Modi’s budget was exactly what Indian economy needed: INTERVIEW

Frank-Jürgen Richter

By Frank-Jürgen Richter

May 7, 2019

This article originally appeared on Financial Express

Modi’s government has shaken India to its grass roots to wake it to the realities — thus it is tackling its once poor education system that permitted too many youths to enter the job market unable to read, write or understand arithmetic sufficiently well to benefit their employers.

 

Narendra Modi government’s interim budget has got a resounding thumbs up from a prominent global development thought leader, even as some at home criticise it as a populist exercise ahead of the 2019 Lok Sabha election. Interim budget 2019 was exactly what Indian economy needed at present, says Frank-Jurgen Richter, Chairman, Horasis — an independent think tank based in Switzerland.

In an exclusive interview with Financial Express Online, Frank-Jurgen Richter, former Asia Director at the World Economic Forum, also weighed in on matters concerning de-globalisation, automation versus humans in job sector debate, and global climate change.

Horasis advises government and private sector on issues including globalisation, trade and sustainable development. Here are edited excerpts of Frank-Jurgen Richter’s interview with Eram Tafsir and Prachi Gupta:

What do you think of the interim budget 2019 presented by the Modi government?

The Prime Minister’s interim budget has offered more cash to further relieve poverty including a new pensions scheme, reduce middle-class taxation, and to increase infrastructure spending which were all in the pending pipeline within the many reforms and changes he has promised over the years. I personally believe that the presented budget is a good one — it is exactly what India’s economy needs at this point of time.

What structural changes do you think the Indian economy needs in order to alleviate poverty and create more jobs?

Modi’s government has shaken India to its grass roots to wake it to the realities — thus it is tackling its once poor education system that permitted too many youths to enter the job market unable to read, write or understand arithmetic sufficiently well to benefit their employers. This situation will change, but will take time. Even so there are many economic sectors that blossom and will benefit from freeing restrictive pressures as the GST has done through its aims to equalize all inter-regional taxation.
Reduction of government restrictions will permit greater inward investment which will stimulate job creation as well as offer competition to local producers (forcing greater efficiencies on their part — which might include more numerous in-house training schemes). ‘Ease of Doing Business’ will benefit.

As SAARC weakens, how do you think the government should use forums like BIMSTEC and BBIN to further its agenda?

SAARC is a massive economic community, second to the EU, and it has almost three times the population of the EU. At its incorporation in Dacca in 1985 it was hailed as the South Asian savior, but now seems not to be able to create strong intra-region trade, and India is often blamed for any intransigence. To create alternative groupings like BIMSTEC or BBIN continues to promote Indian hegemony critics suggest, and they will not easily accelerate growth or raise economic conditions across their nations.
There is an inevitable issue in these multi-nation groupings. There is an imbalance between India and all the others across most measures and thus a clear danger of it over pressing its own agenda.

What, according to you, should be India’s answer to de-globalisation?

Being isolationist does offer some immediate protection for local producers, and all will clamor for this. But ultimately isolation with a silo mentality creates complacency, inefficiency and finally a falling behind global norms. Presently India is becoming a global player for the manufacturing of vehicles, aircraft and electronics for defense and creating medical devices. It is learning to conserve its own water that aids plant husbandry as well as local health — and its health treatment knowledge may be exported to all nations.
The government pressure on ‘Make in India’ is initiating innovation across many sectors from manufacturing to healthcare. But this pressure may force local manufacturing to ignore benefits that might accrue from overseas purchases as others may have a distinct comparative advantage.

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What changes must India incorporate to cope up with the global climate change?

India is already working hard to do this, but its massive population in rural and urban locations offer differing resistances yet have one common demand — for subsidies to support change. Generally, the government can promote a more rapid retirement of older, more polluting equipment.
Yet India has a quandary — as a rapidly growing economy its production sector demands ever greater electricity power. This can be provided, over time from further renewable sources (provided storage facilities are incorporated into the supply), from the nearly pollution free nuclear systems (but disposal of contaminants is really difficult) or from fossil fuels (with their inherent ability to pollute, or to be cleaned using much of their own energy): it’s a vexing issue.

There is rising automation versus human crises in the job sector. How do you think this will be impacting Indian job scenario? What could be the possible measures that can be undertaken to avoid human replacement in jobs?

This is a heavy global burden at present. At present, too many Indian people face too few jobs and across most job sectors managers find robots work more effectively than humans (are faster and cheaper while producing better quality output). The government has to find ways to entice firms to employ people rather than robots — but managers must also learn to use robots as the Indian demographic dividend will not last forever, and human workforce numbers will sharply decrease. As an example, note that food production can be increased greatly even at the present time by using autonomous farm tractors incorporating all the advances in seed quality, fertilizer management and better supply chains to minimize the waste that was once about 40% between ‘field and fork’. Not all robot systems are bad.