frees up more commodities for fair trade. It can help market forces play an overarching goal in ensuring crops get the right prices, stable food inflation, strong growth in farm sector and allied sectors contribution to GDP, improve FDI in the agricultural focused start-ups, streamline the marketing of agricultural produce and boost the rural economy.

On the financial sectors, there are several measures that can help drive and augment the full benefit of agriculture reform. A slew of measures in financial sector should go in tandem for financial intermediation across the full value chain—farmers, traders, warehouse provider, processers, Custom Hiring Centres (CHCs) providing irrigation pumps, tractors, other mechanisation tools, other input providers, etc.

• Government should plan for expanded and broad-based definition of Priority Sector Lending (PSL). Currently of the 40% of banking asset earmarked as PSL, the direct agriculture is 13.5%, while 4.5% is indirect agriculture and rest includes other categories. Most of the new element will fall under indirect. We need a more expanded definition of indirect. In fact, indirect should be expanded to include at least 10% of PSL. PSL definition should also include agri-ecommerce companies, warehouse providers, processors or aggregators at farm gates.
• Government should leverage SIDBI and other institutions to drive refinancing and creation of SMEs in agriculture sector, particularly catering to new segments which will become critical as the agriculture reforms plays out. Further, an equity fund to be created to have direct investments in agriculture sector. For efficient dissemination of equity investment, this can be achieved via “Funds of Funds” structure.
• The secondary market for PSL papers with enhanced definition of PSL will provide a more market-friendly funding for large investments in warehouses, cold storage, processing capability, input requirements in terms or mechanisation, etc.

In summary, the government is on the path to stabilise the economic growth post the pandemic and is not shying away from taking even further bold efforts. These reforms will go a long way in shaping a more conducive regulatory setup for growth of our financial sector and for safeguarding the rights of different participants in our financial system.

Author Brief Bio: Ranvir Singh is the Managing Director and Founder of Kissht (leading fintech in India). He is an Alumnus of IIM-Bangalore and IIT-Bombay, and was an Associate Principal at McKinsey& Company prior to starting Kissht.

References

^[i] https://www.businesstoday.in/current/economy-politics/corporate-tax-cut-pm-modi-says-its-a-historic-move-will-create-more-jobs-finance-minister-nirmala-sitharaman/story/380281.html

^[ii] https://inc42.com/buzz/upi-regains-momentum-with-19-hike-in-transactions-in-march-2021/

^[iii]https://www.financialexpress.com/economy/agri-market-reforms-nirmala-sitharaman-stimulus-package-covid-economic-package-essential-commodities-act-latest-news/1960548/

End Notes:

1. https://www.livemint.com/industry/banking/financial-sector-reforms-11601001838262.html
2. https://www.moneycontrol.com/news/business/budget-provided-clear-roadmap-to-expand-private-sector-participation-strengthen-public-sector-institutions-pm-narendra-modi-6578121.html
3. https://theprint.in/theprint-essential/74-fdi-in-insurance-what-this-means-for-policy-holders-indian-companies-promoters/624624/
4. https://bfsi.economictimes.indiatimes.com/news/policy/modis-reforms-in-first-six-months-of-two-terms/72410925
5. https://www.financialexpress.com/economy/urgent-need-for-more-ambitious-structural-and-financial-sector-reform-measures-in-india-imf/1867735/
6. https://www.theindiaforum.in/article/indian-banking-reforms-talking-tokyo-looking-london

 

Prime Minister Narendra Modi moved dextrously across the globe from May 2014, making high profile foreign visits and hosting dignitaries in turn, with the aim of entrenching India as a strategic pillar in a changing world. The United States, Russia, China, Australia, Israel, Japan, neighbouring SAARC and ASEAN nations, Arab and Muslim States, Europe, Africa, and even Pacific Islands States received meticulous attention. Geopolitical exigencies have dictated the priorities of Modi 2.0, viz., getting India acknowledged as a legitimate stakeholder in Afghanistan; adding heft to the Indo-Pacific alliance; rising to the challenge of the Coronavirus pandemic; and strengthening ties with traditional allies.

In highly emotive symbolism, India conferred the Gandhi Peace Prize 2019 on late Majesty Sultan Qaboos bin Said Al Said of Oman, and the Gandhi Peace Prize 2020 on late Sheikh Mujibur Rahman, first President and later Prime Minister of Bangladesh. These indicate the government’s commitment to its immediate neighbourhood and to West Asia, which is critical for India’s energy needs.

United States, Quad and Indo-Pacific

At the Shangri La Dialogue in 2018, Prime Minister Modi outlined the geographical span of India’s idea of the Indo-Pacific, stretching from the East Coast of Africa to the West Coast of the United States. Earlier, Modi had enunciated India’s concept of oceans through its vision of SAGAR (Security and Growth for All in the Region), emphasising the inclusive and open nature of the oceans which must conform to a rules based order. This marked a welcome shift from the post-1947 perception of India as only a continental power and reflected a desire to reclaim its strong maritime heritage.

Since 2014, India has deepened military ties with the United States, agreed to a 2+2 defence and foreign ministers dialogue, and become an active member of the “Quad.” During the face-off with China in 2020, the Trump Administration gave India two advanced surveillance drones on lease and cold weather gear for the soldiers. An issue facing both countries now is whether the Biden Administration will apply or waive sanctions on India under the 2017 Countering America’s Adversaries Through Sanctions Act (CAATSA) due to India’s purchase of Russia’s S-400 air defence system (to be delivered this year).

The Quad (Quadrilateral Security Dialogue) was born on December 28, 2004 in response to the Indian Ocean tsunami of December 26, 2004 that killed 230,000 persons along the Indian Ocean rim. In mid-January it handed over the task to the United Nations and faded away. It was reborn in November 2017 and met twice a year in 2018 and 2019. Maritime strategist James Holmes views the Quad as an entente cordiale rather than an Asian NATO.

The first ever virtual summit of Quad leaders (Joe Biden, Narendra Modi, Scott Morrison and Yoshihide Suga) was held at the initiative of President Biden on March 12, 2021. The joint statement, “The Spirit of the Quad,” recalled the tsunami of 2004 and upheld “a region that is free, open, inclusive, healthy, anchored by democratic values, and unconstrained by coercion.” They pledged to jointly face the global devastation wrought by Covid-19, combat climate change and security challenges facing the region (including in cyber space, critical technologies, counterterrorism, quality infrastructure investment, humanitarian-assistance and disaster-relief). The Quad endorsed ASEAN’s unity and centrality and the ASEAN Outlook on the Indo-Pacific, the role of international law in the maritime domain, especially the UN Convention on the Law of the Sea (UNCLOS), and to collaborate to meet challenges to the rules-based maritime order in the East and South China Seas.

In a joint article for The Washington Post, the leaders stressed the need to strengthen the Paris agreement, adding, “We are determined to end the Covid-19 pandemic because no country will be safe so long as the pandemic continues.” They agreed to expand production of safe, accessible and effective vaccines in India and ensure that vaccines permeate the Indo-Pacific region by 2022. The Quad tasked India’s Biological E firm to produce one billion Covid-19 vaccine doses by end-2022, including the Johnson & Johnson vaccine; India could thus emerge as the manufacturing hub for Quad countries. At the time of writing, India had gifted/sold around 80 million vaccine doses to 85 countries.

The four nations also plan to build a rare-earth procurement chain to secure elements critical in manufacturing smartphones, high-performance motors, EV batteries, etc. Currently China produces nearly 60% of the world’s rare earths (neodymium for electric vehicles; and lithium for batteries, wind turbines and other “decarbonisation” infrastructure). Given China’s frenetic port-building along the Indian Ocean, India is increasing naval exercises with the Quad and other allies to build a “credible deterrence” against China. US Secretary of Defence Lloyd Austin visited New Delhi (March 19-21) amidst the India-China stalemate in eastern Ladakh, though troops disengaged at Pangong Tso in February 2021. He discussed enhancing the bilateral defence relationship and ensuring “a free, open and inclusive” Indo-Pacific region in talks with defence minister Rajnath Singh.

Gen. Austin also tweeted that the Western Indian Ocean would be an area for collaboration as hitherto Washington has focused on the Eastern Indian Ocean and Western Pacific, but India faces threats in the Western Indian Ocean from piracy, the Pakistani navy, and a Chinese base in Djibouti on the east coast of Africa. India has a large diaspora in the Middle East and imports of energy from the region. The Trump Administration included the Western Indian Ocean in the Indo-Pacific by expanding its boundaries from the west coast of India to the east coast of Africa. It invited an Indian liaison officer at US Naval Forces Central Command (NAVCENT) in Bahrain.

However, Darshana M. Baruah points out that Madagascar and the Comoros were excluded from the Indian Ocean Division of the Ministry of External Affairs until December 2019. Both nations are still excluded from the Indian Ocean Coastal Surveillance Radar Network and India has no defence attaché in either country.

The Quad members joined France’s “La Pérouse” exercise in the Bay of Bengal (April 4-7, 2021), where India deployed its stealth frigate INS Shivalik, helicopters, and P-8I maritime patrol aircraft from the Eastern Naval Command at Vizag. The exercise aimed to project dominance in the Indo-Pacific from the Gulf of Aden to the north and far Pacific, touching the western coast of US. The UAE is joining the “Varuna” naval exercise between India and France in the northwest Arabian Sea near the Persian Gulf (April 25-27, 2021). France has deployed its nuclear-powered aircraft carrier FNS Charles de Gaulle with Rafale-M naval jets for the exercise. France, Germany and Canada are also enhancing maritime collaboration with the Quad. The “Malabar” naval war games in the Indian Ocean in November 2020, the first-ever Quad military drills, were followed by “Sea Dragon,” an anti-submarine warfare exercise of Quad members and Canada, in January 2021.

India has inked reciprocal military logistics pacts with Quad partners as well as France, South Korea and Singapore to enhance its strategic reach in the entire Indian Ocean region and is building ports in Chabahar, Chittagong, Colombo and Sittwe; Japan has offered access to its facility in Djibouti. India is also developing an air and naval base on the Mauritian island of North Agalega in the south-western Indian Ocean, with communications and electronic intelligence facilities. Agalega will support India’s P8I fleet, and facilitate maritime patrols over the Mozambique Channel through which large commercial ships, especially oil tankers, pass. It will enable the Indian Navy to observe shipping routes around southern Africa, through which China’s energy imports pass.

Quad-Plus ties are being developed with Vietnam, New Zealand, South Korea, Brazil and Israel. France and Indonesia could join the Defence and Security Plus group, while Taiwan, Korea and The Netherlands could join the group on semiconductors. Britain is trying to return to Oceania; it will have to determine its role in the region.

Russia

India’s relations with Russia are strong, tied through a strategic partnership and long-standing friendship. US hostility to Russia has compelled the latter to buttress ties with China—a nexus likely to grow in coming years. However, Moscow refused to take sides between India and China during the standoff in eastern Ladakh in 2020, and expedited military supplies to India several weeks after the Galwan clash and “responded positively to every defence requirement that India had.” Michael Kugelman states that Russia discretely aided bilateral negotiations between the two nations after the Galwan conflict.

In his visit to New Delhi (April 5-7, 2021), Foreign Minister Sergei Lavrov discussed Beijing. Speaking to The Hindustan Times, he said Russia was “closely watching the process of normalisation” along the border. Lavrov however showed discomfort with the term “Indo-Pacific,” preferring “Asia Pacific”. Acknowledging close ties with Beijing, he said Moscow eschewed “military alliances” and cautioned that groupings such as “Asian NATO” (Quad) can be “counterproductive” and at odds with “inclusive cooperation”. Disregarding South Block’s new taboo on hyphenating India and Pakistan, Lavrov proceeded to Islamabad to discuss the Afghan peace process and bilateral cooperation. In Islamabad, Lavrov said Russia and Pakistan had “convergent positions” on the Afghan peace process. The bilateral cooperation in the field of energy, security, including counter-terrorism and defence, was within the framework of the Shanghai Cooperation Organisation.

New Delhi is keen to promote links between the Indo-Pacific and the Russian Far East. Visiting Vladivostok in 2019, Prime Minister Narendra Modi averred, “the Far East will become a confluence of the Eurasian Union on one side and the open, free, and inclusive Indo-Pacific on the other.” Currently, India, Russia, and Japan are mulling joint economic projects in the Far East and the Chennai-Vladivostok maritime trade route. Visiting Moscow to prepare for the India-Russia annual summit 2021, Foreign Secretary Harsh Shringla hoped Russia would play a role in three strategic geographies: Eurasia, Indo-Pacific and Russian Far East, and the Arctic. As both India and Russia broaden their respective diplomatic outreach, the bilateral relationship, despite the Russia-China-Pakistan nexus, remains strong with commitments in defence and energy, space and nuclear sectors.

Afghanistan

India is committed to a political solution that leads to an independent and democratic Afghanistan and a peace process that is Afghan-led, Afghan-controlled and Afghan-owned. India has made significant contribution to Afghanistan’s civilian reconstruction effort and earned tremendous goodwill amongst the Afghan people. However, with President Biden announcing a complete withdrawal of US troops by 11 September 2021, barring limited personnel to guard US installations, including the embassy in Kabul, the security landscape in Afghanistan is changing dramatically.

Earlier, President Donald Trump’s insistence on ending the long war in Afghanistan culminated in a unilateral deal with the Taliban at Doha, Qatar, on 29 February 2020, excluding Afghanistan’s elected government. The Biden administration has recognised India as a legitimate stakeholder in Afghanistan, and has proposed a regional conference on Afghanistan, under UN auspices, with the foreign ministers of US, India, Russia, China, Pakistan and Iran. This is a major relief for India that has made strenuous efforts to reach the negotiating table. Former Afghan vice president Abdul Rashid Dostum visited India in September 2020, former Afghanistan Chief Executive Officer Abdullah Abdullah (now chair of High Peace Council) and Afghan leader Ata Mohammad Noor arrived in October 2020. India’s National Security Advisor Ajit Doval visited Kabul in January 2021. India is also engaging Iran and its investment in the Chabahar port can provide Afghanistan access to the sea.

US Defence Secretary Gen Lloyd Austin discussed new initiatives with the Prime Minister, Defence Minister, and National Security Advisor during his visit to New Delhi (19 March 2021). The Russian Foreign Minister, Sergei Lavrov, who visited New Delhi recently along with Russian special envoy for Afghanistan, Zamir Kabulov, also endorsed a prominent Indian role in the peace process.

Russia, now an important player in the Afghanistan peace process, hosted a meeting on March 18, 2021 between the Taliban and Afghan government, with international observers. The meeting failed, as did the 9th Heart of Asia Ministerial Conference at Dushanbe, Tajikistan on March 30, where India was represented by Foreign Minister S. Jaishankar. The Moscow conference alarmed Afghan women who fear loss of agency and legal rights. Later, the United States, Russia, China, and Pakistan issued a joint statement that they “do not support the restoration of the Islamic Emirate” and that “Any peace agreement must include protections for the rights of all Afghans, including women, men, children, victims of war, and minorities, and should respond to the strong desire of all Afghans for economic, social and political development including the rule of law.”

Turkey was to host a meeting of the Afghan government and the Taliban, but at the time of writing the Taliban announced a boycott of the conference. President Biden then announced a complete withdrawal of troops by September 11, 2021. The stage will now shift to the proposed regional conference under UN auspices with the foreign ministers of US, India, Russia, China, Pakistan and Iran.

President Ghani boldly offered to hold early elections with international observers, to enable the Afghan people to elect their representatives, and rebuffed an Interim Administration as mooted at Doha, saying it would lack legitimacy and contravene the Afghan constitution. As the Taliban are vehemently opposed to free elections, the situation remains fluid but prospects for peace appear dim. India would have to prepare for a worst case scenario in the event of the country slipping into civil war.

China

Tensions with China rose when, on June 15, 2020, a clash between troops in the Galwan Valley in Eastern Ladakh led to the death of 20 Indian soldiers including Col. Santosh Babu, commanding officer of 16 Bihar. Both sides ratcheted up force accretions on their respective sides, including air power. After initially denying any losses, Beijing admitted four casualties in February 2021 when it agreed to disengagement in Pangong Tso region along the Line of Actual Control after nine rounds of high-level military talks. However, Chinese reluctance to disengage in other sectors has stalled further progress, as evident after the 11th round of talks on 10 April 2021.

While the long standing boundary dispute has strained ties, differing world views have contributed an element of mistrust. Beijing’s insensitivity to India’s core concerns, as reflected in support to Pakistan, opposition to India’s entry in the Nuclear Suppliers Group and stance on international terrorists such as Azhar Masood, amongst other issues, cause concern in New Delhi. Further, China has made no attempts to address the trade imbalance between the two countries which weighs heavily in Beijing’s favour. Moreover, China, which is vying for superpower status, views India’s growing proximity to Washington and the Quad with suspicion.

The Rajiv Gandhi–Deng Xiaoping consensus is over. For a reset, China must reconcile to an India seeking its place in the sun. India understands China’s desire to assert on the international stage with the Belt and Road Initiative (BRI), but India cannot join this project as the China Pakistan Economic Corridor (CPEC), a key component of the BRI, passes through Indian territory that is illegally occupied by Pakistan.

For India, the SAGAR vision and its Indo-Pacific strategy is as much of a developmental necessity as the BRI may be for China. Hence, a reset in India-China relations requires Beijing to accept Indian aspirations. Currently, we are witnessing a new phase in India-China rivalry as both sides strive to protect their strategic interests in a fast-changing world.

Pakistan

When the BJP-led government came to power with an absolute majority in 2014, Prime Minister Modi made a major foreign policy initiative by inviting the heads of state of the SAARC countries to his swearing-in ceremony. Many analysts believed the move was driven by a desire for détente with Pakistan. A number of initiatives followed, including a brief stopover in Lahore on 25 December 2015, to greet Prime Minister Nawaz Sharif on his birthday and convey felicitations for his granddaughter’s wedding. However, these gestures failed to lessen Pakistani intransigence and a terrorist attack on the Pathankot air base (2 January 2016) and a military base in Uri (18 September 2016) followed.

The Modi government changed gears and decided to respond. Thus, 11 days after the Uri attack, Indian Army commandoes struck at multiple points across the line of control and eliminated several terrorist camps, thereby demonstrating that India will not tolerate such attacks, nor will she be cowed down by threats of nuclear blackmail from Pakistan. After a lull, on 14 February 2019, a Jaish-e-Mohamed (JeM) suicide bomber rammed his car into a vehicle of the Central Reserve Police Forces in Pulwama, killing 40 police personnel. India responded 12 days later (26 February) with an air strike on a JeM base deep inside Pakistani territory in Khyber Pakhtunkhwa, thus showcasing its willingness to avenge terror attacks on its soil.

The policy of hard retaliation against Pakistani military posts supporting cross border infiltration forced Pakistan to call for an end to cross border firing. In a meeting at the level of the Director Generals of Military Operations of India and Pakistan, Lt. Gen. Paramjit Singh Sangha and Maj. Gen. Nauman Zakaria, on February 25, 2021, both sides agreed to follow all ceasefire accords along the LoC and sectors of the International Border. The ceasefire agreement was first reached in 2003 and reiterated in 2018, but violations were the norm; over 5,000 violations were reported in 2020 and over 600 in the initial weeks of 2021.

Islamabad is under enormous pressure from the international community and Financial Action Task Force to cease using terrorism as an instrument of State policy. The abrogation of laws treating Jammu and Kashmir differently from other States on 5 August 2019, and dividing the State into two Union Territories (Ladakh and Jammu and Kashmir) has altered the ground situation in the new UT of J&K. The international community has accepted India’s right to change its internal geography and address terrorist threats emanating across the border. The changed political landscape owing to Governor’s rule, and India’s readiness to show the iron fist, has seriously degraded Pakistan’s ability to promote terror in the UT of J&K and other parts of the country. Strategic analysts, however, believe that the call for ceasefire is a ruse to enable Islamabad to divert resources to lend heft to the Taliban in Afghanistan.

Sri Lanka

India abstained from a UN Human Rights Council resolution on Sri Lanka on March 23, 2021, after President Gotabaya Rajapaksa telephoned Prime Minister Modi for support ahead of the vote. Ties between the two nations became strained after Colombo moved closer to Beijing and recently excluded New Delhi from a Colombo Port terminal project while approving a Chinese energy project in the northern islands, close to the Tamil Nadu coast. After New Delhi conveyed displeasure on both moves, Colombo offered an alternative terminal project which is being negotiated with the Adani Group.

Prime Minister Modi tweeted that the conversation covered issues of bilateral and multilateral cooperation, including the Covid-19 pandemic for which India gifted Colombo Sri Lanka its first consignment of vaccines. However, New Delhi had to balance Colombo’s plea with Tamil sentiments at home and the rights of Sri Lanka’s Tamil minority. During discussions on the report of the Office of the UN High Commissioner for Human Rights in February, India’s Permanent Representative in Geneva said respecting the rights of the Tamil community “including through meaningful devolution, contributes directly to the unity and integrity of Sri Lanka.” Hence, India abstained; the UNHRC resolution was passed with 22 countries for, 11 against, and 14 abstentions.

Conclusion

To conclude, since 2014, Indian foreign policy has become more robust and focused on India’s core interests. Hitherto, Indian foreign policy strove for a multipolar Asia in a bipolar or unipolar world. Now, as Asia’s economic rise challenges Western economic and ideological dominance, New Delhi has to maintain status in a multipolar Asia and a multipolar world. Like Russia and China, and unlike the (affectations of) Western democracies, India is not averse to dealing with political and/or ideological diversity. The European Union shares some of these perceptions. The current world order is in a flux. We live in interesting times.

Author Brief Bio: Sandhya Jain is a political analyst, independent researcher, and author of multiple books. She is also editor of the platform Vijayvaani.

The 2014 mandate that catapulted Narendra Modi into the prime ministership of the world’s largest democracy was essentially due to three factors – Modi’s personal charisma, united grassroot efforts of the party and Sangh Parivaar cadre and the failures of the previous UPA II government. When the elections took place five years later in 2019, the third factor was no longer there. Yet, the mandate that Modi secured in 2019 General Elections was even bigger than the 2014 mandate. Modi’s charisma continued to be a factor. In fact, defying conventional political wisdom about incumbency, Modi’s personal popularity with the masses has increased with each passing year and was at all-time high when he faced the electorate in April 2019. Under Amit Shah’s leadership, the party organization has also grown in strength and expanse.

But the most important factor that was responsible for the favorable mandate in 2019 was the 5-year performance track record of the Modi government. In fact, Modi went before the people with his progress card and secured massive endorsement from them. Two qualities that distinguished Modi’s government in its first term were ‘decisive’ and ‘hands on’. Unlike his predecessors who largely stayed dormant, Modi led from the front. He not only demonstrated courage in taking strong actions, like demonetization, Land Border Agreement with Bangladesh and withdrawal from the J&K government of BJP & PDP, he also clearly showed that he was the one handling the matters. He sat through the entire night monitoring surgical strikes against Pakistan after Uri attack in 2016 and the Balakot air strikes after the Pulwama attack in early 2019.

As he began his second term after the landslide   in 2019, the decisive and hands on approach continued. It became clear from some of the significant legislative decisions taken by the Modi government within months of the coming back to power that Modi was confident about victory and had already chalked out plans for his second term in office. Several major decisions taken in the first 100 days clearly indicate that the government was preparing for them before the elections itself. Merger of 10 public sector banks into 4 big ones and announcement of major incentives like pension to farmers were announced by the Finance Minister within a month after the new cabinet was sworn in on May 30, 2019. The bill for abrogation of triple talaq was introduced and passed in July. And in early August came the historic abrogation of Articles 35 A and 370 of the Indian Constitution affecting a major change in the constitutional status of Jammu & Kashmir. Towards the end of the year another big step was taken by passing the Citizenship Amendment Act – CAA.

Speaking on the completion of first 100 days of his Modi 2.0 government, Prime Minister said that development, trust and big changes mark the performance during the period. Trust and big changes certainly. That people have trusted Prime Minister massively is beyond dispute. But people also included the core supporters of the party and Parivaar. They always trusted him. Modi decided to pay them back in the first few months through big changes and the result was the passing of triple talaq, Article 370 and CAA bills. In November same year, the Supreme Court had delivered its final verdict on Ram Janma Bhoomi dispute allowing for the construction of a temple on the site under question. Modi did not waste time in constituting a trust led by people not only dedicated to the cause but also involved in the temple movement for decades.

The country has overwhelmingly supported Modi on almost all of these issues. In the eyes of his core supporters, Modi acquired the stature of a supreme leader. Perhaps, Modi wanted these contentious issues to be addressed as soon as possible so that he could focus on the third issue of development in the remaining duration of his government. In that sense, Modi 2.0 opened with a big bang.

Decisions like neutralization of Article 370 and annulment of Triple Talaq were not easy. They needed determined effort to pass in the parliament and also secure popular support. In his characteristic style, Modi went ahead and got the bills passed in both Houses. He seemed to have quietly worked on the draft bills for months with the help of a couple of trusted officials. Large sections of the political establishment came to know about them only on the day of their presentation before the parliament. Modi had elaborate plans ready to tackle the fallout of such momentous decisions like Article 370 too. The result was the all-round applause and support he got for those historic decisions.

However, there are four areas in which the government faced challenges. They are – pandemic, economy, security and foreign policy, and perception.

Pandemic:

At a time when the government was preparing to embark on a major developmental drive with $ 5 Trillion GDP as the target, the country, and the world were hit by the Corona pandemic. Unlike many other countries including the US, Modi government acted swiftly by imposing restrictions on foreign passengers in early March 2020. It finally went for full lockdown for close to two months during March-May that year. These strict measures together with Prime Minister’s continuous monitoring and engagement with masses have helped in India successfully overcoming the deadly impact of the first wave of Covid.

India also led in the manufacture of vaccines and their supply to many countries. Two Indian made vaccines have come into the market by the end of 2020 while more were added subsequently. India also helped neighbors and many other countries through what it described as ‘Vaccine Maitri’.

However, the deadly attack of the pandemic in its second wave has caught the country off guard. It turned out to be much more virulent than the first wave leading to total suffocation of the healthcare establishment. The government’s handling has come under severe criticism among the netizens primarily because of the high expectations they had from Prime Minister Modi in view of the experience from last year. The government should take this criticism in right spirit and address the challenge.

One important lesson that the healthcare crisis has taught was the need for empowering grassroots institutions. Decentralization and popular activism should be the way forward for a country of India’s size and diversity. One of the hallmarks of Modi’s government has been to make people the stakeholders in its programs. He also repeatedly asserted his commitment to minimum government and maximum governance. In the Constituent Assembly, when members insisted on a strong center, Ambedkar explained the need for decentralization of power structure to cater to the aspirations of diverse sections of the society. That was how a union with federal structure was created as a compromise. The way forward is not hyper-centralization, but ‘cooperative federalism’.

Economy:

In the first five years, Modi focused on setting the economic basics of the country right. They included eradication of corruption, addressing the perils of parallel economy and black money, restructuring banking system and integrating the last mile citizens into the economic network. As the government entered the second term, it moved fast on the reforms front. New and broad-based reforms in agriculture and banking sectors, together with the push to dispense with public sector bulge indicate government’s bold commitment to further liberalize the economy. Modi understands the need for encouraging private capital both from within and without to stimulate economic growth in the country. Bogged down by basic weakness of Indian economy and political imperatives in the first term, Modi boldly decided to move ahead in his second term with much needed opening up.

Bold push for encouraging market forces to take lead in the agriculture sector has led to some resistance from a section of the farmers. Vested interests have joined them to put pressure on the government to withdraw the reforms. On an earlier occasion at the beginning of the first term, Modi had to succumb to political pressures and walk back on important land reforms. But this time, the government seemed determined to push ahead ignoring the ill-motivated protests. For the long-term benefit of India’s agriculture sector these reforms are going to be a turning point for the farmers of the country.

At a time when the Indian economy was all set to take off with improvement in ease of doing business indicators and investor-friendly policies, the pandemic struck. Pandemic has significantly crippled Indian economy. Despite intensive rehabilitation measures taken by the government, it still seems limping. The second wave is going to further delay the recovery. However, the determination shown by Modi 2.0 to forge ahead with right policies for greater liberalization can certainly help in the process of economic recovery.

India’s economic future depends on how successful its Atma Nirbhar programs and start up and innovation initiatives would be. The real aim of Atma Nirbhar is to make citizen-investors less dependent on government and more integrated with global supply chain economy. Similarly, the start up and innovation sector needs greater attention and focus. So far, despite best efforts of the Prime Minister, these sectors remained low key. The critical component for its success is the infusion of capital. For want of the capital, innovation in India has so far remained limited to secondary and tertiary applications. India seriously lags behind in deep-tech innovations and research.

Climate change is another area that has the potential to impact India’s economy. Prime Minister Modi has championed the cause of climate change in a big way since the Paris Climate Summit of 2016. The Indian government has taken many proactive and progressive measures to meet global climate change challenges. It has successfully upgraded its targets in renewable energy generation while simultaneously imposing heavy additional duties on fossil fuel based energy generation. Modi government has set generation of 450 G Wt of renewable energy by 2030 as the target. It is also under pressure from the Western powers to commit for Net-Zero emissions deadline. As a developing nation with high targets for its domestic development and recovery, India needs to tread the climate path rather cautiously. Endlessly invoking arguments like historic responsibility and per capita emissions may be a political winner, but India cannot ignore the lead taken by Prime Minister Modi in the matter. It has to take a more balanced, yet constructive approach on climate issues thus not giving up on the leadership role Modi acquired for himself. It was after all Modi’s initiative that has brought International Solar Alliance into existence and its headquarters to Gurugram in India, the first ever UN headquarters in the country.

Security and Foreign Policy:

One important area where Modi 1.0 came out in flying colours was security and foreign policy. Its handling of Doklam crisis in 2017 and its befitting reply to Pakistan in 2016 after the Uri incident and again in 2019 after Pulwama attack have won laurels domestically and internationally for Modi. He emerged as a strong leader when it comes to India’s security imperatives. On the foreign policy front too, the first 3 years of Modi 1.0 had been a runaway success for the country with Modi’s and India’s stature going up and up in the world. Almost every important leader of the world had made it a point to engage with Modi on bilateral level. Modi built exceptional personal equations with a number of world leaders.

However, Modi 2.0 began with mounting security and foreign policy challenges. It is important to understand that national security does no longer mean military security alone. It involves economic, technological and political aspects also. For example energy security, cyber security, communications security and health security are also important aspects of a nation’s overall security. Political stability in the extended neighbourhood is also an important element of the national security. Hence, globally, national security is understood more as a diplomatic endeavour than a military one.

While Modi government has a strong and stable military security apparatus in place and is able to counter its recalcitrant neighbours like Pakistan and China effectively, its diplomatic endeavours need further sharpening. Indian diplomacy, right from the time of its first Prime Minister Jawahar Lal Nehru, has had two undeclared priority commitments. They are – Asian pre-eminence, and non-alliance. In the last seven decades, successive leaders have adhered to these two commitments although using their own formulations and vocabulary. Neighbourhood first policy of the previous governments or strategic autonomy policy of the Modi government are an extension of those commitments only.

Indian diplomacy needs to pursue these twin commitments vigorously. Perception of its over-dependence on one Western power may hinder its larger security strategy. While India’s relations with America have improved substantially under Modi government, it is imperative for India to pursue a policy of frontline state in its Asian neighbourhood. Prime Minister’s inclusive approach to Indo-Pacific region is an important indicator of India’s distinct vision for the region. While Quad is an important minilateral for India, it also needs to pursue other relationships in the region like the BIMSTEC, East Asia Summit and the Indian Ocean groupings like IORA.

Also important are its relations with the immediate neighbourhood. Modi 1.0 saw great enthusiasm among the neighbours. Almost all the top leaders of the SAARC neighbourhood were present at his oath-taking in 2014. Modi emerged as a cynosure of all eyes in the neighbouring countries also. But over the last few years, the neighbourhood relations are slipping due to intense pressure from the other big neighbour – China. India has to quickly reorient its strategy towards the important neighbours like Afghanistan, Sri Lanka, Nepal and Myanmar.

Perception:

The greatest challenge that Modi 2.0 faces is the perception challenge. Modi 1.0 saw Modi himself aggressively pushing for a major image makeover for India through various initiatives. His initiatives at the UN, bilateral engagements with senior world leaders and hosting of BIMSTEC and African Leaders Summit have all helped in creating a positive perception about Modi. His proactive engagement with multilateral forums like G-20, Paris Climate Summit, East Asia Summit etc has also helped in further enhancing his prestige as an important world leader. He constantly interacted with world leaders in politics, industry, academe and civil society. There was a time when he was projected by many international magazines as an important global statesman.

However, in the last couple of years, the perception related challenge has certainly become serious for the Indian leadership. The negative perception that was sought to be created globally was based on fictitious and biased conjectures. Certain interest groups like the radical Left-Liberal cabal, are in the forefront in the misinformation campaign. These groups have no support base in India, but have their tentacles spread across the NGO, media and think tank circuits globally. They provide fodder for the neutral liberals in the Western countries, thus influencing many right thinking individuals and institutions also adversely. These mischievous attempts have resulted in India ranking poorly on several indices presented by various think tanks and other institutions.

Critics have succeeded in damaging India’s reputation misrepresenting some of the progressive measures like the agricultural reforms or constitutionally sound measures like the Citizenship Amendment Act and abrogation of Article 370. Indian response varied from ‘who-cares’ smugness to innuendo-filled angry outbursts. Neither would help India address this perception challenge. The fact that several Indian interest groups were also actively conniving with others globally in spreading canards about India should make Indian response much more coherent and comprehensive. India should step up its efforts to engage with global public and civilian institutions in a more proactive and constructive manner so as to be able to address this perception challenge.

Conclusion:

Despite these challenges Prime Minister Modi continues to be popular with the masses primarily because of his direct connect with them and also because they see in him a leader genuinely and selflessly committed to the welfare and well-being of the country. The utter disarray in the opposition ranks also helps strengthen Modi’s position as the only hope for the country. In the political arena though, Modi is expected to carry every election on his shoulders using his popularity. Yet, in the elections to state legislatures, the BJP is securing mixed results only. Of the nine Assembly elections held in the two years of Modi 2.0, the BJP could win in only three states – Arunachal Pradesh, Haryana and Bihar. In the current round of elections that took place in April 2021 to five assemblies, the party was able to retain Assam while the big win expected in the prestigious election in West Bengal eluded it once again. In Tamil Nadu and Kerala too the performance of the party has been dismal. That leaves half the states outside the NDA and in the hands of various opposition parties.

In order to overcome the four important challenges that the country is facing, Modi 2.0 needs to put greater focus on decentralism and cooperative federalism domestically and proactive engagement globally.

Budget 2021-22^[i]  presented by Finance Minister Nirmala Sitharaman on 1 February 2021 in Parliament was perhaps the most revolutionary budget presented by any finance minister since the opening up of the economy in 1991. It came in the backdrop of a year long lockdown caused by the COVID-19 pandemic—a result of the SARS-Cov-2 virus which originated and spread from China, and which caused a severe economic meltdown in India and across the world. Fortunately, India has handled the pandemic extremely well, which reflects on the capacity of the government and the people of India to respond to a crisis. Among the major initiatives taken by the government to alleviate the impact of the pandemic and provide succour to the weakest and most vulnerable sections of society were schemes such as the Pradhan Mantri Garib Kalyan Yojana, valued at Rs 2.76 lakh crore, and announced within 48 hours of the three week long complete lockdown of the country being announced on 24 March 2020. This was followed by the rollout of the AtmaNirbhar Bharat package (ANB 1.0) in May 2020, and thereafter the rollout of two more AtmaNirbhar Bharat packages (ANB 2.0 and ANB 3.0), the three packages having a total financial impact of Rs 27.1 lakh crore, which also included measures taken by the Reserve Bank of India.

Towards the end of 2020, there were visible signs of an economic recovery. GST collections for the month of December 2020 crossed Rs 1.15 lakh crore, which was the highest since GST was introduced, surpassing the earlier highest GST collection of Rs 1,13,866 crore for April 2019.^[ii] The GST collections for January 2021 stood at Rs 1,19,847 crore^[iii], marking the fourth straight month of over Rs 1 lakh crore tax collection, a sign of strong recovery.

The budget has variously been described as a bold and imaginative budget to revive the economy, the sentiment being reflected in the stock market which saw a bullish trend. Much to the relief of the people of India, the budget went beyond expectations by refraining from imposing any new taxes. The reformist agenda of the budget was also apparent in measures such as the intent to go the privatisation path, which was signalled by the proposal to privatise two nationalised banks and one general insurance company, raising the FDI limit on insurance to 74 percent from 49 percent and the proposal to set up an Asset Reconstruction and Management Company, for stressed assets of banks. Clearly, India’s financial sector is headed for much better times.

That the government is set on its reformist agenda is also indicated by its refusal to buckle under the farmers protest. A revival of the economy and a push towards self reliance in key sectors such as defence and cutting edge technologies will however not suit certain countries who perceive India’s rise as being antithetical to their interests. Within the country, vested interests which have benefitted from the statism of the past will also hotly oppose any attempts at reform. The coming years are hence likely to see heightened civil protests, organised by powerful groups, but camouflaged under the veneer of India’s democratic structure and the freedoms which it affords for all shades of dissent.

The toolkit, unintentionally revealed by Greta Thunberg in a tweet she made supporting the farmers agitation in India is a pointer to a wider conspiracy, wherein the social media is used to shape opinions and perceptions. Robyn Rihanna Fenty, a Barbadian singer, actress and businesswoman, also tweeted in support of the agitating farmers in India as did a host of other people who have large fan followings. A tweet per se is harmless and not of special significance. But when a large number of influential people express similar ideas in unison, it creates a ripple effect which has the potential to transform into a wave, when it crosses the tipping point—a theory expounded by Malcolm Gladwell in his book The Tipping Point. In his book, Gladwell explains how many of today’s problems are as volatile as epidemics and can ‘tip’ and change radically at any point. The same goes for information. A tweet can become viral and cause concerns across the world stage.

The farmers agitation which began in 2020 and peaked in January 2021 has striking similarities to the protests which took place in Delhi and some other parts of the country against the Citizenship Amendment Act in 2019 and which peaked in January 2020, timed to the visit of the US President to India. Going back further in time, we see a continuum of such protests, timed and motivated to fan disturbances. The fake narratives of an ‘intolerant India,’ to staging protests against bauxite mining in Odisha, which forced the closure of the Vedanta alumina refinery in the state are examples of how perceptions can be shaped to suit vested interests. It comes as little surprise that the Chinese benefitted by the closure of the Vedanta refinery, as it resulted in increased imports of aluminium by India from China.

Increasingly, efforts at shaping perceptions to stall government initiatives will gain salience, and this will be the defining challenge in the coming years. How information is managed and a narrative is shaped will become more and more relevant in each successive year. The pragmatic reforms that budget 2021 has signalled must hence also be accompanied by an appropriate narrative to shape the information environment. Winning the perception war is all about correct and judicious messaging, exploiting all available dissemination platforms, and keeping the messages delivered credible and truthful. This too must form part of the reform process, to prevent the stage being hijacked by forces inimical to the nation.

(Author Brief Bio: Maj. Gen. Dhruv C Katoch is Editor, India Foundation Journal and Director, India Foundation.)

^[i] Speech of Nirmala Sitharaman Minister of Finance, Govt of India, Budget 2021-2022, https://www.indiabudget.gov.in/doc/budget_speech.pdf

^[ii] Ministry of Finance, Govt of India, PIB, https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1685332

^[iii] Ministry of Finance, “GST Revenue collection for January 2021 almost touches ₹1.20 lakh crore”, PIB, https://pib.gov.in/PressReleseDetailm.aspx?PRID=1693779

The World Economic Order is witnessing a major disruption as the Digital Age transforms economies and the workplace at a pace most players are struggling to cope with, leaving behind a graveyard of failed businesses, large and small. This transition comes at a time when most large economies have started to look “inwards” after decades of Globalisation – whether it was Trump’s campaign of “Making America Great Again” or UK’s exit from EU or India’s “Make in India” initiative or Japan’s incentive to companies to move back from China. Think Local First has become a priority for most economies in recent years.

World shifting from Globalisation to Glocalisation

Before we delve into this shift towards Glocalisation, let us understand the spirit behind Globalisation and why did it start to fail nations. While trade in commodities (oil/coal, metals, grains/spices, gems and textiles) has always been prevalent, over the past 3-4 decades as industrialisation got to scale and Information Technology emerged, global trade shifted from commodities to manufactured goods and services, and became the major theme for most companies based on three fundamental tenets:

• Produce where Cost is lowest
• Create Scale to build barriers (on cost and innovation)
• Treat entire World as the Market and create demand (“Push” and “Use & Throw” models, driven by cheap finance)

Japan, followed by Korea, Eastern Europe and finally China leveraged the Globalisation wave to become the manufacturing hubs of the world. China today accounts for almost half of all manufactured goods commonly used world over.

However, the Globalisation trend has begun to fall apart and reverse due to three fundamental reasons leading to governments across the world to rethink:

• Rapid and large scale job loss – with cheaper imports, local industries in most countries took a big hit and the workforce could not be retrained/refocused for other newer jobs/roles. America has 25% of its jobs (that is ~4.5 million jobs) in manufacturing since the start of this century^[i] and the import-led job loss in sectors such as automotive, electronics and consumer goods has hit them hard.
• Large disparity amongst nations and amongst populations within nations, putting countries and companies into debt/forex traps and economic turmoil. MSMEs, which are the largest employers in most countries, are increasingly unable to compete with cheaper imports from countries such as China and are staring at an existential crisis.
• New problems/challenges created at a pace faster than countries could solve (eg., handling pollution & waste as the “Use & Throw” culture grew, managing rapid urbanisation with jobs moving to Services, unsustainable use of natural resources for industrial scale production, water scarcity in many large cities and countries)

The conflicting forces of globalisation and nationalism are making governments and companies rethink their priorities, forcing them to come up with new constructs. In a post globalised world, communities and people find themselves on either side of an increasingly stark divide between winners and losers. Against this backdrop of multiple competing interests is the one unifying truth which is that we all share this planet and will collectively drive it to its rescue or doom.

A Unique Opportunity for “Bharat”

It is in this context that I believe India has a unique opportunity, coming as it does when the world is getting wary of China (the “factory of the world”) and looking for more reliable and trustworthy alternates. This is an opportunity that we can, or rather should, seize, not as India but as Bharat—a nation that not only dominated the global economy for over 2 millennia but was also the commerce and technological leader across fields and a spiritual guide for the world. An opportunity that we should seize not by trying to take our villagers to the cities, but instead by developing our villages sustainably and taking these solutions & products to the World.

As analysed by the IMF^[ii], Bharat was over 30% of the Global GDP since the start of the Common Era right until the 15^th century, even after centuries of invasions and loot by the Turks/Afghans/Moghuls. For over 1500 years, India was twice of what the US is today in share of the Global GDP! And it was only over the last two centuries under British rule that slowly, with systematic extraction of resources and wealth, and destruction of the local industries and ecosystems that India was reduced to <3% of Global GDP by 1947. More importantly, over these 2 centuries we got conditioned to become a market for British ideas and products, and a supplier of talent and resources for them.

However, even post-independence we continue to operate with the same mindset – a market for Western ideas and products, and a supplier of talent and resources to them. We remain in awe of global companies and products, prefer using either cheaper Chinese imports or over-priced Western products (many of which are not tailored for our use), and the US dream is still perhaps the biggest draw on most educational campuses. “Getting a job, especially in an MNC” is the ambition for most rather than being an entrepreneur or a scientist/innovator.

So strong has been this conditioning that we believe something only if a developed nation endorses it. Yoga and Ayurveda are classic examples – we continuously look for Western endorsement of these versus proudly develop and propagate these perfected sciences through well-funded efforts ourselves. Just as in equipment maintenance, preventive maintenance is better than breakdown maintenance, for the human body, preventive sciences such as Yoga and Ayurveda are better than the allopathic science which is akin to breakdown maintenance. Yes, the allopathic approach led by the global pharmaceutical majors has its advantages and we should learn and benefit from these, but we should also invest and take Yoga and Ayurveda to the world in a form and manner they can understand and appreciate. Most of the scientific laws/theories that we learn today as Newton’s or Einstein’s or Darwin’s theories or earlier ones such as the Pythagoras theorem, had been written about in depth in the ancient texts of Bharat (such as the Vedas and Upanishads) several millennia earlier. However, over the past millennia of invasions as our education systems were destroyed, we lost this knowledge and worse, we lost our faith in this knowledge.

One of the primary reason for this large gap in our understanding and appreciation of our heritage is that we lost the key to this heritage – Sanskrit. It is ironic that the language which is still the key to the largest bank of scientific knowledge (across biology, health and medicine, astronomy and forces of nature, physical and chemical sciences, architecture and spiritual sciences) and one that NASA or Germany are still pursing avidly, is restricted at best to a 3-year crash course in secondary school in its home country! And hence most Indians either are not aware of the knowledge of the Vedas and Upanishads, or at best read some short, often misrepresented/misquoted English translations by Western authors! During the last leg of foreign rule we not only lost our pride as a Nation, but also, with the destruction of our education system and knowledge of Sanskrit, we lost the confidence in our ability and worth. And post-independence we have not done much to rekindle it.

Reviving “Bharatiyata”

Countries like China, and before them Japan or Korea, did not get to their position of eminence by merely aping the West. Even as they looked to break into these markets, they continued to bank on their own manufacturing for their local consumption and continued to work on quality until they perfected and even surpassed the Americans and Europeans. They also invested heavily to take pole positions in the technologies of the future. For example, as far back as in 2005, it was a stated goal of China that while they lost out on the Internal Combustion Engine technology and will play catch-up to the West and Japan, on Electric Vehicles they will lead the world – and they did. The same goes for Digital Technology; Chinese funds and companies are the largest acquirers of Digital start-ups world over. Each of these countries, even as they connected with the rest of the world, never lost faith and confidence in their own capabilities and culture. That is why, as we in India develop our nation, we need to make our “Bharatiyata” our strength (and not consider it a disadvantage) and once again lead the world – economically, technologically and spiritually!

This mindset shift from India to Bharat is important for us if we are to regain our rightful place in the Global Order. And there are three specific reasons that are central to this shift:

1. Need to Adopt a Leader/Innovator mindset instead of a Follower/Adopter mindset. If you go back a millennia (or even a few millennia before that), you will find that Bharat was the pioneer not just in textiles and agri-products but also in metallurgy, healthcare, education, astronomy, architecture and even administration. And the advances in each of these domains were unparalleled and sustained for centuries. However, over the years we lost this knowledge with a systematic and brutal destruction of our education system and texts. When Bhaktiyar Khilji burnt the Nalanda University, the Library burnt for over three months – such was the extent of knowledge! We need to bring the best of the World to India, but we also need to take the Best of Bharat to the World. And for this, we need to be proud of our heritage! A classic example is the Covid-19 pandemic. India has performed far better than most developed countries in terms of containing the virus and improving recovery rates. Most global experts had not expected this and had written off India as a country heading for a disaster. But when India effectively contained the virus, most were quick to attribute it to an outcome of better immunity due to bad hygiene. Unfortunately, many in India were happy to accept that as a rationale. However, the real reason perhaps is threefold – i) we use lot of immunity boosting ingredients in our daily diet (Haldi, Ginger, Tulsi, etc), ii) we have not yet fallen prey to the “pill culture” propagated by global pharmaceutical giants and hence our immunity has not been compromised, and iii) our natural cures (such as Ayurveda, Homeopathy, Yoga and even home remedies) are quite effective. After leading in controlling the pandemic, India is now leading the global vaccination effort—not only developing one of the best Covid vaccines and launching the largest vaccination program but also being a supplier to the world for the vaccines. Bharat led the world responsibly on handling of the pandemic and we should be proud of it! And taking a lesson from this, we need to think how we can help the world by marketing our products/solutions better, rather than enjoy being labeled as “primitive/unhygienic” or worst just “lucky”.
2. Need to Solve for Our Challenges in Our Unique & Sustainable Ways. We are a large population and cannot just copy Western solutions for our needs and problems. Worse, we cannot let the West define these for us. If India was to develop the same way as the US or Europe, Earth will not be able to sustain the resource intensity required. Therefore, we need to define our needs and desires and identify our unique problems and then develop our own solutions for these. And with the scale in India, take these solutions to the world economically, especially to other developing countries.

A classic example is E-commerce. We have a vibrant and widespread retail network – so instead of adopting the standard western E-Comm model, we needed to build on our Kirana Retail Network to create the right blend of Omni-Channel that ensures the small retailer also thrives as you bring in efficiencies of scale through digital. However, most E-Comm players started with a Cut-Copy-Paste of the Western models and only now some of them are moving to leverage the Local Kirana! This not only gives them lower cost last mile access, it also ensures that our large population is productively employed. And such an approach will create a collaborative environment rather than an adversarial one. As we adopt new technology from the West, we need to keep in mind that many of these have been developed in the backdrop of nations with low population densities looking to solve for challenges of low manpower availability or higher cost. In India, our challenges are different, and our solutions need to build on our strengths even as we adopt good concepts from other countries, else we will create unsustainable models that will fail.

3. Bring back business ecosystems that are “In Sync with Nature & Society” (in today’s language, Sustainable). While Western thought has traditionally been linear, Bharatiya systems have in general followed the “Closed Loop” principle and worked with nature as a stakeholder instead of as a resource. While the scale of industry and the population today cannot be compared with that of a millennium ago, the concepts and thought processes are still relevant as we design new business systems.

Let me illustrate this through an example one of my McKinsey colleague turned historian shared recently about the way the Temples of Chola Empire operated. When a rich person would come to donate money to a temple and ask for a Diya to be lit in memory of their loved one, the Temple priest would ask them to instead donate cows or goats to a poor family around the temple with the same money. The poor family would then give Ghee for the Diya for perpetuity and the extra earnings from the milk would help spread prosperity in the neighbourhood. A simple idea but sustainable!Another example is of the packaging industry. In Bharat we traditionally used jute or cloth bags that were not just better for the environment but also supported thousands of people in rural areas (from farmers to artisans to traders). And these handicraft-based ecosystems/industries didn’t just serve the Indian market but were also exported widely to other parts of the world. However, with the advent of plastics, these natural and sustainable solutions lost out due to higher initial purchase costs (though on a lifecycle basis they may still be cheaper) and perhaps convenience. And now, after seeing the negative impact of plastics, countries the world over are once again moving back to natural and sustainable solutions such as jute and cloth bags! However, unfortunately now the domestic ecosystems involved in such handicrafts have disappeared due to the lack of a market and rebuilding them will be difficult.

Similarly, if you look at most of the structures built in Bharat over the past 15-20 centuries, they very efficiently leveraged nature for lighting, temperature control and structural strength (so strong was the understanding of concepts of wind patterns, material sciences, astronomy, architecture). Take for example the Modera Sun Temple that was built a 1000 years ago. The temple was so perfectly designed and built that on the equinox days, the rays of the sun would fall straight on the diamond on the crown of the Sun God and light up the entire temple^[iii]. Such was the knowledge of astronomy and the precision of architecture and geometry! Most of our forts/palaces and homes leveraged knowledge of wind and weather patterns, materials and architecture to provide comfort within throughout the year.

In the core Bharatiya philosophy, nature (including flora & fauna) and natural resources have always been considered as “partners” of the society which we leverage and not something that we exploit or fight against. And therefore, most cities/villages and economic activity was designed in a manner where, what was taken from nature was also returned to it in a usable form. Today we call it Sustainability. The world is slowly beginning to realise its importance. Renewable energy has become the fastest growing source of power with local customised solutions being the focus (solar power cycles/cars, transport, homes, gadgets and even clothes!). World is fast moving towards organic and vegetarian foods. Communities are banning use of plastics and exploring reusable/natural packaging material. Use of cycles is becoming vogue in several big cities. Sustainability and social responsibility are buzz words becoming core to the financial markets steadily. In Bharat, these principles were the core to most business systems that were developed and perfected over centuries!

I believe that today, India has a unique opportunity to not only reclaim its place in the Global Economic Order and take Bharat to the World, but also to lead the world spiritually! There is an urgent need for humanity to start a quest for the purpose of our existence and not just chase wealth/economic power – else we will rush towards social unrest and disorder (signs of which are loud and clear in all parts of the world by now). Our scriptures have most of the solutions and tools for this, and the onus is on us to share this with the world in a structured and coherent manner, being the North Star/Dhruv Tara for the world. But for this, we first have to rekindle our pride in our heritage and reinvest in Bharat. A pride that has been systematically destroyed by centuries of foreign rule and one that distorted narratives of our post independent historians have perhaps further dented (instead of revived).

Reviving this pride and the glory of Bharat will require six actions:

1. Re-write the history of Bharat from Bharat’s perspective (not from the invaders perspective). Our young generations need to know of the glorious empires of Bharat that had a strong influence not just on South Asia but the broader world right until 1000 CE and of the brave Kings, Queens and people that fought off invading armies bravely right until the British rule. And even as we write about these 2000 years of our history, we must also go back a further 8-10 millennia when we had thriving civilisations in Bharat that were well ahead of other regions of the world. And draw out the lessons and implications from those that can help us today.
2. Formalise Sanskrit, Ayurveda and Yoga education in schools to ensure that the young generation gets to learn these in a structured way from good teachers. It is sad to see that even today the more popular centers for these are today in universities in the US or Germany, rather than in India.
3. Revive our local, rural ecosystems to make them self-sufficient for their requirements (our cities are already filled to the brim)! We need to rethink how our local administration (SDMs, DMs, Collectors) are re-oriented to operate as Development Officers/CEOs, and form partnerships with industry and local communities to create economic ecosystems building on the strength of each district (the Indian Government has started this thinking but it will need strong partnership with industry to make this work).
4. Encourage entrepreneurship and business/industry. We still continue to have a strong hangover of the British era where money-making by Indians was looked down upon/discouraged. And even today, in the general public discourse, industry is looked at with suspicion in policy making, considered as anti-poor and normally at the receiving end of additional taxes or regulations! This needs to change if we want to be a global economic power.
5. Develop/create schemes to encourage companies and educational institutes to invest in R&D, and create an ecosystem and regulatory framework to support/incubate start-ups in certain focused sectors (the recent move on defence manufacturing is an excellent example of what could be done in many other sectors).
6. Fiercely defend our Industry in global negotiations. All countries from the US to EU to China fiercely support their industry globally to help create new opportunities for them in global trade. This is a core agenda for the foreign policy of most countries and we must do the same for our industry if we need to give a strong competition to established global players

The Prime Minister’s call for Atmanirbhar Bharat and going Vocal for Local, would require a change in mindset. No longer can India be a mere markets for foreign ideas and products and subservient to foreign interests. It devolves on each one of us as Citizens and the Companies/Entrepreneurs to truly reclaim the legacy of Bharat – economically, technologically and spiritually.

(Author Brief Bio: Rohit Pathak is the CEO in an Indian MNC and a Director at Indian Electrical & Electronics Manufacturer’s Association. He is an Alumnus of IIM-Ahmedabad and BITS-Pilani, and was an Associate Principal at McKinsey & Company prior to moving to his current company.)

^[i] US Labor Department, Haver Analytics

^[ii] “Statistics on World Population, GDP and Per Capita GDP, 1-2008 AD”, Angus Maddison, IMF

^[iii] Government Tourist Guide, Modera Sun Temple

India is at a “chauraha”. A confluence of events makes the present a determining moment for India’s economy. Like any “chauraha,” there is “static” from bystanders offering guidance—sometimes of questionable quality or intent.

One (non!)-option is returning to the license raj with public-sector domination of the economy’s “commanding heights”. The overly-regulated structure benefitted powerful participants who played the rule game best, rather than the underprivileged.  Equally avoidable is the second option of taking on sporadic, incremental reforms. In the best case, this may achieve high single-digit growth levels for a while. Both options do not do India justice, and fail in two important objectives – creating employment and pulling people rapidly out of poverty. In a competitive world, India risks falling behind countries that make better policy choices.

The right path is to take inspiration from “bahu-yuddha” – using the opponents’ strengths and one’s flexibility to win. We respond to COVID19 and the global economic situation by doubling down on change and undertaking large-scale transformational measures that make India a preferred destination for investment, technology and skills. Reforms must focus on ease of doing business and “minimum government”, improving productivity and making India a magnet for capital flows while strengthening a targeted social safety system that helps the real under-privileged.

A Multi-generational Opportunity

The chance to revitalise our economy into a global leader has transpired through a coincidence of events – some are years in making and others are unexpectedly sudden.

COVID: Beyond being a humanitarian disaster, the pandemic has wreaked havoc on the global economy. Analysts estimate losses to be in the range of USD 25-50 trillion. Beyond numbers, changed behaviours have upended established business models and caused drastic changes in the methods and practices across almost every aspect of our economies. Changes that would otherwise have taken years, have happened in months. Covid and the resultant lockdown, have proven the efficacy of remote and dispersed operations and delivery. It has also caused lasting damage to sectors dependent on the traditional in-office operations.

The impact of COVID has been widely differentiated – across countries and individuals. The poor have suffered inordinately more. Global trade has also been disrupted – though may be a positive development for us by reinforcing the importance of supply chain players who have the safety net of a large domestic market.

Trump, Brexit and loss of faith in “Internationalism”. Trump’s rhetoric on “America first,” Brexit and multiple political wins by parties that are inward-looking and anti-multilateral trade has created uncertainty around WTO, NAFTA et al. Trump’s successful negotiations on some bilateral trade deals, further encouraged this trend. Counter-intuitively, this helps countries that have clearly defined their trade priorities and are ready to go the extra mile to close deals quickly.  Biden’s election has brought multilateralism back on the table – and this too can help India especially vis a vis China.

World “Breaks-up” with China. Less than perfect disclosures about COVID19, the Belt and Road Initiative (BRI) pushing some of the world’s poorest countries into inextricable debt traps, aggression – military, economic and territorial, and unabashed muscle-flexing, made the world’s view of China less rosy. Questions are being raised about “trusting” China as a partner.  Suddenly the world is looking at China++ strategies, and pushing back on China’s unilateral claims like hegemony over the South China Sea.

Global macro situation that can “subsidise” reform and pivotal changes. Most OECD countries have signalled the maintenance of an easy monetary stance at-least till 2022. Global energy prices are likely to remain low. This has created “headroom” for policy risk taking by reducing risk of external price shocks.  Multiple rounds of quantitative easing around the world have created a huge global pool of liquidity waiting for “productive” investment opportunities. This is especially relevant because we do not have indigenous capital in the scale needed to transform us into a first world economy.

4^th (or is it already 6^th!) Industrial Revolution – Coming Omnipresence of AI/ML, Nanotechnology and Biotech. It’s not yet “Machines Rule” but AI-ML will inevitably impact every aspect of our lives. How we cook, to how we run cities, how healthcare is delivered, how we conduct research, how we manufacture etc. – old process flow-charts will be thrown out of the window. There will be disruption. Positively, mankind will acquire capabilities that Captain Kirk might have described as “god-like”. Negatively, the weakest, least educated and underprivileged may face dislocation including at-least temporary unemployment. At the 8^th C D Deshmukh lecture, Dr David Lipton referred to the possibility of 375 million people globally, losing their jobs due to technology.  Mastering and pioneering cutting edge technology will differentiate countries, as well as determine the quality of employment we offer our citizens.

Emergence of true, and confident “entrepreneurial” class in India. Too often, private “old” family run businesses have been described as entrepreneurs. Old business-houses have contributed to India’s development but entrepreneurship is different. The last three decades have seen a new class of first-generation entrepreneurs coming to the fore – rarely from a wealthy background; building businesses based on “new” ideas for products and services; tech savvy; and, not afraid of failing. Just as TCS and Infosys spawned an entire IT industry, the unicorns created in the last decade are inspiring a generation of young entrepreneurs. This development, and the example of sectors like IT and Pharma that succeeded with minimal government support has put to rest the need for a “mother government”. It is a point that PM Modi has highlighted recently in assigning the private sector a major role in India’s future development.

India has the ingredients to exploit the opportunity – a large domestic consumer market, favourable demographics, pool of educated and skilled human capital, democracy, established judicial-administrative institutions and processes etc.  Leveraging our strengths, in a timely and coordinated manner, will allow us to make massive gains in the global economic hierarchy. We will also transform the living standards of our most underprivileged citizens – fulfilling Gandhiji’s vision of Sarvodaya through Antyodaya.

One Still Has To Hit The Ball To The Boundary: Making The Most Of Our Opportunity

History is a litany of cautionary tales about opportunities – countries that made the most of them, and those that failed to do so. Spain discovered the “new world” but England colonised it; the East Asian Tiger economies started at a similar level but Korea and Singapore made the most of opportunities while others floundered; and closer to home our own dalliance with socialism, labyrinthine regulations and maximum government – which led to anaemic rate of growth for decades.

India has made progress in cutting through the maze. Narasimha Rao, even if under duress from multilateral institutions, took courageous policy decisions to start opening up the economy. Since then, there have been small steps that continued liberalisation. Unfortunately, we also suffered from regulatory inertia.  Often, at the slightest hint of adversity, the vines of regulatory over-reach and complexity reappeared like tenacious weeds. Modi 1.0 made Minimum Government, Maximum Government a stated policy. Hundreds of outdated laws were junked. Approval processes were streamlined. Reforms like GST were executed.  India was open for business.

The recent budget unveiled by Nirmala Sitharaman, together with the earlier “mini-budgets” are a gigantic step forward. It is, perhaps, the most radical set of reforms since Narasimha Rao’s. Coping with the impact of the pandemic, the government has stepped in to reignite demand and investment. It opened up sectors for private participation, and took innovative steps to spur entrepreneurship.  Investments will be made in rural India to spark agricultural productivity and developing rural logistics. As a response to the unprecedented COVID19 crisis, this is a dream budget.

Now we have to construct the edifice of a sustainable, strong, world-leading economy on the foundation of this budget.  This task can be viewed through two lenses – the macro-strategic view covering broad themes, and a micro, sector specific set of policies.

The Macro-Strategic Approach And Policies

Convergence in the “strategy” of policy making. Our economic policy sometimes appears to be formulated in isolation. We need a convergence of our multifarious strategic interests – external affairs (mainly, response to China); defence – exploiting linkages between large purchases and access to latest civilian technology; commerce and industry – ensuring we have access to capital and the latest technology to power the creation of champion industries; health etc. Convergence may help build consensus around bolder bets as a country, in contrast to a “middle path” without conviction. For example, we made the decision to work more closely with the US – given the advantages that such cooperation brings – reforms we need – transparency, corporate governance etc., and the recognition that the US represents the single largest pool of capital. It may also mean preferential treatment to particular countries in order to access deeper capital or technology pools.

Dismantle Regulatory Distortion Of The Markets and Pricing. Across sectors, the Indian economy has been distorted by subsidies, sops and other artificial market deviations. This has led to over-use of inputs and over-concentration of certain crops in agriculture. In industry, it has bred practices of “gaming” of rules just to access tax breaks and subsidies. We have kept uncompetitive, unprofitable industries going for years based on a misplaced sense of indispensability. Worst of all, even the most well-intentioned market interventions tend to have large leakages – with benefits not reaching the people who really need it. Barring exceptional circumstances, we need to map out a path for the government to move out of a price-determiner or market-disrupter role.

Let execution and policy making reflect the true breadth and ambitions of Atmanirbhar Bharat. The grandness of vision that PM Narendra Modi has proposed needs to be suitably executed. Instead of understanding that it is an aspirational “big tent” with multiple elements, people have inaccurately tried to pigeon-hole it into simplistic boxes – strong manufacturing, import substitution etc. It is much more. It is a dream where the gap between being best of class and market leader in India, and internationally, is minimised. Across sectors, Indian products and services must aspire to reach world leading standards. To get there, India remains welcoming to global capital, global ventures and global technology.  Indian ventures may get assistance – to improve, build scale and do research, but not protective barriers to foster suboptimal businesses.

Extension, continued tightening of benefits delivery. Moving out of broad subsidies and price support does not imply reduction of assistance to the truly needy.  In fact, it will support and enhance support. Expansion of DBT has been one of the biggest successes under PM Modi. This needs to be extended beyond just cash transfers and into “social parachute” services – unemployment benefits, insurance for exigencies, access to medical and education services. Savings accruing from reduced subsidies and price supports should be channelled into direct benefits for the most under-privileged.  This re-purposing of benefits has to be accompanied by comprehensive, verified and up-to-data so that benefits go to intended beneficiaries.

Push Integration into Global Supply Chains. Global supply chains are “sticky” business. Once in, business is significantly easier to hold on to. There are the added benefits of correlated investment and capital that follow the supply chain.  The advantages of scale that our manufacturing can enjoy while catering to a global market are hard to imagine.

Source: “High-Technology Exports (Current US$)”, The World Bank, 2007-2018

Inclusion and Participation. Inclusion has often been used in narrow contexts such as financial, employment etc. We need to broaden inclusion and participation to cover every aspect of our social-economy. Use of technology for delivery of education, financial services, medical services are an immediate need. Experience gained during the COVID lockdown in internet-based work collaboration and remote working needs to be translated into greater participation in our economy for women, the differently enabled, those living on the margins of society, residents of our North-east etc. Similarly, technology as a tool should be made available to the largest portion of our citizenry with the old public library becoming the new digital services centres.

Beyond individuals and families, inclusion and participation are also relevant to corporate entities. There is investment needed in broadening corporate credit delivery so that fiat-based credit provision is not needed. Similarly, mechanisms that reduce the cost of technology for MSMEs are needed. Last but not the least, we must enforce our competition regulations and provide a level playing field.  Need for transparent handling of competition breaches must go hand in hand with giving the Competition Commission and similar regulators real punitive “teeth”.

Climate and Sustainability Integral To Real Development. Modi government was the first to stop treating development and environmental-protection as mutually antithetical. The recentlandslides and break-up of the glacier in Uttarakhand is a stark reminder about the fragility of nature and our ecosystems.  In fact, Modi 1.0 had put a stop to further hydropower projects in Uttarakhand.  We now need to marry environmental concerns with our economic development agenda. Reduction of carbon footprint, conservation of water, air-quality et al need focussed efforts. Energy needs to turn towards renewables as a major and not marginal source. Electric transport must become our targeted norm over the next 15 years. Many of these are “social good” investments that the government has to make, since the benefits will be spread over decades.

Recalibrate Marketing & Policy Incentives For Foreign Investment. India’s push for foreign investment has been focussed on financial institutions, largely by the broking community. Investor interactions have increasingly narrowed to roadshows for foreign funds and asset managers. This prioritisation needs to be reversed immediately with focus on strategic investors for companies setting up businesses in India. These investments are very long term and establish a continuing flow of capital and technology in to the country.  Attracting these investments requires marketing, and incentives over a period of time. Some policy measures to attract such investments are:

• Establish tax holidays and other financial incentives based on investment size.
• Establish targets for some countries with greater investment potential like the US, Japan and Taiwan and focussed interactions with the largest corporates to customise incentives.

Commitment To Intellectual Property Rights and Contract Enforceability. India needs foreign capital and technology. Both have been curtailed by the issue of IP rights and contract enforceability. Whether it be the impunity of JV partners “borrowing” technology and starting parallel production, or toll road operators being evicted for “earning too much,” investors get spooked. Steps need to be taken to reassure potential investors through accelerated judicial processes, special arbitration cells and similar policy measures.

Bringing it all together: Productivity and Invest-ability. Just as Arjun remained focussed on the “eye of the bird,” our macro policy measures need to come together and focus on improving productivity across sectors of the economy. Higher productivity will naturally make India an attractive investment destination – the result will be self-sustaining supply of global capital to drive our economy growth.

There is a subtle message in the ordering of the policy recommendations above.  By not putting inclusion-participation and sustainability-environmental protection at the end of the “developmental” recommendations, we want to reiterate the integral role these play.  We will not succeed if we treat them as an afterthought.

The Micro Lens: Sector Specific Policy Approaches

Manufacturing. We need a leap-frog strategy for participating in the global value chain.  Low-end, cheap assembly-manufacturing coupled with depreciated currency fostered exports approach that China exploited and Vietnam, Thailand et al are trying to mimic is the past. Our industrial sector needs to focus on the higher end of value addition, making complex components, high end machinery etc. and scale. We can use our large domestic consumer base as a platform for commercialising new technology. Focus should be on bringing in OEMs rather than their contract manufacturing. Scaling up will happen if our manufacturers can become internationally competitive and not protection enabled national champions. International competitiveness will draw in the capital needed to finance the scaling up.

Agriculture. In a recent address, while commenting about development in Eastern Uttar Pradesh, CM Yogi Adityanath sought a change in “Mansikta,” a need for positivity.  For too long, agriculture has been negatively depicted as an unproductive, subsidy soaking sector holding the country back. Small farmers were profiled the worst. This false “Mansikta” must change. The bane of our actual farmers is “access” – to market (for inputs and produce), to water and land.  Price distortionary policies and productions risks compound their misery. We need massive investment in building this “access”. Technology can play a role in improving input access – be it seeds, fertiliser or agri-tech knowhow about improving productivity.  It can also help regulate illegally incentivised use of inputs. During cultivation, we need to figure out ways for farmers to reduce their costs for e.g. in use of machinery, irrigation. Finally, the small farmer needs access to the markets without losing value to multiple intermediaries. The MSP regime, accessed by less than 15% of our farmers has distorted cultivation towards low value, land-water guzzling crops. More than MSP, we need wider procurement infrastructure that benefits more farmers. FPOs (Farmer Producer Organisations) and similar organisations hold out great promise and need to be fostered. FPOs are more dynamic rather than the institutionally rigid cooperative institutions, and provide farmers with pricing power and buyers with reduced transactional expenses. Some FPOs will fail – and we need to let them – so that we eventually have a network of viable FPOs.

Agriculture policy will not be complete without incentives for organic farming.  Organic farming has shown equal or better productivity but needs a 2-3 year conversion period. Governments, both centre and state, must come together to formulate a plan to encourage, and subsidise the cost of this conversion. We also need to encourage supplementary income from “remote working” that allows rural citizens to take up “urban” opportunities. This is also an achievable objective in the post COVID era.

Change Infrastructure Priorities. Infrastructure has traditionally meant roads, ports, power generation. There is a need to shift to “softer” infrastructure that supports the next leap in national productivity – healthcare, education, clean energy. Healthcare has already been a centrepiece of spending in this budget – following on the ramp-up in health infrastructure as a COVID response.  Similarly, the National Education Policy 2020 (NEP) has set out the path to modernise Indian education, and more importantly help our educational system produce more fit-for-employment students.

Financial Sector. The recent announcement about disinvesting in two banks is a positive step. Eventually, the government should turn this objective on its head and keep only 2-3 banks. Continued government ownership and interference will only consign them to the fate of Air India and BSNL. A path to privatisation—capital, management change and empowerment etc. must be planned and timelines put in place. Pathbreaking steps have been taken in Insurance, capital markets as well as resolving bad loans. Many of these have not received adequate attention.

The money released from disinvestment (and by avoiding repeated recapitalisations) can be used to broaden our financial markets. More “types” of capital need to be made available. This needs more sophisticated exchanges, specialised institutions, access to financial technology and investments in effective regulation that truly prevents systemic risks.

Research and Development (R&D). R&D is not a sector, but needs separate attention. For India to gain from global advances in technology, we need to be plugged into the global R&D ecosystem. Else, we will be like the Road-runner cartoon figure – always running to catch up and paying huge premia for the latest technology. We need a way to draw in global R&D into an onshore presence. Initially, our support role, clinical trials, reverse engineering etc., can help draw in research labs but there has to be prioritisation of original research. This needs to be incentivised commercially. We need a comprehensive policy that draws in the equivalent of the Teslas and Bell Labs to set up research labs in India.

Source: https://datacatalog.worldbank.org/public-licenses#cc-by

Conclusion

India is ready to fulfil its economic potential.  Global conditions are conducive, and in fact need a resurgent India. It needs courage and conviction to take on multiple initiatives across sectors, to throw off the yoke of unwieldy policies and to overcome our own vested interests and naysayers. It also needs consistent prioritisation for providing relief to our poorest citizens. The “sunahri chidiya” is ready to fly.

Author Brief Bio: Saket Misra is an investment banker and Advisor, Poorvanchal Vikas Board and Shreyam Misra is studying Economics at Williams College, USA.

References:

1. Sukhpal Singh, “Future of Indian agriculture and small farmers: Role of policy, regulation and farmer agency” https://www.downtoearth.org.in/blog/agriculture/future-of-indian-agriculture-and-small-farmers-role-of-policy-regulation-and-farmer-agency-75325 published on 02 February 2021

2. Rumki Majumdar, “India The year that was and will be” https://www2.deloitte.com/za/en/insights/economy/asia-pacific/india-economic-outlook.html, published on 08 January 2021
3. Kapil Shah, “The future of Indian agriculture lies with ‘atmanirbhar’ farmers” https://www.downtoearth.org.in/blog/agriculture/the-future-of-indian-agriculture-lies-with-atmanirbhar-farmers-75228, Published on 27 January 2021

4. Shelly Anand, “NEP 2020: A roadmap to success”, India Today Insight, https://www.indiatoday.in/india-today-insight/story/nep-2020-a-roadmap-to-success-1767976-2021-02-10 , published on 10 February 2021

5. Ram Krishna Sinha, “National Education Policy: Why education must be anchored in quality and equity”, https://www.downtoearth.org.in/blog/governance/national-education-policy-why-education-must-be-anchored-in-quality-and-equity-74492, Published on 02 December 2020
6. The 8th NCAER C. D. Deshmukh Memorial Lecture 2020,  India in a Changing World by David Lipton, First Deputy Managing Director, The International Monetary Fund  https://www.ncaer.org/event_details.php?EID=271&EID=271 , 13 February 2020
7. Kogila Balakrishnan, Saurabh Kukreja, “Can India be the Next Global Manufacturing Hub?” https://idsa.in/issuebrief/india-next-global-manufacturing-hub-kogila-saurabh-131120, 13 November 2020

8. TN NINAN, “Like it or not, future of Indian economy will have to be built on services, not manufacturing”, https://theprint.in/opinion/like-it-or-not-future-of-indian-economy-will-have-to-be-built-on-services-not-manufacturing/590613/ , 23 January 2021
9. Naveen Jindal, “2020 could be for manufacturing what 1991 was for our economy”, https://www.livemint.com/opinion/online-views/2020-could-be-for-manufacturing-what-1991-was-for-our-economy-11604415919783.html, 04 November 2020

Introduction

India has the second largest number of micro, small, and medium enterprises (MSME) in the world, second only to China, and these contribute to about 30 percent of the Indian economy and over 40 percent of the labour force.^[i] These comprise over 63 million enterprises, of which 99.5 percent fall in the micro and small category. It is apparent that the growth of the Indian economy is going to be dependent on the growth of these industries; more so in the manufacturing space, which constitutes about 32 percent of all enterprises. The Government recognises the need for the manufacturing industries to scale and hence is creating incentives to bolster it.

There is no doubt of the government’s intent, which is moving quickly where necessary, to support industry, the emergency credit line scheme during the COVID crisis being a case in point. The recent budget is reflective of the government’s attitude, and it has lifted the spirits of Indian industry. Its effect is bound to benefit the MSME sector too. However, to really change the landscape and to implement changes, one needs to understand certain underlying issues.

Underlying Issues

Having gone through the experience of our company’s journey of manufacturing in India over the last 25 years and having been closely associated with entrepreneur forums and associations during this period, I am deeply aware of the circumstances of Indian entrepreneurs. Through this lens, I wish to throw light on some of the issues we need to overcome and the remedies thereof, if we are to truly meet the goal of becoming a USD 5 trillion economy in another five years.

As a point of reference and parallel, if we look back at the revival of the German economy post World War 2, it was largely provided by the growth of small industries into what became known as the ‘Mittelstand’,^[ii] a backbone of the German economy. It employs about 60 percent of the work force and contributes to about 55% of net value added by all enterprises in Germany. Many of the Mittelstand companies are now world leaders in their expertise areas. During the development phase, after the war, the leadership, bureaucracy, academia, and entrepreneurs were united by a common purpose, and worked collaboratively to create the miracle. Their focus was on technology and manufacturing. Similar recoveries in Japan and China, and the development of nations like Korea and Taiwan are sources of learning, but the common factor that arises out of all these, is that manufacturing was enabled, not shackled, and that the growth was fuelled by the rapid scaling of the small Industries into medium ones.

In contrast, in India, we thwarted the efforts of our entrepreneurs, whose energies were diverted towards fighting the system, rather than in creating productive value. Labour trouble, constant barrage of show cause notices/raids from the multiple government departments, ongoing court cases, and state Industrial corporations that were in opposition, rather than in support, have been the bane of Indian manufacturing entrepreneurs.

The state of the industrial area in Navi Mumbai, where our company operates, is reflective of the state of the decay of the industry therein. The area which was once the start-up hub of over 6000 industries, now has unmotorable dusty roads where garbage and filth are the norm. Battling the system has worn down many an entrepreneur. The scars of their experience make them unwilling to stake any further, the risks and obstacles being too high. The resultant is that most enterprises having started about 20 years ago, operate more as one-man enterprises, without the visible potential that would take them to the next level. Many of the entrepreneurs are now at the stage of retiring and many of their children have chosen not to continue their family business, as the environment is not conducive.

We have made ‘small’ a virtue, but a certain level of scale is necessary for industry to be competitive and we need to support the rapid scaling of all enterprises having the potential and will to do so. With Indian manufacturing not being even a tenth of China, we are woefully behind. There is a lot to be done. Due to current global events, there is no better time to push for change, but we must not underestimate the extent and urgency of the task. A war like strategy is required. We may miss this bus also, if we do not act now. The remedy is going to need more than just policy changes.

I outline below the various key areas in which we need to act, if we are to make the transformation we seek. The solutions to industry’s problems, whether large or small are similar, except that the larger companies have the wherewithal to tackle these on their own, whereas the impact of the obstacles is debilitating for the smaller enterprises. If the restricting conditions are removed, these small enterprises, being nimble, will move quick, and the economy will show immediate revival.

Changing the National Consciousness, to work together for a Common Cause:

In Germany or Japan, post-World War 2, there was a driving common national purpose. In India, this is missing. In fact, the mindset at the level that operates with industry is bereft of any intent to support and facilitate. I recall, in 1996, when the land allocated to me for starting industry was stuck for over 5 years, and with no redressal in sight, I was fortunate to meet with the chief engineer of the MIDC, who could see the injustice, and he immediately found a way out of the situation for me, simply because it was the right thing to do, and it was his job to support industry. Such an approach has today become rare.

The professional duty of administration is to put the nations interest above all else, which in the case of those promoting industry is to look at things from the entrepreneur’s perspective. Today, we have got accustomed to apathy and purely selfish interest at the cost of honesty of purpose and action. Entrepreneurs and administration alike, wish to navigate only their personal agenda, and not think progressively. Wealth creators are viewed with suspicion, and there is a clear sentiment of ‘us’ versus ‘them’ between entrepreneurs and the administration.

How do we change a mindset that has got entrenched over such a long period? The call for an Atmanirbhar Bharat, is one that has already appealed to everyone, but it must galvanise all stakeholders on the ground—that is, the industry, the policy makers, and the bureaucracy, who need to work in unison. Programs educating all and creating an environment of collaboration will be required constantly. Projects that demonstrate visible results are required with planned outcome and constant measurement and review. Re-industrialisation of India must now be converted to a concrete goal.

Removing the Shackles of Restrictive Laws and their Implementation

The plethora of laws and controls that exist to regulate manufacturing activities have now become like a heavy stone that drags the industry down. Simplifying these laws is a priority. The implementation of Goods and Services Tax (GST) was one big game changer. In one stroke, the industry was free from the yoke of the provision in the of laws such as excise, sales tax, octroi, Local Body Tax (LBT) etc., which were hindering every decision and transaction of business.

In many countries, states have administrative staff, whose only job is to attract industry and facilitate their starting up. In India, we find ways to oppose the starting, through the number of licences needed, and so we rank 136 on the world bank survey on the ease of starting a business. The simplification of these processes is an urgent need.

In a similar vein, one needs to look closely at the various unnecessary compliances that companies must adhere to. There are many smaller laws that can quickly change. Their elimination or simplification would remove unproductive work. Many simple to implement examples come to mind; for example, the need for MRP labelling for retail sale can be removed on industrial goods, where consumers are B to B and not B to C, saving enormous rework and error in transferring goods from domestic to export sale and vice versa due to the different labelling on them. Another such example is the document submission required by banks for import and export transactions. Such wasteful requirements can be done away with, given the intent. With so much that can be shifted on-line, it is easy to find remedies to unproductive practices. A special force must be dedicated to cover these areas for rapid action.

Providing Basic Facilities in Infrastructure and Financing thereof

The availability of land to start industry has been a major problem. The Gujarat government in the last two decades has demonstrated that it is a problem possible to overcome, by providing land at reasonable rates, and supporting industry to set up new projects, on a fast track basis. Smaller companies face the challenge that the cost of premises is too high an initial investment, and uses up scarce resource, needed for the actual business.

Building industrial parks (possibly in collaboration with private entities), where small and medium industry could operate, would provide a solution to the problem of infrastructure. Flatted factories could be created with reasonable lease rents, that are given for extendable 3-year periods; (like was done in SEEPZ, the export processing zone, in Mumbai). In existing industrial zones, many units lie shut, and are stuck due to statutory liabilities or other legal issues. Buyers are unwilling to get entangled in a messy situation that could prove to be a liability later. Here, the appropriate agencies could create a transparent process to transfer these properties either to a new buyer or back to the industrial corporation, freeing up existing infrastructure for immediate use.

The need for capital to put up the land and building is often a major hurdle. The loans given by banks do not cover investments for land, and the capex loan tenure for constructing a building is just five years. If the infrastructure development loans had interest rates and tenure like the home loans, it would facilitate the creation of much needed infrastructure, whereas the money for the machinery could be allocated more judiciously through short term loans.

Creating Opportunity to ensure the Demand on the back of which Industry would Develop

India is a consumption driven economy. This is probably the biggest benefit we can leverage to create our growth story. Producing high quality goods is no longer an option, as customers have gotten used to global quality standards, but we must encourage and take pride in what is made-in-India. Meanwhile, though Indian industry must be competitive, it must simultaneously be protected from low-cost unfair import dumping, so that it can survive in the first place.

Collaboration among industry and commitment to support each other with business, is likely to be one of the biggest factors for growing the industry. In the German development program, the state institutions, academia, and the entrepreneurs had a close collaborative relation. This needs to be replicated in India too. Each major national institution should have a special cell that promotes an Atmanirbhar Bharat, in which any process hurdles in dealing with the institution would be addressed and dealt with. Continuous vendor development programs encouraging Indian entrepreneurs should be a part of an ongoing activity.

In a recent example of a vendor development initiative, IEEMA (Indian Electrical and Electronics Manufacturer’s association) have begun one such pilot program, engaging with BHEL (Bharat Heavy Electricals Ltd), and it is very encouraging to note the spirit and enthusiasm with which this was conducted. Such engagements will bring out the necessary opportunities to collaborate. It is the high potential, growth ready companies which must be first identified and facilitated on a high-speed program as the catalytic outcome of this process would bring the fastest results.

With investments likely to surge on infrastructure and defence projects, a portion of the work that can be done by smaller industry should be awarded in proportion to their capacity and technical competence. This way, they can use the opportunity to scale up their capabilities. The formation of consortiums of small industry coming together for specific projects needs to be explored and created as a mechanism, as it could trigger a method of bringing smaller industries to the fore instead of depending on the few large industries alone.

While we look for foreign investment, we must ensure that there is no erosion on the long-term capability of the country. There is a difference between the investments that enable and create value; like infrastructure or technology or exports, vs selling off Indian assets or giving up our markets to foreign entities. Foreign companies have deep pockets, whereas we have only human capital to create wealth from. It is for this reason that encouraging and promoting from within the country makes so much more sense than over dependence on FDI to fund growth.

Incentivising Manufacturing by Simple to Implement Schemes

So often, good intent is ruined by poor implementation, and well-meaning schemes of government are often bogged down in red tape. Simple schemes that are amenable to quick implementation are often far more effective than elaborately designed schemes. A case in point is the ECLGS^[iii] (Emergency credit line guarantee scheme) offered to small industries during the COVID crisis. As of January 20, 2021, Rs 2.14 lakh crore had been disbursed, without fuss or red tape. The success of this disbursal was its simplicity, which did not have a slew of conditions attached. The reason is that it was under a crisis and therefore, any red tape would have defeated the purpose.

Contrast this with the incentive given in the manufacturing sector for new companies wherein the corporate tax rate has been reduced to 15%.^[iv] There are very few showing interest, as the interpretations of its conditions and fine print will need legal experts, whose opinions leave industry wondering if it is worth the effort and risk of future litigation. Only schemes that are immediately implementable, without intervention of bureaucracy and transparent enough to not need the interpretation by the legal experts, will succeed. For example, had the incentive for manufacturing companies been announced as a 10-year tax reduction to 15% on incremental profits, for 3 years on rolling basis, investment automatically would have happened, and the exchequer would have benefitted too with the additional tax revenue.

All schemes that have had elaborate conditions have had very limited adoption and therefore have not produced the desired results in creating industry growth. Schemes like cluster formation, subsidy schemes such as M-SIPS^[v] (Modified Special Incentive Package Scheme), are possible to get sanctioned only after great effort, and even then, are difficult to comply with due to the restrictive conditions that are characteristic of all such schemes. Hence, schemes offered should be enabling in nature, and self-sustainable. For example, new investment made could be subsidised by tax rebate up to a given percentage, or credit guarantee for certain investments (for example infrastructure).

Enabling Engineering Technology and R & D

To build the nation’s infrastructure and manufacturing base, which is a primary need for an economy like India’s, the need for engineering talent, and their training is of vital importance. While India’s manufacturing sector’s growth stagnated over the last 20 years, the opportunity for India’s engineers disappeared. Engineers preferred to pursue IT and management as career options, rather than core engineering. The remaining engineering talent went out of the country. This situation has left a vacuum in mid-level core engineering capability in the country. The experienced engineers who graduated in the 80’s and worked extensively in industry, had no one to pass on their learning to. Unless the capability is quickly created, we will lack the talent to accomplish the manufacturing miracle we wish to pursue.

The Mangalyaan mission made every Indian proud. Its success however was rooted in the pursuit of technology goals. It is because of people like Vikram Sarabhai, who led the space program and the Government’s interest to invest in this technology, that we have such an advanced space program, at such a low cost. In a similar manner, we need to invest in core technologies with joint vision by the government, academia, and industry, with a nationalistic fervour. National interest is not possible to meet by private players alone. Development of technology is the only long-term option, and it needs a conscious effort, especially in critical areas. It is also a great way to develop scientific and engineering talent, while being the most self-reliant way to grow as a nation.

Incentivising development of technology is therefore a priority. The outlay required is not big and one must think of this generously and not through a control mindset. The provisions in income tax of deducting as expense, 200 percent of R & D costs was a good provision and can be brought back. Technology should be recognised as an asset and its acquisition should be possible to fund through a loan.

Investment in identified core technologies of national importance needs to be encouraged through grants to the academic institutions along with industry involvement and partnership. The companies contributing to these efforts would benefit from the knowledge gained through these engagements. Technologies acquired or developed by government agencies or academia could be shared with the industries contributing therein or given to companies seeking it for a price. Enabling growth through providing technology would help revival of the small industry the most, as it does not have the means to do so entirely on its own.

Removing the Major Block, Reforming the Labour Laws

This is the one area in which bold reform is a must if we wish to see a major transformation. All expansion and new activity must have exemption from the provisions of labour laws that make investment into any business too risky to attempt under the provisions of the current act. Relations and long-term skilling, employment, and growth of the nation rests on the relations inside an enterprise, which should be left largely to their own mechanisms. The current laws only encourage confrontation and division, and in fact hinder good normal relations.

Good companies will educate and empower their employees, many of whom will be able to grow to higher levels of personal growth through training and if an employee finds growth, will stay, or otherwise seek other avenues. Any company that has encountered and dealt with labour unrest and its consequences could never be convinced to go back into a labour-intensive business unless they were assured of a just and fair system that protected their investment. India needs labour intensive industry as a step to evolving the economy. Large industries have the clout and reach to deal with the conditions in the land and find their way. It is the small industry that cannot weather the blow that is dealt by any disruption, and hence needs protection from its effects.

The software and services industry did not have to contend with the problems the manufacturing industry had to on the labour front and thereby these grew without being fettered. If the same freedom is accorded to the manufacturing sector, India can be the next manufacturing hub of the world. The new labour code is due to become law, and one waits and hopes to see if it can address the issue adequately.

In conclusion, globally the time is opportune, the nationalistic feeling is at its highest in the last 30 years, and the Government of the day is supportive. But we will need a plan to change, as the old ways will bring only the same old results. Inclusion of all stakeholders through communication is necessary. Above all, we will need the right people in an organised effort to oversee the plan and execution.

(Author Brief Bio: Samir Kaji is the Founder and Managing Director of Selec Controls Pvt Ltd, one of India’s biggest brands in Electronic measurements and controls. He is also Chairman, IEEMA SME Division.)

^[i]Vikas Vasal, “MSMEs: The growth engines of the Indian economy”, https://www.livemint.com/news/india/msmes-the-growth-engines-of-the-indian-economy-11597923225239.html

^[ii] IGI Global, https://www.igi-global.com/dictionary/enterprise-system-german-manufacturing-mittelstand/12168

^[iii] Schemes, https://www.hdbfs.com/emergency-credit-line-guarantee-scheme

^[iv]Tanvi Loond, “17 gifts for MSMEs, Startups in Budget 2020”, https://www.financialexpress.com/industry/sme/cafe-sme/msme-eodb-startups-benefits-budget-2020-funding-tax-holiday-gst-ease-of-doing-business-tax-rate-cut/1854126/

^[v] Schemes, https://www.meity.gov.in/esdm/incentive-schemes

Since India gained independence in 1947, the country has been making great strides towards achieving economic autonomy, and during the course of more than 70 years, the country has been able to shed its colonial past and has paved the way to become an economic powerhouse. The most important ingredient for this progress, however, not as much as China in the neighbourhood, is the role played by the Union Budget. Indian Union budget reflects from the very beginning and more so in the post 2014 period a decisive framework that was architectured to introduce policies and reforms in an open and transparent way unlike in a totalitarian state like China.

History of Union Budgets in India

Finance minister RK Shanmukham Chetty presented the first budget of Independent India in 1947. Total expenditure under the budget was Rs 197.39 crore, out of which approximately Rs 92.74 crore (or 46 percent) was allocated for Defence Services. In 1948 he used the term “Interim Budget.” The Interim Budget later became an institutional process, for each year the General Elections are held. Primarily, an Interim budget denotes a short-term budget, which is presented just before the Lok Sabha elections are held. It was during his presenting the budget in 1949 that he first used the term “Union Budget”. Under this budget, the government decided to abolish the Capital Gains Tax. Which was again reinstated under the budget 1956-57 and continues to serve as an entity closely monitored by the income tax authorities to prevent any tax evasion.

The inception of the Planning Commission was done in the budget of 1950-51 which became a key body headed by the Prime Minister which over the years formulated the Five-Year Plans and directed the well-defined programs for the Country’s development. The various highlights of the same since 1952 to the Union Budget 2013 by Finance Minister P C Chidambaram ranged from introducing double surcharge (1951-52) to raising the minimum income tax exemption limits (1953-54) introduction of wealth tax (1957-58) which continued to exist for the next six decades. The budget of 1958-59 was for the first and last time was presented by the then Prime Minister of India and not by the Finance Minister. Prime Minister Nehru in this historic budget introduced a new tax called the Gift Tax. It was during the 1962-63 that the tax payers paid the highest income tax which stood at 72.5% excluding surcharge[i].

Finance Minister Nirmala Sitharaman’s Union Budget of 2019-20, was the first introduction of several intuitive reforms such as more relaxed taxation norms, faceless e-assessment, and direct tax reforms. However, her Union Budget 2021-22, presented after the crippling effects of COVID-19 Pandemic is nothing short of revolutionary. As Vaidyanathan Iyer stated that the Budget “was bold, and offers not only a direction for growth but also a strong intent for reforms. Thankfully, it doesn’t have a spoiler.” The ten takeaways quoted are listed as under[ii]

1. An Expenditure Budget:Finance Minister Nirmala Sitharaman has found space for imparting a fiscal impulse in 2021-22. Compared with a capex of Rs 4.12 lakh crore in Revised Estimate (RE) of 2020-21, she has hiked it 34.46 per cent to Rs 5.54 lakh crore in 2021-22.
2. A Reform Signal:Two public-sector banks and one state-owned general insurance company to be lined up for disinvestment. FDI in insurance to be hiked to 74% from 49% now. LIC IPO.
3. 3.No Populism, But Focus on Growth:Despite being a tough year for the aam admi, the FM has avoided giving any income tax relief. No increase in standard deduction, no raise in the tax slabs.
4. Health Gets Its Due:In a year when the world was ravaged by the Covid-19 pandemic, FM gives health the attention it merited. Health allocation jumped 137% to Rs 2,23,846 crore in 2021-22 compared with Rs 94,452 crore in 2020-21. She provided Rs 35,000 crore for the Covid-19 vaccine, and promised to provide further funds, if required.
5. Bad Bank– A Good Idea: After dithering for almost six years, the government has finally decided to set up an asset reconstruction company that will take over the bad loans of banks, giving them flexibility to finance the economic recovery.
6. Development Finance Institutions (DFI) Reborn:The idea was dead with most earlier DFIs including IDBI and ICICI turning into banks. To provide debt to long gestation projects, a new DFI with a capital of Rs 20,000 crore. It will have statutory backing, but will be professionally managed. Lending portfolio of Rs 5 lakh crore within three years.
7. Asset Monetisation – Will it Gather Pace:This is an ongoing exercise, where the government hasnt done much to inspire confidence. National Monetisation Pipeline of potential assets of NHAI, PGCIL, Railways, airports, warehouses, sports stadiums.
8. Eye on Elections – Not Unexpected:Four poll-bound states get major highway projects: Tamil Nadu (3,500 km – Rs 1.03 lakh crore), Kerala (1,100 km – Rs 65,000 crore), West Bengal (675 km – Rs 25,000 crore) and Assam (1,300 km – Rs 34,000 crore).
9. Strategic Disinvestment – Again, Needs Political/ Bureaucratic Push:NITI Aayog asked to short list non-core PSUs for strategic sale. After a poor show in 2020-21, the government has estimated disinvestment receipts at Rs 1,75,000 crore.
10. Growth Vs Prudence – Tilting Towards Growth:Fiscal deficit estimated at 6.8 per cent of GDP in 2021-22; it is estimated to touch 9.5% in 2020-21. It will be brought down to 4.5 per cent of GDP by 2025-26.

What the Budget Proposals are Attempting to Do[iii]

Anil Sasi writing in the post budget analysis makes an important contribution to explain how the Finance Minister has attempted to propose new measures in the midst of the pandemic to kick start the flagging economy and more essentially to boost spending across various sector. The points he has covered needs to be reproduced here as under:

1. 1. Production-linked incentive (PLI) scheme push: The government aims to spend Rs 1.97 lakh crore on various PLI schemesover the next five years, starting this fiscal. This is in addition to the Rs 40,951 crore announced for the PLI for electronic manufacturing schemes.

Why the move: It is likely to attract global players in the Indian manufacturing sector as the government is planning to offer plug-and-play infrastructure to the companies willing to come to India.

2. Health push

The government has announced a new central healthcare scheme to strengthen the country’s healthcare infrastructure over the next six years. The Pradhan Mantri Atma Nirbhar Swasthya Bharat Yojana, which will operate in addition to the existing National Health Mission, has been allocated around Rs 64,180 crore.

3. 3. Why the move:This scheme is expected to be used to develop capacities of primary, secondary and tertiary healthcare systems as well as existing national institutions over a period of six years, according to Sitharaman.

In addition to this, it would be used towards creating new institutions to cater to the detection and cure of new and emerging diseases. During her budget speech, the minister said that investment on health in this budget has increased “substantially”, with a focus on strengthening preventive care, curative and well-being of the population.

4. Power push

The government has decided to create a framework to give consumers alternatives to choose from more than one power distribution company.

Why the move: It is aimed at offering competition at operator level and more choice to consumers. Targets better efficiency levels in the distribution sector

5. Divestment push and Bad bank proposal

Strategic disinvestment of companies, including BPCL, Air India, Pawan Hans, IDBI Bank, Container Corporation of India, to be completed in 2021-22. Government to ask Niti Aayog to start working on identifying the next list of companies for strategic sale.

Announcing its version of the bad bank[iv]  proposal, the government will set up an Asset Reconstruction and Management Company for Stressed Assets to take over bad loans. Alongside, a Rs 20,000-crore equity infusion has been announced for public sector banks.

The FM said it will take up strategic sale of two public sector banks and one general insurance company along with completing the sale of BPCL, Concor, SCI, IDBI and BEML among others in 2021-22.

Why the move: These measures are expected to strengthen the state-owned banks and hasten the process of clean up of their balance sheet. The divestments will help raise revenue for the government and is expected to improve efficiency and provide momentum to privatisation.

It’s more about the principle of separating the good from the bad. It’s about not wasting more good money on bad assets. Former RBI Deputy Governor Viral Acharya has in the past stressed on the need to separate the ‘good’ from the ‘bad’, and to set up a bad bank.

The government has been toying for far too long with the idea of a National Asset Reconstruction Company that can hold the bad assets of all state-owned banks.  The proposal has gone around in circles between the Finance Ministry, the Niti Aayog and the Prime Minister’s Office. Spooked by Opposition politics earlier, Modi had shied away from being labelled as being pro-corporate. This proposal marks a departure. After almost 70 years since being in power, the BJP-led government has finally taken a call on setting up a Big Bad Bank. Finance Minister Nirmala Sitharaman has announced a new asset reconstruction company and an asset management company to take care of the bad assets of banks, and equip the banks to lend to productive sectors as the economy starts recovering.

6. Why it requires Govt involvement:There are many mechanisms to proceed with how to realise value from the NARC. Though India has over a dozen private ARCs, no state-owned banker in the current environment will be courageous enough to sell his bad assets to these at a discount, for fear of prosecution by state investigative agencies at a later date. And private ARCs will ask for a massive haircut from banks. It’s here that a national ARC can inspire confidence amongst banks.
7. FDI limit hiked in insurance

The Finance Minister announced to hike the FDI limit in Insurance from 49% to 74%. She, however, said that majority directors on board and Key management personnel will be Indians.

Why the move: The move will help increase capital inflow in insurance companies and enhance their expansion and growth.

Development Financial Institution reborn

Given that there is a lack of finance for infrastructure and long gestation projects, Finance Minister Nirmala Sitharaman has announced the setting up of a Development Financial Institution (DFI). The DFI will have statutory backing and Rs 27,000 crore capital.

To differentiate it from DFIs that existed in the past, she said the DFI will be professionally managed.

What will be its focus?

The proposed DFI will be used to finance both social and economic infrastructure projects identified under the National Infrastructure Pipeline (NIP), according to finance ministry sources.

8. Scrapping policy

The government has introduced the scrapping policy to remove unfit vehicles on a voluntary basis. All private vehicles beyond 20 years and commercial vehicles older than 15 years old will have to undergo a fitness test.

Why the move: The proposal is expected to offer a boost to the auto sector, both for commercial and private vehicles. Auto shares surged after the announcement.

9. Bad debt resolution

The government plans to further strengthen the NCLT framework and continue with the e-court system for faster resolution of bad debts. A separate framework for MSMEs will also be made by the government.

Why the move: With the government-imposed moratorium on admission of new cases likely to end by March 31, a number of MSMEs, which have not been able to earn enough during the fiscal are likely to be taken to insolvency by their creditors. The separate framework may help MSME owners avoid losing their company while continuing to pay the debt.

10. Gas transport

The government has announced an independent gas transport system operator for booking and coordination to ensure for unbiased allocation of natural gas transportation capacity.

Why the move: The government aims to address concerns of bias in the allocation of gas transportation capacity by players such as GAIL involved in both the supply and transportation of natural gas.

11. Ujjawala push

The government has announced the extension of benefits of the Ujjawala scheme to an additional 1 crore people.

Why the move: The scheme, which provides LPG connections with financial assistance from the central government and currently benefits 12 crore households, will be extended further to provide clean cheap cooking fuel.

12. Power sector push

The government has allocated close to Rs 3.60 lakh crore in the Budget towards launching a “revamped”, reforms-based, result-linked power distribution sector scheme.

A framework will also be put in place to give consumers alternatives to choose from more than one distribution company.

Why the move: This comes amid “serious” concerns over the viability of power distribution companies (discoms) in the country. The scheme is expected to provide assistance to discoms for infrastructure creation tied to financial improvements, including prepaid smart metering, feeder separation and upgradation of systems, said Finance Minister Nirmala Sitharaman.

Discoms across the country are monopolies, whether government or private, said the minister. There is a need to provide a choice to the consumer, she said.

The past six years have seen a “number” of reforms and achievements in the country’s power sector, including the addition of 139 GW of installed capacity, the connection of an additional 2.8 crore houses and addition of 1.41 lakh circuit kilometres of transmission lines.

13. Social security net for gig workers

Social security benefits will be extended to gig and platform workers, the finance minister said. Minimum wages will apply to all categories of workers and will be covered under ESIC.

This will impact around 15 million gig workers in India, in addition to online platform providers across sectors such as transportation (Uber and Ola), food delivery (Swiggy and Zomato), and the contract workers in IT and software firms.

Importance: The economic survey had noted that India has become one of the largest markets for flexi-staffing in the world due to the wider adoption of e-commerce and online retailing. It had also said that the increasing role of the gig economy was evident through the significant growth of online retail businesses during the lockdown caused by Covid-19 pandemic.

14. Fiscal deficit

India’s fiscal deficit is set to jump to 9.5 per cent of Gross Domestic Product (GDP) in 2020-21, according to the revised estimates presented by the finance minister today. This is sharply higher than 3.5 per cent of GDP that was projected in the budget estimates. Slump in government revenues amid the Covid-19 pandemic has led to sharp rise in deficit and market borrowing.

The government plans to borrow another Rs 80,000 crore to fund the deficit this year. Gross market borrowings for next year has been pegged at Rs 12 lakh crore. A new roadmap for fiscal consolidation has been announced in the budget.

15. Pension relief

The government has given relief measures for senior citizens by removing the need to file income tax returns for those aged over 75 years.

It has also announced a halving of the time frame for reopening of income-tax assessment cases from 6 years to 3 years. For reopening of serious tax evasion cases up to 10 years, the government has put in a monetary limit of cases involving over Rs 50 lakh in a year.

This is expected to reduce instances of tax harassment of income taxpayers.

Critical Observations

In the above pages we have enumerated and incorporated the history of the Union Budget of India since independence to the present time, elaborated and quoted some of the writings related to the major takeaway from the Budget presented for 2021-22, explanation as to why and what the Budget planned to do. Considering the intent of the Government of India to take steps to push India in amongst the top five economies of the world, it is necessary to understand that for that intent to become a reality, we have to identify the three main verticals which will allow India to reach that status. The three main pillars are:

1. Security
2. Infrastructure
3. Education

A strong and an invincible SECURITY architecture assisted by a strong Infrastructure and supported by quality Education is necessary to securitise all he ten takeaways as enumerated above. A nation state in the 21^st century requires to achieve a credible SECURITY beyond Defence to become truly a world leader. Hence the problems of national security which is the integral part of the totality of SECURITY for a country like ours which has seen a series of catastrophes from within its recent past and continuing threat from without has to be formulated in terms of the larger goals and aspirations to which this civilizational community has committed itself. Briefly we can think of three such objectives:

1. National stability and Integrity
2. Social, Political and Economic progress
3. Peace and Stability in our relations to other states.

The problems of national security must be seen in terms of these larger goals. If this may be called the cultural dimension of the problem of national security, we have to look at the problem from the political perspectives as well. Here we have to consider a complex interaction between our perception of our neighbours beyond the border as well as the larger major powers and their perception and assessment of our situation and our objectives. It is within this matrix of relationship that specific goals of our SECURITY policy will get structured. The cultural and the political aspects of the problem create a texture of tasks and priorities of decision making and possible options for actions. The actualization of our objectives as modulated and structured require an adequate process of institutionalization ranging from the economic to the administrative and legal preconditions. This institutionalization of our SECURITY efforts themselves create further problems and difficulties. Hence all the three dimensions viz., the cultural, socio-political and institutional enter in a complex interaction calling for skills and patterns of leadership to securitise the SECURITY of our nation. To achieve the same, we need to understand and commit to strengthen our national security architecture supported by the Union Budget. It needs to be emphasised that present allocation related to Defence budget 2021-22 is grossly inadequate. I have noted in the beginning of this paper that in 1947, the Union Budget had allocated 46 percent of the total budget for Defence. With the recent happenings in Eastern Ladakh, and a serious collusion between our two neighbours, a two front war scenario a distinct possibility, the Union Budget has no other options to allocate adequate financial outlays for Defence and national security when our northern neighbour is officially spending nearly three and a half time more than India’s 2021 defence budget.

On the issue if infrastructure, it must be emphasised that the Make in India policy, strengthening the hands of the Private Sector with a revolving door policy where the best of manpower in every field should be able transit between the Government and the non-government sectors must be prioritised. The private sector must be able to lend their expertise, change the mind set existing within the personnel of the Government agencies and remove what the Prime Minister has hinted very recently the need to unshackle the Indian bureaucratic hold on every decision-making platform. I believe that the Union Budget has a very specific role to play by handholding the private sector by investing financially through a fiscal policy in every form of non-governmental body, institution and organisation to leapfrog and reduce the tremendous asymmetry that has developed between us and our northern neighbour in the past thirty years.

Lastly, the architecture of Education policy has to commensurate with the needs of India in the 21^st Century. The New Education Policy is less of a policy document and more an enumeration of a method to make Research and Teaching more accountable if possible. It is good if the Research Council will have a budget of 20,000 crores over and above the existing funding available to the UGC, DBT, DST etc. However, it has at least increased a little, the percentage of GDP and therefore the first Baby Step towards Education per se. It is essential to quote what Arvind Panagariya and B Vekkatesh Kumar[v] critically wrote on the New Education Policy as follows:

“But the recommendation by the draft NEP that a National Higher Education Regulatory Authority of India be all-encompassing and, additionally, subsume the functions of many professional regulatory bodies such as the Bar Council of India and the erstwhile Medical Council of India (MCI), runs the risk of becoming overly contentious with the reform getting stalled altogether. It will be best to let the reform in these areas proceed on separate tracks along the lines of the National Medical Commission Bill, which would replace the MCI Act and is soon to be reintroduced in Lok Sabha.”

Once again, the Budget allocation for Education in the present budget is far away from the requirement of allocating 6% of the GDP.

Conclusion

In this article, we have recognised the path breaking and almost revolutionary approach to craft the Union Budget 2021-22 by the Finance Minister. It is people centric with a very appreciable effort to balance the fiscal policy towards the developmental goals. India is transiting through an unchartered path while still groping with the COVID-19 pandemic. The efforts of increasing health security measures due to the pandemic by 140% is an un believable effort by all counts. However, India has no other options but to pay utmost attention to the three pillars comprising of SECURITY, Infrastructure and Education.

Author Brief Bio: Professor Gautam Sen was Formerly Sawarkar Professor of Strategic Studies (1981-2007), Head Department of Defence Studies (1981-2001), Director Board of Colleges & University Development (2001-2004) Director National Centre of International Security and Defence Analysis (2002-2007) at the University of Pune. He was Director General and Member Board of Trustees, Indian Institute of Education, Pune (2006-2011), Research Professor National Security Council Secretariat, GoI, Delhi (2015-16).  He has been a Visiting Professor at Madras University, Gujrat Vidyapith, Goa University, Institute of Social and Economic Change and UGC Visiting Professor at Gorakhpur University. Air Marshal Subroto Mukherjee Chair of Excellence, United Services Institution, Delhi (2018-19). Sen has also been a FORD FOUNDATION International Fellow at Harvard and Massachusetts Institute of Technology and Twice Fellow at the International Institute of Strategic Studies (IISS), London.

[i] History of Union Budget in India,

https://www.maxlifeinsurance.com/blog/term-insurance/history-of-union-budgets-in-india

[ii] P. Vaidyanathan Iyer, “Union Budget 2021 Explained: The 10 biggest takeaways”, Indian Express, https://indianexpress.com/article/explained/explained-the-10-big-budget-takeaways-7169967/, 15 February 2021

[iii] Anil Sasi, P Vaidyanathan Iyer, Sandeep Singh, Harish Damodaran, “What top Budget 2021 proposals are trying to do”, Indian Express, https://indianexpress.com/article/explained/explained-what-top-budget-2021-proposals-are-trying-to-do-7169789/ , 03 February 2021

[iv] Sunny Verma & George Mathew, “Explained: The arguments for and against a bad bank”, Indian Express, https://indianexpress.com/article/explained/npa-bad-bank-balance-sheet-loan-rbi-shaktikanta-das-7151841/, 22 January 2021

[v] Arvind Panagariya & B Venkatesh Kumar, “Sharpen Educational Tools”, The Economic Times, https://economictimes.indiatimes.com/blogs/et-commentary/sharpen-educational-tools/ , 02 July 2019

To me the Blue Wheel or Chakra in our national flag represents the potential of the Blue Revolution or the Ocean Economy. That is how central the ocean economy is to us.” – Prime Minister Narendra Modi

Introduction

The importance of the maritime domain for India’s security, stability, economic well-being and sustainable development needs no emphasis and is underlined by its rich maritime heritage dating back 5000 years. The world’s oldest drydock has been excavated at Lothal which dates back to the Harappan civilisation. As India now stands on the threshold of becoming a 21^st century global economic powerhouse and has set a target of becoming a USD 5 trillion economy by 2025, it is aiming at a USD 25 billion from the maritime zone^[i] in accordance with the global standard of about 5%. With the target of achieving a USD 10 trillion economy by 2032, the maritime sector will have a major contribution to make.

India’s Maritime Credentials

India, despite its peninsular geographic conformation and its predominantly continental outlook due to its pre-occupation with its northern and western neighbours, is essentially a maritime nation. The country has a long and porous coastline of 7516.6 kms, an Exclusive Economic Zone (EEZ) in excess of 2.37 million sq. kms, where India enjoys the exclusive legal right to utilise all living and non-living resources. Nine states and four union territories are washed by the waters of the Arabian sea, the Bay of Bengal and the Indian Ocean and more than 200 million people are dependent on the sea for their sustenance and livelihood. About 95% of India’s trade by volume and about 74% by value travels over the sea and is served by a network of 12 major ports and 205 notified minor and intermediate ports. The country has two strategically located island territories. The Andaman and Nicobar archipelagic group comprising 572 islands including 38 permanently inhabited ones are located about 750 miles from the Indian mainland on the eastern seaboard and the Lakshadweep group of 38 islands is located about 200-odd nautical miles from India’s west coast.

The maritime domain is also critical for India’s energy security which in turn has a direct impact on the country’s economy. More than 80% of India’s oil and over 50% of India’s gas is sourced from various parts of the world and travels over the sea. More than 60% of this is imported from the Arabian Gulf. On the indigenous front too, most of India’s critical energy infrastructure is either located afloat or on the coast, thus increasing its vulnerability from the sea.

India is also the first country to have been given a pioneer investor status way back in 1987, and was allotted an exclusive area of 150,000 sq. km in the Central Indian Ocean Basin by the International Seabed Authority for exploration and developmental activity for polymetallic nodules. These rights are presently being exploited over 75,000 sq. km of area.^[ii]

Aspiring Maritime Power

India has been blessed with a favourable and pivotal position in the midst of the Indian ocean. Its peninsular tip juts out almost 1000 miles into the sea  and straddles some of the most critical shipping lanes in the world. Its size and economic stature make it the pre-eminent power in the Indian Ocean region which it must leverage to establish itself as a global maritime power of reckoning. Presently its status as a maritime power is based on its highly capable blue water navy (the fifth largest in the world) which is just one constituent of maritime power, although its most important one. However, India still has some way to go in most aspects of non-military maritime power which is critical for a robust maritime economy.

Alfred Thayer Mahan, the doyen of naval strategists in his seminal work, ‘The Influence of Sea Power on History’ had listed six essential attributes for a maritime power (which he referred to as sea power but meaning more or less the same). These were geographical position, physical conformation, extent of territory, size of population, character of the people, and character of government.^[iii] These remain as relevant today as they were then and are the very characteristics that influence the development of a maritime economy.

India has all of these in ample measure but has still fallen short of becoming a maritime power. Historically, it is maritime power that has been the key to global domination. Small European countries were able to establish global empires primarily because of their domination of the sea and it was at sea that the survival of the fittest was decided. India provides a classic example. After Vasco da Gama’s famous landing at Calicut on 20 May 1498, the floodgates to the riches of India opened and in the struggle for domination the Dutch, the French and the British followed the Portuguese. Finally, Great Britain prevailed because of its superior maritime power to make India the crown jewel in its global empire on which the sun never set. Pax Britannica gave way to Pax Americana after the World War II, which, on the basis of its economic and technological superiority and the might of its powerful navy, continues to this day. This is now being challenged by China, which, in less than 70 years, has emerged as a leading global maritime power with its ‘Mahanian’ approach to global domination through maritime power and is well on its way to establish Pax Sinica by 2049, the centenary year of the Cultural Revolution and a date the Chinese President Xi Jinping has cast in stone.

China, despite being disadvantaged in its approach to the sea, now has the largest navy (numerically), the largest coast guard, the largest maritime militia, the largest fishing fleet, the largest merchant fleet, the largest shipbuilding industry, seven of the ten largest and busiest ports in the world and has not stopped there. Its ambitious Belt and Road Initiative (BRI), unprecedented in scope and ambition, is clearly intended to reorient the existing global western rules-based maritime order into one with ‘Chinese characteristics.’ Not only has China invested heavily in building this impressive capability, but it has also given a maritime orientation to its historical narrative by eulogising the eunuch Admiral Zheng He and his voyages into a legend of sorts. This maritime consciousness is being successfully imbibed in a nation which, till four decades ago, was barely capable of defending its own maritime frontiers. This comprehensive maritime approach by China is as much about building its maritime economy as it is about its political ambitions. Domination of the waters of its interest and leverage in countries where it is extending its economic largesse (debt trap?), will give it access to marine resources far beyond its own maritime boundaries.

India on the other hand, despite its rich maritime lineage and advantageous location in the Indian Ocean has failed to harness this potential to develop its maritime economy and has lagged behind considerably. While a comparison with China may not be an accurate reflection since the circumstances in that country differ vastly from India’s, there are lessons to be learnt. Developing a maritime economy requires a clear intent, a long-term policy commitment, a flexible approach to adapt to a dynamic environment and the resilience to achieve the desired end-state. The post-independence port and shipping infrastructure, largely state owned, could have become the catalyst for the maritime economy to emerge as part of India’s growth story but systemic inefficiencies retarded the effort and has resulted in India’s maritime economy lagging behind in almost all parameters.

Winds of Change

However, the winds of change became evident with Prime Minister Modi’s first outstation visit after assuming office in May 2014, to the Indian aircraft carrier INS Vikramaditya, where he spent time at sea watching the Western Fleet being put through its paces. Soon after that, he commissioned the indigenously built guided missile destroyer, INS Kolkatta which was an acknowledgement of the strides India has made in indigenous warship production. In March 2015, during his visit to Mauritius, the Prime Minister outlined his vision of SAGAR, (an acronym for Security And Growth for All in the Region), aimed at regional capacity building for mutual benefit of India’s strategic neighbourhood and the larger Indian Ocean region.  The distinct maritime orientation of SAGAR which is the Hindi word for Ocean, was sweet music to those lamenting the lack of attention to the maritime domain. In February 2016, the country hosted an International Fleet Review at Visakhapatnam in which more than 50 navies participated. This reflected India’s importance as a naval power, commensurate with the country’s growing global stature. Two months later, in April 2016, the country hosted a Global Maritime Summit at Mumbai which was aimed at revitalising India’s maritime sector.

The Summit was attended by over 5000 delegates from 42 countries and business worth Rs 82,905 crore was transacted. It was during this summit that the Sagarmala programme, a port development led multi-billion rupee initiative aimed at revitalising and modernising India’s maritime infrastructure was announced. This initiative in fact, lays down the blueprint for developing India’s maritime economy. This spate of activity in the first two years of the present government’s coming to power underlined its serious intent to give this sector its due attention.

SAGARMALA

The Sagarmala Initiative had been preceded by the ‘Maritime Agenda 2010-2020’. This document promulgated by the UPA Government had also emphasised the importance of the maritime sector for India’s economic growth and had laid out a detailed roadmap with specific milestones to be achieved by 2020, though it did so with a caveat that these could well change depending over the years and on the circumstances. At the end of 2020, which marks the end of this 10 year agenda, the report card is not encouraging and has fallen woefully short of the intended objectives across most of the sectors highlighted in the document. Many of these objectives got absorbed into the Sagarmala initiative, which five years down the line remain a work in progress. Sagarmala includes modernisation of the existing port infrastructure, building new ports, augmenting port capacity through improved efficiency, best practices and technology, optimising the cost of freight transportation by developing an extensive inland waterway network, developing coastal communities and building adequate skill sets for generating employment in the maritime sector.

As part of the Sagarmala Programme, more than 574 projects (Cost: Rs. 6.01 lac crore) have been identified for implementation, during 2015-2035, across the areas of port modernisation (236 projects) port connectivity (235), port led industrialisation (35) and coastal community development (68). As of 30 September 2019, a total of 493 projects had either been completed (121) or were either under implementation (235) or under development (137).^[iv]

At the end of 2020, the Government announced its intention of promulgating a ‘Maritime Vision 2030’ document which, in the words of the Director General of Shipping, Shri Amitabh Kumar, speaking on the opening day of the two-day Inmex SMM Virtual Expo in November 2020 “…will remain dynamic over the next decade, changing its contours with time, and adapting to situations that may arise, and keeping abreast of developments”.^[v]

Maritime Vision 2030

The DG Shipping also highlighted that this vision will be developed on four limbs underlined by the overall objective of the Sagarmala vision of a string of highly efficient and productive ports along the Indian coastline. Port development, which is the first limb, has lagged in this country with not a single major Indian port in the list of the top 25 global ports. Many of the 205 non-major ports lack even the basic port infrastructure for handling and transhipment of coastal and inland waterway cargo. The Vision envisages a doubling of port capacity to 2600 million tonnes which is still short of the figure outlined in the earlier maritime agenda, but with the progress made over the last few years, very much more realistic. It also envisages the setting up of three major ports though the two major ports outlined in the previous agenda have as yet failed to materialise.

Coastal shipping and inland waterways have also been identified as the second limb. Movement of goods over water is the cleanest and most economical mode of transportation and the vast network of inland waterways in India can become a valuable source for connecting the vast Indian hinterland to the coastal port network. Shipbuilding as a national asset has been identified as the third important priority area with the endeavour being to increase Indian flagged ships. Maritime training has been identified as the fourth limb to address the requirement of qualified personnel over the next decade. Indian seafarers constitute 9.35% of the world’s total^[vi] which is in line with the figure of 9% envisioned in the maritime Agenda 2010-2020.

The Vision also includes the setting up of a Rs 25,000 crore Maritime Development Fund to provide the financial impetus and a robust regulatory framework more relevant to the contemporary environment than the antiquated extant laws.

The Security Dimension

In the last two decades, the global shift in the geopolitical and geo-economic centre of gravity to the East, driven primarily by the rise of China and India and the rapid growth of the East and South East Asian economies has focussed attention on the Indo-Pacific. This region is home to about 65% of world population, generates 62% of world’s GDP and accounts for 46% of global trade.^[vii] China has been the first off the block to exploit the potential of this region; its claims on the South China Sea, it’s bid to dominate the East China Sea, its belligerence in the Taiwan Straits and its expanding presence in the Indian Ocean are part of its larger global strategy of military intimidation to achieve economic domination through maritime superiority. A large Chinese maritime presence in the Indian Ocean has very serious security and economic implications for India; it must develop a long-term strategy to thwart any Chinese attempts at establishing a dominating presence in the Indian Ocean in general but more specifically India’s strategic maritime neighbourhood.

Besides the permanent presence of the PLA Navy in the Indian Ocean which is bound to increase as it develops more power projection capability, there is already enough evidence of China’s large fishing fleets indulging in illegal, unreported and unregulated (IUU) fishing in the Indian Ocean. Their research ships are frequently seen in the eastern Indian Ocean carrying out oceanographic research to understand these waters better for economic gain and military use. India had expelled one such vessel from the eastern Indian Ocean in 2019. However, there is not much India can do legally as long as this presence continues in international waters but it must take adequate steps to guard against any encroachment in its Exclusive Economic Zone and take the lead in strengthening its strategic neighbourhood through inclusive and cooperative capacity and capability building initiatives to ensure that its own economic and security interests and also those of its maritime neighbours are adequately protected.

China has been very actively pursuing its economic and military diplomacy in the region through arms exports and economic inducements including infrastructure upgradation. India obviously cannot match China’s economic muscle but a comprehensive and proactive all-of-government approach with effective use of its sharp and soft power has shown encouraging results in India’s engagement with its neighbours. Recent visits by senior functionaries of the government to most of the neighbouring countries, the NSA level India-Sri Lanka-Maldives trilateral meeting, integration of the neighbouring countries into the coastal security network, initiating information sharing mechanisms and increasing economic engagement through connectivity initiatives and favourable trading arrangements have been beneficial in consolidating the existing gains and overcoming past dogmas about India’s big brother approach.

The Prime Minister’s invitation to the SAARC Heads of Government during the swearing in of the NDA government in May 2014 and the BIMSTEC Heads of Government during the swearing in after the election victory in May 2019 conveyed his personal commitment to the region to foster an inclusive and cooperative relationship for mutual economic benefit. Various socio-economic capacity building measures have gone a long way in instilling the confidence and reassurance of India’s support in their economic development through an inclusive approach. Security and economic development go hand in hand, thus highlighting the importance of the SAGAR (Security and Growth for all in the Region) doctrine. Being the net security provider in the Indian Ocean bestows on India the responsibility of ensuring that the economic benefits from the maritime domain in this region remain within.

Blue Economy

The term Blue Economy, which first became popular with Gunther Puauli’s use of the term in his book ‘The Blue Economy: 10 years – 100 innovations – 100 million jobs’ was about opportunities for developing a sustainable model for the future and had no specific maritime connotation.^[viii] However, the term gained currency subsequently as a model of sustainable development for mankind with the responsible utilisation of marine resources. The burgeoning global population, rising living standards and improved conditions in many previously impoverished nations coupled with the loss of agricultural cover due to rapid  urbanisation and lack of agricultural space is leading to an alarming  depletion in land resources. The consequent challenge to global and national food security itself is a matter of concern. Water too is already a contentious issue both within and across national boundaries. Hence, it is to the oceans that mankind is turning to address this existential threat.

The oceans are integral to human sustenance covering about 72% of the earth’s surface and constitute more than 95% of the bio-sphere. More than 80% of global trade transits over the seas; essential ingredients that support life on earth and provide the balance to sustain it are found here. The growing demand for energy in large part is met from the sea and research is continuing to further use the sea for sources of alternate energy. This precious resource is therefore bearing the huge burden for sustaining humankind. Responsible utilisation of this resource will ensure a model of sustainable development and as a source of food, transportation, energy and livelihoods.

Goal No 14 of the 17 Sustainable Development Goals (SDG) listed in the 2030 Agenda for Sustainable Development adopted by the United Nations member states in 2015^[ix] specifically addresses the marine aspect though various other aspects are included in many of the other SDG too. Developing a global Blue Economy has been defined by the World Bank as “sustainable use of ocean resources for economic growth, improved livelihoods and jobs, while preserving the health of ocean ecosystem.”^[x]

The global focus of the Blue Economy is on the oceans and the challenges being faced due to unregulated exploitation and the effects of global warming and climate change. Some of the small island states in the Indian Ocean are facing a challenge to their very existence with the rising sea levels threatening them with inundation. Even low-lying coastal areas of larger nations are facing a similar threat. The effect of this could be disastrous on coastal economies and coastal communities besides upsetting the delicate balance of the marine bio-sphere.  The effects of climate change are also being seen in the rising incidence of natural disasters which cause widespread destruction and damage to life and property with the consequential effects on the economy. India too has its fair share of weather and climate related disasters which leave cities and villages devastated and hundreds of thousands of people destitute, homeless and without a livelihood.

India is deeply committed to addressing climate change issues through its adherence to the targets set out in the Sustainable Development Goals, its leadership of the Global Solar Initiative and its internal efforts to reduce its carbon footprint. As this century progresses, the existence of mankind on land will be deeply affected by the sea. If this is not properly addressed through a multilateral cooperative framework for sustainable exploitation of marine resources, it will inevitably lead to competition, confrontation and possibly conflict besides destabilising large sections of the global population and coastal communities dependent on the sea for their sustenance and livelihood. The Indo-Pacific is itself home to many large and small coastal and archipelagic states which are wholly dependent on the sea for their very existence.

There is enough evidence to establish that the recent maritime resurgence in the region through various economic development models like the BRI is all related to the Blue Economy. The belligerence of some of the extra-regional powers is aimed at seizing the initiative in tapping the abundance of marine resources and leveraging this to create dependencies for further exploitation which may actually be detrimental to the region. India should take a leadership role in promoting the Blue Economy initiatives for the responsible exploitation of the oceans and champion the cause of the smaller countries in the region, particularly the small though strategically located island states at various global fora where India wields considerable influence as a stabilising force for good.

While the global focus of the Blue Economy is on the oceans, the internal waters of a large country like India are also vital for economic sustainability and development. India has rivers and canals extending about 1.95 lakh sq. km, flood plain lakes that cover an area of 8.12 lakh hectares, ponds and tanks covering 24.1 lakh hectares, reservoirs of about 31.5 lakh hectares, brackish water in extent of about 12.4 lakh hectares and dams over 48,570 lakh hectares.  The effects of climate change and unregulated exploitation of land is leading to increasing frequency of floods, storms, pollution etc. Hence, at least in India’s case, its internal marine environment must be integrated into its overall Blue Economy initiatives. The Sagarmala programme and the forthcoming Maritime Vision 2030 have focussed their attention on this.

India’s Maritime Economy

Ports and Port Infrastructure

India has 12 major ports and 205 non-major/intermediate ports including those in the private sector. With the steady growth in the Indian economy and a targeted USD 5 trillion economy by 2025, the volume of trade will also grow exponentially. For many years India’s ports were languishing, but in the last five years or so there, has been a focussed effort on augmenting India’s port infrastructure in some key areas; the cargo capacity has increased from 871.52 MT in 2015 to 1534.91 MT in March 2020 with an ambitious target to achieve 3130 MT of which about 50% is expected be at the non-major ports.^[xi] Construction of six mega ports is envisaged under the Sagarmala plan, although the soon-to-be-released Maritime Vision 2030 will provide a clearer picture. Foreign Direct Investment of 100% is now permitted for projects related to the construction of ports and harbours with a 10 year tax holiday. A National Maritime Development Programme (NMDP) for improving both port infrastructure and port connectivity has been initiated under which various rail and road projects are underway. The Shipping Ministry also launched Project Unnati to enhance and improve port operations under which a majority of programmes have already been implemented.

However, these encouraging initiatives notwithstanding, Indian ports continue to be plagued by outdated equipment, an inefficient work force and lack of some fundamental infrastructure which makes them uncompetitive. The state of non-major ports needs major attention with some even lacking a complete perimeter fencing and basic cargo monitoring equipment. With more than 90% of India’s trade by volume being seaborne, the importance of an efficient port infrastructure is critical to India’s economic progress.

Inland Water Transportation

India’s vast network of inland waterways has never been utilised for economic benefit despite providing a cleaner and cheaper alternative to road and rail transport This was perhaps because the potential of using inland waters for this purpose was never recognised. The Sagarmala programme gave a fresh impetus and in 2019, the first cargo arrived at the inland waterway Multi Modal Terminal at Varanasi from Kolkata on the River Ganges in the presence of the Prime Minister. The development of India’s inland waterway infrastructure will enhance the hinterland connectivity to the port network along the coast. Inland waterway transportation is used extensively in countries with an interconnected marine network and is a long overdue development in India. It is still in its initial stages here and constitutes less than 6% of the total goods transportation. It has been included in the Government’s National Maritime Development Project (NMDP) and will require a sustained effort to become a viable alternative to the present rail and road network.

The National Waterways Act 2016 has declared 111 inland waterways as National Waterways with a total length of 20, 725 kms across 24 states.^[xii] Sound policy formulation, sustained budgetary support and effective professional implementation will be critical for its success. Inland water transportation is not restricted only to movement of freight; it has potential in transporting people as well as a source of inland water tourism. The development of an inland waterway gird will benefit India’s land-locked neighbours providing them access to the Bay of Bengal and enhancing India’s capacity building efforts.

Fishing

India has a large fishing industry providing employment to over 24 million people either directly or indirectly. However, the industry has yet to realise its full potential, a large part of  which either remains unutilised or under utilised. Hence, a well-structured, efficient and well regulated fishing industry performing to its full potential would provide a substantial boost to the national economy besides the upliftment of the coastal community which in India is in excess of 200 million. The share of the fisheries sector in the national GDP has gone up from 0.4% in 1950-51 to 1.05% in 2017-18 and has contributed over 1.75 lakh crore to the GDP. A little-known fact is that India’s marine exports constitute over 5% of all exports and in 2017-18 this translated to about USD 6.75 billion. It is believed that India’s total fisheries potential is about 22.3 million metric tons (2018) but the actual figure for the year was only 13.42 million metric tons.

The National Fisheries Policy 2020 has identified the areas that need attention and has suggested a very detailed though ambitious framework for this sector to achieve its full potential. However, the devil lies in the implementation and overcoming the existing constraints of limited scope for expansion, inefficient and archaic fishing practices, inadequate regulatory framework, supply chain constraints and lack of skilled manpower. Traditional fishermen operating in a loosely disorganised manner constitute the bulk of people involved in fishing but contribute barely 2% of the total marine fish production. It is this large base of traditionally skilled but technologically challenged fishermen who have to be integrated into a modern framework for this sector. From a regional economic perspective, the environment is becoming increasingly global which requires a robust regulatory mechanism and a cooperative and coordinated management of the common waters. India is fully committed to various international initiatives aimed at eliminating IUU (Illegal, Unreported and unregulated) fishing and should, on behalf of its smaller maritime neighbours ensure that this scourge is reduced even if not fully eliminated.

Oil and Gas

India’s dependence on sourcing a majority of its energy requirements from abroad not only makes the Indian economy vulnerable to global pressures but also hazards the country’s energy security. India imports over 80% of its crude oil (in April 2020, crude oil imports peaked at 84.5%) with a major portion of the indigenous 20% being sourced from offshore oil fields. The Prime Minister has set a 10% reduction target in crude oil import by 2022 and as per the Petroleum Minister, India is on track to meet this target. About 50% of its gas requirements is imported. It is already the third largest consumer of oil in the world after China and the US and as per the BP Energy Outlook 2050,^[xiii] India “will be the largest source of demand growth out to 2050”. Hence, in the absence of adequate exploration, India’s import dependency is likely to increase substantially in the next few decades.

This has a significant effect on the economy, even though India is focussing on reducing this dependence by increasing its upstream activity and widening its supply base while also investing in offshore exploration in other countries. Blue Economy initiatives to develop sources of alternate and renewable energy by harnessing wave energy and offshore wind power need to be invested in for the long term to reduce the vulnerability of India’s energy security from an economic as well as security perspective. As part of its regional capacity building initiatives, India must also focus on investing on nationally flagged tankers and gas carriers to reduce its dependence on foreign flagged tankers. The Iran-Iraq tanker war is a case in point when Indian flagged tankers ensured an uninterrupted supply of India’s critical oil requirement from the Arabian Gulf despite being attacked. Building more Indian flagged ships is a priority area in the draft Maritime Vision 2030.

Marine Tourism

On 14 February 2021, the Prime Minister inaugurated India’s first full-fledged cruise terminal called Sagarika at Kochi. Promoting cruise tourism is one of the objectives of the Sagarmala programme which also includes the development of coastal tourist circuits lighthouse tourism, a national maritime heritage museum at Lothal and an underwater viewing gallery at Beyt Dwarka. However, international cruise tourism is just one of the many avenues for promoting marine tourism. India is blessed with a long and scenic coastline and pristine beaches. The popularity of Goa and more recently Kochi and the Kerala backwaters has rarely been capitalised on to make India a top-class marine tourism destination. Internal cruise tourism along India’s inland waterways should be promoted. Beach resorts should be developed as tourist friendly, clean and accessible venues with a range of activities for all ages including water sports. Such facilities do exist but are few and far between. India’s tourism potential has barely been tapped as yet and marine tourism even less. Just building infrastructure may not be sufficient unless it is well managed. It will take much more than cruise terminals to attract the well-heeled cruise tourist to India. While marine tourism has great economic potential there is also the risk of damage to the delicate marine biodiversity. Shrinking mangroves, damage to marine growth and increasing water pollution are feeling the effects of climate change. An estimated 8 million metric tons of plastic enters the oceans directly or indirectly through rivers and other inlets into the sea which adds to about 150 million metric tons that is currently circulating in our marine environments. An effective monitoring and regulatory framework will have to be put in place to address these issues.

Shipping

More than 80% of global trade travels over the sea which highlights the importance of a robust shipping industry in a globalised interconnected world. In 2019, India had 1405 registered ships with a total deadweight tonnage (DWT) of 19.22 million tonnes of which about 458 ships with a DWT of 17.58 million tonnes constituted ocean going ships used for external trade. While these numbers may look impressive, the Indian fleet is only a minuscule 1.3% of global shipping. Many of these ships are ageing and the cyclical nature of the shipping business which is directly dependent on the global economic ups and downs is deterring shipowners from augmenting their fleets. Ironically, of the 90% of Indian trade by volume which is seaborne, only a little over 7% sails on Indian flagged ships. National flagged ships are a strategic asset as these reduce dependence and consequent vulnerability to international geopolitical pressures or likely disruptions in troubled areas. As in many other areas requiring private enterprise, an indifferent state controlled bureaucratic approach has retarded the growth of this sector. Added to that are the inherent inefficiencies in the system which drive up costs and make Indian shipping uncompetitive in the international market particularly when the shipping cycle is going through a trough. India’s biggest shipping company is the state owned Shipping Corporation of India which owns 30% of the total Indian tonnage. Plans are afoot for the government to divest part of its stake in the company which is a positive step but the government would do well to exercise care in ensuring that the strategic advantage of having one’s own ships in times of difficulty is not lost. The Maritime Vision 2030 has identified an increase in Indian flagged tonnage as one of the four ‘limbs’ on which the Vision is anchored.

Shipbuilding

Shipbuilding was one of the pillars of India’s rich maritime heritage. However, with the Industrial Revolution from which India was excluded by its colonial masters and the transition from wood to steel and sail to steam, India saw a decline in its shipbuilding industry. The thrust on industrialisation after independence led to a revival, but over the years, the industry has once again lost momentum. The Maritime Agenda 2010-2020 had set an ambitious target of achieving a 5% share which has been an abysmal failure, the reasons for which are not far to seek. An unfavourable competitive environment, official indifference and inefficient management practices among others has restricted the total capacity of India’s 28 or so shipyards at less than 0.5% of the global share while China, Japan and South Korea account for more than 90%. Various financial initiatives like a 30% subsidy has failed to excite the industry because of an uncertain policy environment, the delay of years in approvals which does not therefore benefit the shipbuilders who have to raise capex at prohibitive rates of interest which makes them uncompetitive at the very outset itself.

The government has now introduced the Shipbuilding Financial Assistance Policy offering a financial incentive of 20% over the next ten years but whether this will be able to allay the apprehensions of industry is yet to be seen. India’s shipbuilding industry is being kept alive with naval and coast guard orders. Other than the five major shipyards building warships, there is very little commercial shipbuilding activity except for small craft being built including some for overseas clients. However, these are not enough to sustain these yards. The lack of an enabling environment has led to two large shipyards being forced into liquidation and another two have their backs to the wall. At a time when India should be augmenting its shipbuilding capacity and creating a favourable environment, the opposite seems to be happening. Perhaps the effective implementation of the Maritime Vision will reverse the trend. Shipbuilding is a complex process and spawns a large ancillary industry of Tier 1 and Tier 2 suppliers. It is estimated that shipbuilding activity generates a multiplier of six which is an asset for employment generation and economic benefit.

Ship repair activity generates substantial revenue for shipyards with lesser capital recurring costs. India’s share of the global ship repair market is hovering around 2% but could be more with a more efficient system in place. Archaic facilities, inherent systemic inefficiencies, delays in refits and high costs deter shipowners from sending their ships to Indian yards and prefer more efficient ship repair yards in Singapore etc to optimise both cost and time.

Ship Recycling

India’s ship recycling industry is likely to grow from the present 30% of the global share to about 60% with the promulgation of the ‘Recycling of Ships Act 2019’ which ratifies the Hongkong Convention for environment friendly recycling processes. This will also increase the contribution of this industry to USD 2.2 billion from the present USD 1.3 billion.

Coastal Community Development

India has a coastal community of around 200 million who form the backbone of the marine economy. However, most of them still rely on traditional skills to ply their trade with the attendant inefficiency in the contemporary technological environment. Modern practices, skill training and community development initiatives are essential to improve productivity and their contribution to the national economy. A close industry-academia interaction to optimally harness the benefits of modern disruptive technologies for developing innovative solutions will lead to better economic outputs for the larger community.

Awareness of the Maritime Domain

Oceanographic research in India has barely scratched the surface and still has a long way to go in exploiting what lies beyond its coastline and below the surface. India’s large EEZ is a repository of minerals and resources waiting to be tapped. Underwater Domain Awareness (UDA), a subset of Maritime Domain Awareness is important from a scientific, economic and security perspective. There is also not enough scholarship on this subject which is very important to better utilise the resources within. India will have to make the sizeable investment required to reap the benefits.

Multilateral Initiatives

India is on the threshold of becoming a major global power. Its economic potential and developmental initiatives are being noticed. Its future potential has led to its participation at various leading multilateral fora; an invitation to attend the next G-7 Summit in the UK being the latest. India has recently become a non-permanent member of the UN Security Council for two years (2021-22) and in 2022 will assume the Presidency of the G20. It is a leading member of the Indian Ocean Rim Association (IORA) and its Act East Policy has successfully bridged the gap with the countries east of the Malacca Straits. India has comprehensive strategic partnerships with most countries in the region. It is a member of the Quad grouping and supports a free and open Indo-Pacific. It is committed to maintaining resilient supply chains and it has played a stellar leadership role during the pandemic, both at the beginning and now with its vaccine diplomacy. Nearer home, it is paying increasing attention to BIMSTEC and building economic connectivity between eastern South Asia and South-East Asia. India has recently launched the Indo-Pacific Oceans Initiative. India’s unprecedented diplomatic outreach over the last few years is yielding very positive outcomes and India must leverage this to economic advantage in the predominantly maritime construct of the Indo-Pacific.

Conclusion

India has embarked on a comprehensive revival of its maritime economy though a slew of policy initiatives and development programmes. Sagarmala and the Maritime Vision 2030 have clearly articulated the milestones to be achieved. However, there are challenges within. The political leadership over the years, despite appreciating the importance of the maritime domain towards furthering India’s strategic ambitions has been unable to drive the change required to make India a maritime power. There is a need for an Ocean Governance Architecture under a single maritime authority to shape and implement policy. Presently, ocean and marine issues are dealt with by a plethora of ministries and departments with differing priorities. The government must overcome its bureaucratic dogmas and harness India’s famed entrepreneurial spirit by creating an enabling environment with a fair regulatory framework and timely financial incentive to compete globally. Despite India’s vast Exclusive Economic Zone and seabed mining rights in the Central Indian Ocean Basin, knowledge about what lies beneath the surface of the sea is grossly inadequate. Even the Chief of the Naval Staff in his recent Navy Day press conference alluded to the importance of underwater domain awareness. The centre-state interaction in the maritime domain should work in the spirit of cooperative federalism towards achieving outcomes where the whole is greater than the sum of its parts. A comprehensive all-of-government approach towards developing a Blue Economy will require a deep understanding of the maritime domain in its entirety if India wants to be among the first movers in what is clearly going to be the developmental model for the future.

(Author Brief Bio: Commodore Anil Jai Singh is a former submariner and is presently the Vice President of the Indian Maritime Foundation.)

^[i] Dr Ajay Kumar , Defence Secretary at the commissioning ceremony of two Coast Guard vesselds at GRSE, Kolkata. 12 January 2020.

^[ii] Press Information Bureau, Ministry of Earth Sciences, Government of India, 21 August 2017

^[iii] Mahan, A. T. (Alfred Thayer), 1840-1914. The Influence of Sea Power Upon History, 1660-1783. Boston: Little, Brown, 1911.

^[iv] http://sagarmala.gov.in/projects/projects-under-sagarmala

^[v] http://sagarsandesh.in/single.php?newstitle=15635

^[vi] https://www.dgshipping.gov.in/Content/OurStrength.aspx

^[vii] https://journalofeconomicstructures.springeropen.com/articles/10.1186/s40008-020-00222-4

^[viii] https://www.theblueeconomy.org/the-book.html

^[ix] https://sdgs.un.org/goals

^[x] https://www.worldbank.org/en/news/infographic/2017/06/06/blue-economy

^[xi] https://www.ibef.org/uploads/industry/Infrographics/large/Ports-Infographic-November-2020.pdf

^[xii] https://pib.gov.in/PressReleseDetail.aspx?PRID=1605385

^[xiii] https://www.bp.com/en/global/corporate/energy-economics/energy-outlook.html