PROBIZ International - Vol-1 Probiz File final

Challenges and Opportunities following introduction of Digital Currency The Reserve Bank of India in its First Bi- monthly Monetary Policy announced setting up of an interdepartmental group to assess the feasibility of introducing a central bank digital currency. The economists participating in the survey agreed that developing a fiat digital currency framework is a step in the right direction. Economists said that digital currency will provide an easy and efficient way for instant global electronic transactions, prevent counterfeiting, and reduce printing and administrative costs substantially. It will also benefit by bringing about wider financial inclusion, enhancing market stability and providing for better record keeping and monitoring of transactions. Nonetheless, economists felt that fiat digital currency carries a threat to privacy and security concerns need to be safeguarded first. They called for careful consideration and discussions before implementing any such arrangement. Impending Macro-economic and Financial sector Risks Majority of economists opined that despite certain macro-economic parameters (healthier manufacturing growth, investments, demand etc.) pointing towards signs of optimism; risk factors continue to remain on the anvil. The participating economists pointed out that higher crude oil prices along with uncertainties surrounding greater protectionism and GST related glitches pose as key risk factors and can have an adverse impact on India’s external sector going ahead. Furthermore, the economists added that with general and state elections due next year, there are increased chances of a fiscal slippage in the current financial year. Higher fuel prices and hike in minimum support prices for farmers are likely to put pressure on the fisc and can fuel inflationary pressures. Besides, the participating economists felt that Rupee might continue to remain under pressure during the remaining part of the year. Foreign capital inflows are expected to face risks from tighter global liquidity conditions (with US Federal Reserve withdrawing quantitative easing), introduction of long term capital gains tax and from other global financial developments such as correction in global stock markets and rise in US treasury yields. India achieving USD 5 trillion economy tag by 2025 Most economists were of the opinion that a vibrant manufacturing sector is needed to achieve impressive growth in GDP. However, the sector is grappling with issues related to competitiveness which is contributing to lower export as well as overall growth. The economists opined that the government must stand up to the challenge of carrying out difficult reforms, especially those related to the factor markets (land and labour). Participating economists believed that a special focus must be provided to the small and medium enterprises as they form the backbone of India’s manufacturing sector. The economists suggested that processes for small and medium enterprises and start-ups must be further simplified including provisions for easier access to credit facilities. The participants also called for consistency in long-term policy formulations to bring stability and certainty, which is a necessary condition for attracting investments. Economists felt that the government should consider giving fiscal incentives by reducing the Minimum Alternate Tax (MAT) and Corporate Tax rates. Furthermore, economists pointed out that there is an urgent need for continuous supply of aptly skilled workforce for manufacturing output to expand. This becomes even more important when the world is looking at Industry 4.0 which is expected to open newer opportunities for those with higher value-added skills. Economists reckoned that state of art vocational training institutes must be established around key manufacturing clusters for developing a skilled labour force. They opined that investing in training and retaining labour is essential to ensure higher productivity. In addition, economists believe that supply chain agility is crucial to improve the efficiency of the manufacturing ecosystem and this is where the government’s spending on infrastructure to improve forward and backward linkages will play a significant role. There must be a conscious effort to reduce wastage along the supply chain. This can be done by seeking locations near prominent industry belts and by leveraging supplier parks. Lastly, it was suggested that manufacturing units must ensure world class quality in the products they produce. Economists recommended a zero-tolerance approach to be followed to guarantee process discipline. August 2018 13

PROBIZ International - Vol-1 Probiz File final | Page 13