India must take advantage of opportunities in covid’s wake

“While we had gone slow just prior to covid, it is mostly advantage India post-covid relative to other emerging markets. When you realize that you are back, you have to seize the opportunity,” said Swarup Mohanty, director and CEO, Mirae Asset Investment Managers (India) Pvt. Ltd.

“When you look at the breakup, $1 trillion will come from both agriculture and manufacturing and $3 trillion from services. Bulk of those services will be consumption. And post-covid, the way things will be consumed will be different from the past. The younger generation is moving from asset consumption to experience consumption,” he said.

Ashwini Kumar Tewari, managing director, State Bank of India, pointed to outsourcing as a major opportunity within the services sector that India can take advantage of.

“Services today is 55% of our GDP. India has done really well in services. There are so many varieties of outsourcing that can be done out of India such as new emerging ones like telemedicine, legal-tech etc. We must resolve all issues around data privacy, IP and then I am sure this can be one of the biggest opportunities. Because manufacturing is tough. Getting land is tough, getting land at a reasonable price is tough. So, while we continue to focus on these, let us also focus on these other low hanging fruits,” said Tewari.

Prabhat Awasthi, managing director and country head, India, Nomura, said focusing on areas of manufacturing that are seeing sharp rise in domestic consumption will be critical for healthy growth of the economy.

“Globally, what’s changing is that people are trying to diversify their manufacturing destination. This we did not capitalize on last time when there were sanctions on China. While services may drive the economy, the fact of the matter is that at some point, we will probably start importing more mobile phones than we import oil. And we really need to manufacture what we consume because the current account deficit is running very high,” he said.

He said it is crucial for India to diversify into manufacturing areas where consumption is growing very fast.

Ritu Arora, CEO and CIO, Asia, Allianz Investment Management Singapore Pte Ltd said domestic capital will play a key role in helping grow critical parts of the economy, making it necessary to energize and channel such capital into more sectors.

“The opportunity is to harness the capital from within the country. It is working well for equity markets now but it still does not for AIFs, REITs. There is a huge part of the economy that needs capital and to be able to energize and bring in domestic capital into these spaces will be hugely important,” she said.

The journey towards a $5 trillion economy will also need the country to create more office spaces.

“We have seen consolidation in the commercial real estate sector. Today, you will not find smaller players working in the commercial space as compared to residential. We think that going ahead, while 25% of companies will continue to work from home, the remaining 75% will work from the office. So if the economy grows at 8% or in double digits, after we have more stable, global geopolitical environment, then the demand for commercial space will again come up and the supply will be grossly inadequate,” said Niranjan Hiranandani, MD, Hiranandani Group.

To be sure, while there are major areas of advantages for India, the speakers also pointed out that India is facing some major challenges.

“One opportunity that India has always had is the demographic dividend, but it is a challenge as well. We have the youngest population amongst countries of comparable size. This population, which if educated well and finds jobs will consume more, and as consumption grows, the GDP will grow as well. The challenge, however, is how do we educate, give them the skills, and then give them the right jobs. There is no point in having such a large young population which is not optimally educated or does not have jobs that don’t satisfy them well,” said Tewari of SBI.

Allianz’s Arora added that policy makers also need to ensure that the journey to becoming a $5 trillion economy should be equal for all parts of the society.

“The journey may be unequal, especially when wealth is created in only some pockets. So we need to find the frameworks, support systems that help carry MSMEs and other sections of the society,” said Arora.