The real big worry of Indian economy

Narendra Modi government's efforts to pump-prime the economy are failing to yield the desired result. The piffling growth of 0.1% in industrial output in March 2016 from 2% in the previous month is a huge disappointment for the markets and economists where the consensus view was about 2.5%. Industrial output grew by only 2.4% in 2015-16, down from 2.8% in the previous financial year.

Data released by Central Statistical Organisation (CSO) measured in terms of Index of Industrial Production (IIP) reveals growth in the manufacturing sector which accounts for over 75% of the index has declined by 1.2% in March'2016 as against growth of 2.7% in corresponding previous year. 

                       Index of Industrial Production (IIP) growth

India Inc desires more stimulus to boost demand and overall economy while admitting the fact that weak consumer and investment demand is adversely impacting the growth of manufacturing industry.

All out effort by Central government " Make in India", "Skill India","Stand-up India", Startup India" etc will go in vain unless industry co-operate & support the campaign. Narendra Modi in strengthening the economy and finding new consumers amongst unprivileged class of society and rural population is trying to strengthen bottom of social pyramid to boost demand. This need to be reciprocated by Indian industry in capturing competitive advantage provided.

Micro analysis of drivers impacting weak consumer demand must be addressed by industry itself.

1) Not responding to global supply chain & business practice that represent new organizational model, traditional practice still prevails- leaving behind Indian industry to connect globally.

2) Failed Start-ups, defying the very concept and innovative practices to offer customer solutions, preferring traditional business practice.

3) Not optimizing operational efficiency, human capital still soft target to reduce costs.

4) Salary not commensurating  Indian currency value depreciation- 14.52% over decade and real-time market inflation. Meagre salary of INR 10000-15000 per month for a family of 2-3 is not sufficient to increase demand.With over 500 Millions workers in India, second largest after China, over 94% are employed in unincorporated, unorganised enterprises.This class has tremendous potential to generate demands if taken care of properly.

                          Indian Rupee performance over US Dollar

5) Change in employment strategy, from regular employee to contract employee with no intention to engage mentally, take ownership and accountability undermines growth strategy and restricts opportunity to earn and generate demand.

6) Employment discrimination based on caste,creed & religion preferred by many organizations undermining potentials & growth strategy.

7) Contract of Personal Service involving Master & Servant relations still prevalent defying professional skill & talent governed by Contract for Service.

8) Preferring one-size-fit-all/ready made skills with no attempt to train, develop and remove cultural mismatch.

9) Discriminating through age & generations is adding up to poverty line and social liability burden reducing opportunity to generate demand.

10) Powerful dominance and power of might of Real Estate developers through their over-delayed projects is dearly costing consumers through payment of rent & EMI leaving no cash in hand to boost economy.

11) Allowing China to prevail upon Indian market disturbing not only balance of payment but also capacity utilisation.

12) Under capacity utilisation adversely affecting employment opportunities.

13) No aggressive & proactive approach by Indian industry to counter Chinese dumping policy. Merely depending upon government to increase duty and restrict dumping will not help. 

14) PwC survey of economic crime in India reveals more than one in four organisations is impacted by economic crime. Although 94% of industry have stated to have clear code of conduct in place, introduction of Whistle Blower Act and Bankruptcy Code has necessitated good governance.

Nevertheless, India's economy, which accounts for over 70% of South Asia's GDP is expected to achieve 7.5% GDP growth by 2017 as per  "The World Economic Situation and Prospect report", in its mid-2016 update.

India has much higher potential if governed consciously and fairly micromanaged to generate demand and boost economy. Equal participation by industry, improving operational efficiency, implementing innovative business model moving away from traditional practice, business integration and alignment, shifting focus from profit to progress are few business essentials of 21st century.

The author renders his services in capturing competitive advantage through operational efficiency and micromanage to improve organizational economy.He may be reached through E-mail: trivedi.k.manoj@gmail.com or Mobile: (91)9433013863