The COVID-19 pandemic has set foot in India as across the globe and is likely to impactthe country’s economy in a gigantic proportion. Industries and businesses are grappling with “tremendous uncertainty” about their future.AINR. 20 Lakh CroresAn economic package has been announced by government of India to get the economy back on track after the fierce attack by COVID 19 which has wreaked havocacross the Globe. A strategy has to be evolved to get these minimum requirements in place. As we all know these types of funds are not there in Government kitty which is actually in need to maintain the basic requirements including taking care of its staff, defence and the critical sectors and people below poverty line. Here the Doctrine of Secured Governance offers the much needed solution which is a Self sustained Techno Economic model getting such funds from Valuation by Technical growth. The hidden potential of each sector is optimised and enhanced by creating HUBs, Mini HUBs and Nano HUBs as the core for each sector and will continue with the existing systems without disturbing them. This guarantees huge Employment opportunities and Investments from all with focus on major growth centers utilising the waste land available with government. This will ensure no displacement of farmers or use of agricultural land. This model can give the required INR. 20 Lakh Croresto the system needed to implement the Stimulus in letter and spirits for the benefit of the country and its long term growth.
COVID-19 no doubt disrupted human lives and global supply chain but the pandemic is a severe demand shock which has offset the green shoots of recovery of the Indian economy that was visible towards the end of 2019 and early 2020.
Infrastructure Development in Wasteland
Today we can take water and power almost anywhere. Connecting these areas with roads and making new growth centres of development will be more beneficial and cost effective than trying to develop projects in areas already populated. It will relieve pressure on existing urban areas if we setup various HUBs, Mini HUBs and Nano HUBs in waste lands of India. Wastelands are suited for green field Smart cities. Our country has approximately 557,600 sq. km (16.96% of total India Geographical area) of degraded wasteland. This becomes highly significantas these wastelands could be effectively put to productive use through various land development programmes. Merely 5% (27,880 sq. km.) of wasteland will be more than enough for HUB development and minimise land purchase expenses. Development of these wastelands offers enormous potential both for economic development and sustainable employment generation. Besides, it would not adversely affect the farm land and farmers.The development of Smart Cities in the form of Nano, Mini and large Hubs in Wastelands across the country would have multi-fold benefit for the country. The Government would be able to garner the committed INR 20L crore and much more in this over 25,000Sq.kms. area which is free of any encumbrances and would not displace any existing farmers and other users. Since these are spread throughout the country there could be satellite cities around existing larger Towns and cities and others in rural areas. The developments of these could be strategically funded by properly offering incentives of FSI, sectorial benefits, regional preferential as also routing existing grants in these upcoming projects like THEMAHATMA GANDHI NATIONALRURAL EMPLOYMENT GUARANTEE ACT(MGNREGA) and many others. There has to be long tern term commitments from all as this would benefit all stakeholders Government, public developer investorand all other beneficiaries. This would give multiple outcomes in not only getting the much needed funds internally and externally but also many of the present problems of imbalance in over saturated cities and deprived rural areas would be addressed and they too become active partners in progress.
This land totalling to over 25,000 sq.kms. should be offloaded each year in parts for next 100years and with values going up there would be permanent revenue for Government and other stakeholders. This ensures that investors would naturally benefit and this would induce them to be a part of this perpetually. The initial companies and investors should have good incentives and schemes to make the infrastructures and the upcoming place to be the best for its long-term sustenance.
The incentives announced by Government should be enhanced for small, medium, large and Government PSUs who would take up their expansion in these areas. Banks should set up large HUBs for their customers who are taking loans for expansion and should be incentivised to benefit their growth. All other announcements should properly be knitted to this so the benefit goes for the expansion with due care being taken for self-sustenance of each of the companies, funding agencies, Industrial development organisations and above all the Government and public. They need to commit good employability and local production on the Make in India slogan.
Existing public assets – Sourcesfor Upcoming Funding Scheme
Many of the public infrastructures are existing assetsand have immense potential to generate additional revenue for India. The valuable assets such as roadsand highways (5.9 million kms.), ports (major (13) / minor (200)) and airports (126), railway stations (7,350), power stations (710), telephone exchanges, post offices (154,910), educational institutions (1.52 million), healthcare infrastructures (2.22 lakh), law & order infrastructures (15,555), heritage tourist places (39), uninhabited islands (1,200) etc. with staggering potential for additional revenue to meet funding gap of Indian government. As per Secured Governance estimation says that additional revenue from proper installation of Billboard advertisement could generate around INR. 48,000 crores (Per annum, US$6.36 billion) from 2.68 million billboards. Moreover, could generate around INR. 7 lakh crore from 1,940 railway HUBs.
Land value offers an ethical and efficient source of revenue for government to fund themselves in this type of economic crisis situation. Increased land values are not generated primarily by the actions of the landowner, but by increased demand for land that comes from population growth and rising incomes, as well as nearby public investments for essential infrastructure growth.In India, where almost all land is government-owned and leased to private holders, charging lease fee payments and land rents (as well as property taxes) has enabled the government to recoup 80% of annual infrastructure investments through land-related revenues.
Doctrine of Secured Governance for Self Sustained Economy
Secured Governance is a concept that is catching the attention of many as a holistic approach to infrastructure needs, offering a great deal. It professes taking advantage of valuation of assets created, and delivering at almost no cost to the government. In addition the infrastructure assets provide an opportunity for capital recycling, reducing the need for capital replenishment. It offers self – sustained economic growth, more societal participation and benefit sharing with transparency.
It has made mobilising private investment for HUB development to address these needs a key goal. If doing so as “a win – win situation that requires international cooperation and set goals for public private participation to enhance revenue generation and huge employment opportunity. These will give returns in four to five years which will meet their investment cost. While the concessionaire utilizes valuation in a pattern that is part of a larger plan for the area, the also shares this with more and actually adds more value to the whole system. It will be a win-win situation. The SG approach requires the Government to participate as a facilitator and nothing more. The first step is to recognize the merits of a multi-sector approach to infrastructure and conceive projects which may be predominantly one sector but carry with them smaller packages of other supporting sectors. Implied in this is the ability to take decision across ministries and give clearances at one point. The method of implementation will also be peculiar to each project, the place and the local conditions. Single window clearances would therefore have to be the norm, supported by empowered teams that can help conceptualize and clear a project in the SG model. Once this is done, the execution may be decentralized to specific states or regions. The method of both valuation and value addition needs expertise and imagination for holistic development in the country through Secured Governance.
Current Indian Economy
The World Economic Outlook (WEO) of October 2019 has estimatedIndia’s economy to become the fifth largest in theworld, moving past United Kingdom and France.As per First Advance Estimates,growth in real GDP during 2019-20 isestimated at 5.0%, as comparedto the growth rate of 6.8% in2018-19. The nominal GDP is estimatedat INR. 204.4 lakh crore in 2019-20 with agrowth of 7.5% over the provisionalestimates of GDP (INR. 190.1 lakh crore) for2018-19. Yet, given India’s record ofgrowth with macroeconomic stability overthe last five years, the economy ispoised for a rebound towards the US$5 trilliongoal by 2024 – 25.
Cumulative value of exports was US$185.95 billion (INR.1,304,149.06crore) and imports was US$280.67billion (INR. 1,967,625.73crore) for period April-October 2019-20.
There are 231 operational Special Economic Zone (SEZ) and around 355 SEZ that are notified in India. COVID-19 pandemic may be good news for Indian competitiveness and capital inflows as long as the government can match after the second quarter of 2020 recovery by providing incentives and other advantages for foreign investors that complement their business plans in India. Ultimately, however, the benefits of India’s SEZ policy have been substantial as it is one of the reasons why there is an increase in the number of foreign firms operating in India.Foreign Direct Investment in India US$36.769Million from April 2020to December 2020. Although, During COVID-19 pandemic, Cumulative FDI in India was US$658,893Million (Equity inflows +‘Re-invested earnings’ +‘Other capital’) up to December 2019.
An overview of Indian Industries
The Indian Micro, Small, and Medium Enterprises (MSMEs) sector is the backbone of the national economic structure. In India approximately 97% of the industries fall under the category of MSMEs and the strongest drivers of economic development, innovation, employment, and also contributes 31% of India’s Gross Domestic Product (GDP). Nearly 75 Million enterprises are in India and about 45% contribute to manufacturing output, more than 45% contribute to Indian exports and creating about 114 million employments. Due to the COVID19 lockdown from March 24, 2020 in India, this has badly impacted MSMEs and the contribution of 31% of Indian GDP already gone down. Nearly 25% of firms are on the way to permanently shut down, and more than 60% firm not have funds to pay salary.
“Make in India” initiative has the potential to turn the Indian economy upside down, all for better reasons. With the investment in the manufacturing sector and the advancement of technology, employment opportunities can also be generated. Such an initiative requires a well-coordinated effort from the Ministry of Commerce and Industry as well as the state governments.
Sector-wise Impact on Indian Industry
Aviation Industry: The coronavirus pandemic is expected to impact more than 29 lakh jobs in the Indian aviation and dependent industries. The passenger traffic has declined 47%.Besides, the grouping noted that the revenue impact for airlines operating to and from the Indian market would be US$11.221 billion (over INR. 85,000 crore). Grounding of all international and domestic flights is expected to result in a loss of about US$3 billion – US$3.6 billion for the Indian aviation industry in the June quarter of current year.
Railway: The Indian Railways have stopped all passenger train services during the lockdown period and limited its freight train services with a reduction in demand for bulk commodities such as steel and cement, and disruption in supply chains. It is estimated that Indian Railways will lose around INR. 12,500 crore (INR. 6,500 crore from passenger traffic & INR. 6,000 crore from freight services. Within cities, local transit operators such as metros, city buses, auto/e-rickshaws, taxis and cab aggregators have also stopped operations. The higher costs for frequent cleaning of vehicles and facilities have increased fixed costs and imposed an additional financial strain on all Public Transport Companies at a time when there are zero revenues from passenger transport.
Shipping Industry: Coronavirus outbreak has impacted the business of cargo movement service providers. As per the sources, per day per vessel has declined by more than 75-80% in dry bulk trade.
Auto Industry: The analysis, based on the situation in the current year, suggested that under a realistic scenario, two-wheeler sales are likely to decline by 18% to 14.2 million from 17.2 million, passenger vehicles sales may fall 12% to 2.43 million (from 2.75 million) and commercial vehicles sales are forecast to decline 21% to 1.06 million from 1.34 million.
Pharmaceuticals Industry: There are 57 APIs of crucial antibiotics, vitamins, and hormones or steroids could go out of stock in case of a prolonged lockdown in China. An inter-state transport challenge is also a major issue. The outbreak cause potential disruptions to supply or shortages of critical medical products also. Supply chain disruptions could be truly serious for our access to drugs.. Due to the coronavirus outbreak, it will also be impacted.
Electronics Industry: India’s electronic industry may face supply disruptions, production, reduction impact on product prices due to heavy dependence on electronics component supply directly or indirectly and local manufacturing.
IT Industry: The New Year holidays in China has been extended due to coronavirus outbreak that adversely impacted the revenue and growth of Indian IT companies.
Tourism and Aviation: Due to the coronavirus outbreak, the inflow of tourists from Europe and from other East Asian regions to India will lose that will impact the tourism sector and revenue.
Textiles Industry: Due to coronavirus outbreak, several garments/textile factories in China have halted operations that in turn affecting the exports of fabric, yarn and other raw materials from India.
Estimated impact from the coronavirus (COVID-19) on India between April and June 2020, by sector Gross Value Added (GVA)
Huge Funds Required Recouping the Economy
As stated above all the major sectors in India has come into crisis because pf COVID 19 and Secured governance is best possible solution to uplift them. Infrastructure investment is widely recognised as a crucial driver of economic development. To achieve the target of US$5 trillion economy size by 2025, a robust and resilient infrastructure system is required, supported by adequate private investments.A budget deficit occurs when a government spending is greater than revenues. This leads to an accumulation of public sector debt. If the deficits are unsustainable, this can cause rising infrastructure gap and economy development. Secured Governance concept designed a novel funding model for government to meet the budget deficit and infrastructure gap.
Results & Conclusion
Secured Governance – A Holistic Approach to Infrastructure Development Secured Governance is a concept that is catching the attention of many as a holistic approach to infrastructure needs, promising a great deal. It professes taking advantage of valuation of assets created, and delivering at negligible cost to the government. The value and valuation (land appreciation) strategy offers sophisticated funding mechanism and tailored to the economic growth and generate huge employment opportunity.
The Secured Governance strategy designed to help government through the private & foreign sector investment, and non-profit organisation when to open their economies, and the second outlines an approach for how to do so in this COVID 19 pandemic situation.Establish various HUBs in the villages of India is an effort to create a small yet compact mechanism to generate employment opportunity and minimize the rural urban migration. Detailed investment and employment opportunity is given in below table:
|Growth Centre or HUBs||Number of HUBs||Expected investment by private Bodies
(in INR. Crore)
|Expected Output to Govt./Annum
(in INR. Crore)
The imperative of rapid scaling up of the infrastructure capacity – in post COVID 19 – entails developing and implementing projects of the required scale and within the tight time frames envisaged. The new initiatives of “HUB development” on the part of the Government have begun to turnaround the project as far as the private participation is concerned through project execution and planning new investments. Private participation will be leveraged to attract an investment of INR. 20.00 lakh crore from private / foreign investors during the period 2021-25. And at the same time additional revenue of government (excluding taxes) is estimated INR. 70,000 crore to contribute budget deficit reduction. This implies that it will generate over 215 millionnew jobs over the next five years.
Lastly, we need a system to integrate economic interdependence in today’s modern societies which not only decreases uncertainty regarding where risks begin and end, but also help in judicious planning and development of new empowered, transparent and interdependent Governance systems with higher degree of society participation in nation building Process. Secured Governance is a novel concept which equips to create adequate and coordinated measures to ensure the provision of financial, human, technical, information and sustainable economic growth of the state and nation.
By Dr P. Sekhar
Chairman of Global Smart Cities Panel & Micro Tech Global Foundation