Corona Virus - The Indian Opportunity
Life is strange that even when
there is tragedy and death it results in an opportunity for someone else in
life. When any popular person is sick and being treated to be saved, there is
also someone else who is working on planning that persons funeral because life
demands that to avoid chaos. It is impractical to not accept this reality and
seize the opportunity.
The Corona Virus pandemic
globally gives India a huge opportunity in many ways and even as every resource
in the system is being leveraged to mitigate it, I am assuming that the Govt is
being ruthless and also planning to leverage the opportunities this provides. I
share below, not in any particular order some ideas on what the Govt should do
in these troubled times.
Ring fence against China
predators:
Be it in stock markets, other
financial instruments the Govt needs to have a set of laws passed albeit
temporarily to ensure that Indian businesses are ring fenced from being captured
by Chinese investors and then later the country held to ransom without our
being aware of it publicly. Many an Indian businessman even while demanding
that the Govt protect him from the Chinese will sell his business to the Chinese
if he thinks he is getting a good deal. Like the retrospective tax law this strategy
need not be applicable to all but should be a weapon to be used if required.
Oil futures:
The prices of oil have fallen
down a deep hole. Never in living memory have we heard of such low prices. India
must not only take limited future contracts but also pick up as much oil as possible
for its strategic oil reserve. If required create additional capacity and have
this oil with low cost on our books. Establish
large storage facilities and this will also kickstart the economy with jobs.
Pick up stocks:
Indian and global companies
have seen their stocks hammered down. If what one hears is true, the US Fed or
related govt agencies are picking up blue chip stocks which once there is
normalcy will likely double or more in value leaving the US Govt with a neat
packet. In India the Govt usually uses agencies like LIC of India and one hopes
that this is being done.
Derisk China investments:
While there is a fairly large
investment in China by Indian companies, it is not significant enough as compared
to Chinese investment in India. But there will be political horseplay in the
days to come between the Govts. For anybody to think that whatever red carpets
that Modi may have laid out for Xi, he can get any reciprocity from Xi is a pipedream.
The returns will be negligible and at best cosmetic. So Indian companies who
have invested in China need to have back up plans or ring fence their
investment as quickly as possible. They need to be paranoid to survive. Such Indian
companies need to be advised suitably by the Govt on what actions to take in
advance especially if any future Govt decision is likely to create a backlash,
they need to be protected.
Attract Japanese investments:
The Japanese Govt has already
as a policy announced that they will be funding the shifting (at least
partially) of manufacturing from China to Japan by Japanese companies. Japan
has little land and a very old demography. That the majority would shift to
Japan is unlikely. Here is where Modi needs to wear his sales and marketing
hat, talk to his friend the PM of Japan and offer to give them a large tract of
land near a seaport that can be called a Japanese SEZ. Give the management of
that land to the Japanese so they can build a township and a Japanese city
within that area. They earn foreign exchange for India, sell into India, hire
Indian labour and its like a slice of Japan in India. The east coast of India is
fairly corona free actually and so an area in Odisha/ Andhra could be a great
option. This land should be ready for handover in one day and before the township
is ready India can assure to have all utilities also ready.
Attract USA/ European
Investments:
Attracting investments from
USA/Europe needs some effort. Here an out of the box thinking is needed. The PM
must call a set of top business leaders in India – Ratan Tata, Anand Mahindra,
Aziz Premji, Nandan Nilekani, Mukesh Ambani and such - and they must be given a
target like a sales and marketing team for INDIA. They together as a team must
get at least a consolidated 5 to 10 Billion $ investments into Indian manufacturing
where companies can shift a part of their manufacturing from China into India. It
does not matter whether the investment is direct, with their own group companies
or with others in India but these top leaders must like a sales manager utilise
their links, contacts, network and directly sell this idea and get manufacturing
investments into India. They can be assisted by a team of Joint Secretary
officers from the IAS, IFS to help this effort. If need
be the Govt must place a fleet of private jets ready at the disposal of these
business leaders to go anywhere they need to and meet global companies. These
business leaders must like 20 something salesmen go cold calling and sell
investments into India.
Reduce Chinese imports:
The Govt must form a small technical
experts committee with people from different fields and they must be provided
data on Imports from China. All such items that are not essential, can be made
in India must be listed and every single importer called and informed that they
need to find local options. They would be given 18 months time to find local
options and shift. At the end of the period these items would be specifically
tagged and import duties of 25 to 50% imposed. India imports so much of trash
from China and these are sold on the pavements. India doesn’t need these items.
Pharma API:
A list of all critical pharmaceutical
API’s must be made and all Indian pharma companies called to commit on manufacturing
them in India. Wherever required the Govt of India can even fund some
investments against a non voting stake in these companies, get a royalty over a
period of time and once the investment is recovered walk away from those
companies. The Govt must behave like a venture capitalist here with suitable
changes in model.
Now a larger specific list can be made and actions initiated appropriately.
Some action points that would be common across all strategies would be as
below.
All states should be told that
they need to ear mark a minimum of 250 acres of land, free of all encumbrances,
even if the land is dispersed, even if it is ready buildings but an investor
must be able to get all approvals/ utilities across the table. The environment
clearance where needed would be given in 90 days should be a commitment. Whichever
state govts are ready, the investors will be shown the options and they can
decide which location to choose. These investors must be told that they can
walk in, sign all papers, take possession of the area – on lease only – and walk
out in 24 hrs. If they don’t start operations in say 24 months time, they lose
the land. All such imports would attract either 5 % duty or nil duty but a royalty
to be paid on sales to customs for a certain period of time to compensate up to
10% duty amount.
BJP ruled states can be nudged
to show the way and leaders like Naveen Patnaik of Odisha, Jagan of Andhra, Amarinder
Singh of Punjab, Vijayan of Kerala would likely show active aggression to have everything
ready for investors and seize this opportunity.
The Corona Virus is an opportunity
for the Govt to utilise its political capital, majority and then ram through
these ideas by tweaking laws, procedures as needed. This must be a Déjà vu 1991
moment in Indian economic history. Except that this will not be a Sehwag sixer
moment in the budget but a Gavaskar accumulating runs. This govt in 6 years has
shown that it does not have the spunk to hit economic sixers but prefers the 1’s
and 2’s consistently without fanfare, cymbals and so these above ideas will
suit their style.
The opportunity beckons, a
moment in history has arrived – whether we will create history or become a
footnote in history time will tell.
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