[op-ed snap] Outward flow

Note4students

Mains Paper 3: Economy | Effects of liberalization on the economy, changes in industrial policy & their effects on industrial growth

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Rising footprint of Indian companies in the global market and its advantages for India


Context

Acquisitions by Indian companies

  1. The last few days have seen two big-ticket overseas acquisition announcements by Indian companies
  2. The first is the Aditya Birla Group-promoted Hindalco’s purchase of American aluminium rolled products maker Aleris Corporation and the Shroff family-controlled UPL Ltd’s buyout of the North Carolina-based agrochemicals major, Arysta LifeScience
  3. With Aleris, Hindalco will become a truly value-added aluminium player, as against just a primary metal supplier
  4. The Arysta deal could, likewise, make UPL the fifth biggest global crop protection chemical company

What does this mean for industries in India?

  1. The above acquisitions are significant from the concerned companies’ standpoint
  2. To the extent the strengthened global footprint from these leads to increased sourcing from their Indian manufacturing facilities, there would be some domestic spinoffs as well
  3. It is good that Indian corporates are emboldened to make big investments

Need of the hour

  1. From an overall Indian perspective, this basically represents outward foreign direct investment
  2. What the country really needs today is more investment within the country, whether by domestic or foreign companies

The situation of Indian Economy

  1. The Indian economy is today at a crossroads
  2. The ghosts of demonetisation and GST have been laid to rest, even as the new indirect tax regime has settled down enough to prompt a rationalisation of rates
  3. The “micros”, as far as debt-equity or interest coverage ratios of corporates go, have also improved for many to consider resuming investments
  4. There are two things that are restraining them now:
  • The first is political uncertainty, which may go up in the run-up to next year’s national elections
  • The second is the not-so-great “macros” — global crude prices, rupee, interest rates and fiscal deficits

Way Forward

  1. Adherence to fiscal discipline is what India really needs
  2. It can make a huge difference to investor perception, more so in an uncertain global environment
Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.
  • Subscribe

    Do not miss important study material

Leave a Reply

Please Login to comment
  Subscribe  
Notify of