Industry needs to realign supply chains to derisk against geopolitical, strategic risks: FM Nirmala Sitharaman

“You should work together not just with the Indian government, but with governments across the world, if you are looking for trained and skilled manpower at various levels that you may need. Unless you are going to work with the governments to have them be trained in such skill sets which you require, it is going to be difficult for industry to say: I need manpower but I don’t get the right kind. You can’t sit and ask somebody to provide that for you. I would strongly call upon the industry to work together on a priority. To ensure use of technology, use digital instruments to make sure youth who get out of universities are trained in such a fashion that they are available for you when you want the manpower,” she said.

The Finance Minister pointed out that India needs to have large enterprises for the scale and small enterprises for the horizontal scale, so that the spread ensures benefits such as job creation across the country. “Scale cannot be just the criteria. Large and larger corporations are welcome because they give you the advantages of scale. But I will also say scale together with spread…we need to have a blend of large (enterprises) for the scale and small (enterprises) for the horizontal scale. When I say horizontal scale, you cannot have one unit established in one place and producing with efficiencies of scale but they can only generate a certain number of jobs…unless enterprises spread across the length and breadth of any country, particularly for large countries like India, particularly for large countries with population of youth now in our favour, unless we spread across and give that energy for the micro, small and medium enterprises (MSMEs), you are just not going to reap the benefit for your demographic dividend, which is waiting to be fully realised.”

“I would suggest for the decadal priority, industry should work together with small and medium units to see how they can be supportive of the large unit equally as much as they support job creation. So today the problem is not economic success, which is just production, but it is also economic success, which can spread benefits for those who are waiting for jobs and wages,” she said.

Global supply chains, inflation

Given the global geopolitical situation, Sitharaman pointed out that the economy will have to keep in mind not just commercial considerations or economics whether it is scale-based economics or otherwise, to blend the economy and its priorities with politics and strategic needs. “So when you talk of supply chains, when you talk or want to restore supply chains to some kind of ease, frictionless supply chains, let’s not forget that, it is just not economics, it’s more than that,” she said.

Sitharaman said the economy has to “clawback” more to regain its strength after the Covid pandemic and any skirmish or war will impact the supply chains and food value chains. “The world is facing challenges which are reflected in the economy,” she said.

Underlining the disruptions to global supply chains and food value chains, Sitharaman said the attempt of both the industry and the governments everywhere should be to “restore some global calm, normalcy, talk, sit and discuss”. “War should be avoided, disruptions should be avoided, they are the main cause for disruptions in supply chains, food value chains,” she said.

In this context, she said inflation is a big challenge globally. “Inflation, as you know, doesn’t respect borders. Actually inflation is so contagious that nowhere is any country’s effort today completely successful because beyond its powers are inflation forces which come in. Therefore, the primary cause I would think is the disruption, the skirmish, the war. And, as a result, the world is facing a challenge which is reflected in many many ways in our economies,” she said.

Debt management

Sitharaman flagged the need for efficient debt management, saying that “responsible economies can’t be run with borrowings so large that the next generation and generation after that already knows what it is liable to repay” which would then require it to be passed through as taxation.

She said it is important for both federal and provincial governments to manage their debt well. “I would think it is absolutely important for governments and for industry to work together to say how best debt can be managed at the national level and I hate using this word, but I would say, at the sub-national level. I mean the federal and the provincial level. It is important for us to manage our debt,” she said.