The Rs 20 lakh crore package announced by Prime minister Narendra Modi, followed by Finance Minister Nirmala Sitharaman’s first dose of liquidity, including a Rs 5.94 lakh crore for the Micro, Small and Medium Enterprises, are aimed at revival of economy after the serious setback in the wake of coronavirus outbreak.

The package, we are told, is worth 10 per cent of the Gross Domestic Product (GDP) and was geared to making India self reliant.

The figures seem impressive but remain no more than mumbo jumbo for the common man. How much of it would it trickle down to the common man and how would it revive the economy remain a big question mark. The assertion that it would kickstart the economy and make India a self reliant nation appears a distant dream if you see the ground reality.

A World Bank report released late last year had placed India at the 63rd rank among 190 nations in the bank’s ease of doing business rankings for 2019. The government had then backslapped itself for a jump of 14 places from 77 in the previous year. The report was flawed as it took into account only the survey in Mumbai and Delhi while a majority of industrial units including Medium and Small Enterprises (MSMEs) are located elsewhere in the country. 

But even then, is the 63rd position good enough for a developing country like India which aspires to be a $ 5 Trillion economy by 2024 ? Agreed that the coronavirus pandemic has led to a serious setback to the efforts but the broad point is whether the government has created a conducive atmosphere for ease of doing business in the country ? Neither the prime minister nor the finance minister made any reference to urgent reforms required to unshackle the MSMEs from corruption and the all pervading inspector raj. 

The worst affected due to the pandemic and the extended lockdown are the small and medium enterprises. Together these 65 lakh enterprises account for 95 per cent of the country’s industrial units. These provide 45 per cent of country’s employment, including jobs to 11 crore persons and account for 50 per cent of all exports.

It is open secret that such enterprises work under great strain and the "inspector raj” continues to pull these down despite claims to the contrary. A plethora of laws and rules are used by such corrupt inspectors and other staff to squeeze out small enterprises. Those who do not fall in line are imposed hefty fines or made to wait in the corridors of power till they break down and surrender.

An insider said he has to take care of no less than 40 such inspectors to let his enterprise do business. The so-called single window service is a joke and harassment of entrepreneurs is what may have led to closures of small and medium enterprises. It is not to say that the violations by such entrepreneurs should be condoned or overlooked but of the government is keen on reviving economy it must place more faith on the people running such units while retaining the right to come down heavily against those who violate the law.

The world’s top rating agencies like the International Monetary Fund and Moody’s have estimated that the growth of the country’s economy would slide to less than 1.9 per cent. While some agencies and financial experts have estimated that the growth would be in the negative - that is below even zero per cent growth. This would be happening after india was logging in 7 to 8 per cent growth - the highest growth rate in the world. The estimates had come down to about 5 per cent after the roll out of the GST but it was still much better than most other countries.

It is also true that economy has suffered a serious setback in other countries too including the United States and China. However these are big economies and can absorb the shock. China in fact is back on its revival path and most of its industries are back into production.

Prime minister Modi’s emphasis on self reliance or the Atmanirbhar Bharat Abhiyan is understandable. Evidently he was hinting at our growing dependence on China for a variety of raw products as well as finished materials. 

An example of how China was eating away into our economy is the way the famous cycle industry of Ludhiana had changed over the years. Earlier the entire product was designed and made in Ludhiana itself. However over the years the traders started importing parts and began assembling these here. This was because they could get these much cheaper from China. The result was a serious setback to the cycle industry of Ludhiana.

Likewise we were getting increasingly dependent on China for all kinds of goods including garments, electronic equipments, basic raw materials and even toys and idols of gods!

While the Modi government has affirmed that it would now try to focus on Indian industry and economy, it is also imperative that it analyses reasons for the comparatively slow growth of industry particularly the small and medium enterprises. There is obviously something very very wrong with the government polices which has led the industry into crisis. What’s the reason that several small and medium enterprises are lying shut for the last couple of years ?

Besides the poor rollout of the GST, what the government must look at closely is the continued Inspector Raj. The BJP among other national parties had been strongly criticising the Inspector Raj for long and have done little to eradicate this menace. It is high time its government paid heed to this menace.

 

(The author, a freelance journalist, is a former Resident Editor of Indian Express, Chandigarh, and reported on the political developments in Jammu and Kashmir, North-Eastern India, Gujarat, Himachal Pradesh, Haryana and Punjab in his long, illustrious career.)

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