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Going all out for $5 trillion economy

By Manguirish Pai Raiker

The vision of Prime Minister, Narendra Modi, of achieving USD 5 trillion economy is not entirely difficult provided the efforts are made with full steam in all directions by all the stakeholders.

India requires focusing on innovations and promoting new generation entrepreneurs. Infusion of finance is very crucial and financial institutions, banks and NBFC’s will have to play a very constructive role in the process. The governance and the structure in the banking system will have to undergo sea change. With financial services contributing about seven percent to the Indian GDP, a strengthened banking sector has the potential to contribute directly and indirectly to GDP, increase job creation and enhance median income. FinTech has seen huge developments in the past few years, impacting varied industries and the common people in multiple ways. 

Sector that will play a key role in achieving the target of USD 5 trillion economy is the MSME sector. This sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades. MSME has not only played a crucial role in providing large employment opportunities at comparatively lower capital cost than large industries, but has also helped in industrialization of rural & backward areas, thereby reducing regional imbalances, assuring more equitable distribution of national income and wealth.

MSMEs are complementary to large industries as ancillary units and this sector contributes enormously to the socio-economic development of the country. It is important to ensure funding for MSME sector. 

All stakeholders, ranging from banks, fintech companies, NBFCs, MSMEs, logistic and utility services, regulatory institutions and the skilled manpower must come together to address existing challenges and find rewarding ways to ensure inclusive growth and achieve the target of reaching the goal of US $5 trillion. Structural Reform in MSME funding is the need of the hour.  Additional products like factoring services should be introduced and implemented. Export promotion and funding the export related industries should be quick and need based.

Role of banking and other financial services for achieving US $5 trillion economy is very critical and they have to gear themselves to address the necessities of the arising situation. Technology interventions to strengthen the quality and quantity of credit flow on continuous basis will be important aspect. Trained manpower in this segment will have to be managed.

Structural changes together with enabling infrastructure to make credit flow from the lenders and  revitalising decision making in banks by introducing new initiatives besides some new measures will have to be spelt out. The benefits should be accrued to the MSME, and these measures need to be properly implemented.  We have seen in the recent past that even after the government issuing policy guidelines and stern warning the guidelines are not followed. It is seen that most of the branches do not give the benefit of CGTMSE and insist on collateral security.

One sixth of the world’s population lives in India. However there is a silver lining, the world is aging   but India is growing younger. There is demographic dividend waiting to be exploited. IMF opined that demographic dividend can add two percentage points to per capita GDP growth per annum provided this young generation develop the right skills for the modern job market.

It was estimated that hardly seven percent of India’s labour force is having formal training. It is essential to develop the country’s human capital to enable them to be part of growth engine. Next generation need be given right skills and training in the chosen vocation to prepare them for the world market. The growing manufacturing and service industry will also need the trained personnel to supplement the technological changes incorporated for up gradation. This will be a very important factor in the process achieving USD 5 trillion economy.

The writer is chairman, MSME National Council, ASSOCHAM

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