Basis what I read about 20L crores of stimulus / package outlined by GoI vis-à-vis reactions from all corners, my first reaction was similar too. But I asked myself, what is that we are missing?
I feel Jan-dhan account initiative implemented in an overdrive mode by Government Of India (GoI) has been forgotten which is most relevant in current times! Let’s quickly look at following chart depicting Jan-dhan Accounts across India and how these are helping Government channelizing money for various activities under MGNREGA. I have shared some charts on MGNREGA below to correlate with this.
Let’s explore this along with other aspects as economic activities unfold in Indian.
Jan-Dhan Account Initiative: If we look at the speed at which Jan-dhan accounts were opened & then later used for various DBT schemes including that of MGNREGA, I somehow strongly sense that “20L crores package/ stimulus” as declared by GoI, is also on similar trajectory.
The fiscal support is focused mainly on MSME segment, which generates maximum employment for the nation. Instead of giving free-bees, the liquidity lines are opened with defined conditions to channelize money against business activities. The package and other aspects are only to strengthen MSME before economy returns to full steam.
Recent announcements: MSME definitions have been changed; they have been encouraged to get registered within Udyog Adhaar system; funding lines incl. collateral free loans at discounted interest rates tied up; credit guarantee given by GoI to banking institutions for these loans as they are taken; repayments stretched over 4 years; MGNREGA allocations at record high level; significant rebates / interest subsidies / concessions announced for MSMEs; preferences for MSMEs in Gov’t tenders and many more elements.
Does it not mean, MSME’s will be natural beneficiary, as & when the flywheel of economy starts as all necessary inputs are organized?
But, natural Q was: when will economy start as demand is close to 0 in many areas? Where is the demand? However in last one month itself, some encouraging trends have started emerging.
Given current focus of Central & State Gov’t is to limit deaths & get past COVID-19 pandemic (public health-wise), India will start witnessing massive demand pull coming from many infrastructure projects across all segments which may be initiated by Central & State Gov’t.
In my previous article “What may generate economic activity post COVID-19” (To refer it click here), I mentioned ‘Keynesian Theory of Economics’ which generally is a tool used by Gov’t to pull out the nation from such massive economic crisis. Isn’t Gov’t the largest buyer in current time? And with India’s deficit on infrastructure side, naturally helps.
As Gov’t undertakes these projects and work starts getting awarded & implemented, economic activity will percolate down to MSME segment where the entire system is well organized through these announcements and may generate massive employment as activity picks up.
This drive of getting MSMEs tied up with all funding facilities & current concessions will help focus on implementation of infra projects & little time will be lost in getting all ducks in a row.
Now, further we will eventually see global economy recovering in medium term. When India’s trading partner countries as well as others pump their economies with adequate amount of liquidity through respective stimulus, it will accelerate the demand. It will suddenly fill the vacuum on exports.
Further, possibility of global business value chain shifting to India from neighboring country is getting stronger with each passing week. When India will be preferred over such locations as one of the trusted business partner, either for creating alternate location OR to be only base for future economic activity, the amount of GDP growth will only be significantly higher. The MSME’s will be benefiting from the same too.
All these trends points the needle towards promising direction. When we look at above mentioned global aspects through the lens of on-going geo-political developments which are happening at extremely rapid pace, it only affirms the stated view. Just a recap – suggested economic activity on global aspect is over & beyond the domestic infrastructure spend-led demand pull mentioned above.
Now let’s look at data / trends from last couple of months.
Short term demand across spectrum may not be around but it’s not that economic activity has stopped. Apart from pharmaceuticals, healthcare and related sectors, agriculture sector eco-system and companies associated with it has already gone full steam. Agriculture activity will continue regardless of COVID-19. There are encouraging trends in automotive sales in segment of farm equipment or two / three wheeler.
These are likely to be followed by uptick in rural demand for construction material – cement / steel for house construction. Farming community with cash in hand with less spending avenues elsewhere will go for construction activity.
Add to above, money supply in rural India is further augmented by major work undertaken through Central Schemes of MGNREGA. I had made a strong case for this in my April 2020 article. Following charts published in social media by Uday Tharar validates my views expressed in my earlier article of 10th April 2020 (link shared above).
Key themes these charts suggest:
– Work demanded under MGNREGA shot up in May and further in June
– Daily wages under MGNREGA increased to INR 199
– Government provided more work under MGNREGA from later part of May 2020
Let’s for a moment extrapolate all these trends with oncoming massive tide of opportunities under the banner of #AatmanirbharBharat / #VocalForLocal.
The clarion call by our PM for #AatmanirbharBharat / #VocalForLocal will bring tide of opportunities to the door of domestic companies.
So what will domestic brands or companies experience in near future and how will they ride the wave of #VocalForLocal to be next global brand from India?
India going self-reliant will only add to demand pull especially for domestic companies & brands. It’s never before opportunity for them to set vision and ambitions beyond Indian market and be a global company. To realize such vision & and capitalize such tectonic shift in consumer / customer sentiments (chances of it happening are around), renewed resolve to reorient business culture and make it digital, quality, innovation, process & governance driven will go long way.
Such conscious shift in customer / consumer behavior will also bring these domestic companies / brands face-to-face with consumers / customers used to global quality, design, functionality, features, durability, pan-India availability, price, after sales service / support / care and many more aspects which makes products or brands successful.
Today, consumers are used to social media as way of expression. Immediate onslaught of comments / feedback / experiences about domestic products / services by such community after purchasing domestic products can have greater impact on product / company’s brand.
Such consumer expectations & feedback will soon have ripple effect on the entire eco-system aligned with product / service value chain. The impact will not be limited only to consumer facing organization but those operating in B2B will see the pressures from their clients.
This will impact / influence all facets / functions of business. Domestic companies & #MSMEs should be planning and executing numerous initiatives to reorient themselves from within. Small initiatives can add small value. But to have cultural change, each business will have to align actions to the renewed vision & mission.
Companies will have to set higher target / KRAs (not sales as such but across all operational aspects) to have the entire team rally around it. Such transformation activity / initiatives will greatly help in long run to achieve desired ambitions. Current time of sub-optimal activity can be perfect time to do all this so when economy goes to full steam, team can focus on delivery of most positive experience to their customers.
Promoters, management of these companies/ brands should seize this opportunity and go for such overhaul. As management team will always be integral part of this new journey, it will be critical whom they entrusts to drive this change with passion for outcomes.
Hope you find this relevant and interesting. Do share your views, opinions, comments.
See you again when I write the next one. Till then #StayPositive #StaySafe
#economy #economicActivity #macroeconomics #gdp #demand #AatmanirbharBharat #vocalforlocalindia #msmesector #fiscalstimulus #innovation #transformation #disruption #leadership
