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Wednesday, December 08, 2021

As industry struggles back to its feet, there is an opportunity to do things differently

The key to addressing short-term needs is to improve the liquidity position of businesses. In addition to what has already been done, the government should put its house in order by ensuring that payments for goods and services purchased are made on time.

Written by Meeta Rajivlochan |
Updated: May 6, 2020 9:35:11 am
Creating value after Covid The COVID-19 pandemic has created a major economic opportunity for the Indian industry, provided it realises that for creating value and capturing markets, trust is a key ingredient.

The COVID-19 pandemic has created a major economic opportunity for the Indian industry, provided it realises that for creating value and capturing markets, trust is a key ingredient. And the only way to build trust is to focus on improving product quality and integrating quality assurance protocols with all industrial processes.

The government has already announced several economic measures to rebuild a battered economy. To consolidate those measures and to ensure that the cash being offered helps to ramp up productivity, a great deal more needs to be done. The economy needs help in different time frames — short-term, medium-term and long-term.

The key to addressing short-term needs is to improve the liquidity position of businesses. In addition to what has already been done, the government should put its house in order by ensuring that payments for goods and services purchased are made on time. For decades now, the government has been rather lax on this matter. It is a different matter that government bodies pay anything up to 25-40 per cent more on every tender for this laxity.

Some years ago, I had introduced an e-procurement and e-payment system for medical goods in government purchases. The sum total of my action was to ensure payment in 45 days, but the results were remarkable. Procurement prices of medical goods came down by 25 per cent in Maharashtra immediately. One of the lasting results was the price of USFDA stents coming down from Rs 64,000 to Rs 23,500. Stent prices in Maharashtra came down not due to diktat but simply by collating demand and assuring people they would be paid on time. So, the government should ensure that specific officers are held responsible for delayed payments.

In the medium-term, the key measure would be to put in place institutional mechanisms for quality assurance in the industry. Many businesses tend to see quality assurance as an avoidable cost. They pay the price by being lower in the value chain. Quality assurance is no longer a matter of choice. The one sector where few businesses have learnt this lesson is the pharma industry. But the same businesses that apply Good Manufacturing Practices for making medicines for export use different criteria for the domestic market. If Indian physicians prefer to prescribe branded drugs, this is because suppliers of generic medicines have been unable to build trust in the quality of their products.

If the industry is to deliver better quality products, then to support the industry in this task, the government also needs backend re-organisation to offer support. That is the second medium-term measure needed. Currently, government departments are not structured to offer handholding support to businesses: For this, they need to set up three kinds of groups — data analytics groups whose only job is to read reports; problem-solving groups; and, a third group to ensure that the manufacturers and workers have access to the problem-solving groups. It would be crucial to see that the problem-solvers craft solutions in a language comprehensible to the common people. We must remember that the vast majority of manufacturers today are, at best, matriculates.

For the long-term, the most important measure would be to free up the higher education sector from constant micro-management. To achieve this, governments can offer unconditional autonomy to all colleges — but without linking this with existing grants. Colleges could be asked to sign performance contracts in lieu of the grants. This would leave the colleges free to interact with local businesses, to design courses as per need and to generate knowledge that can be of value.

The second long-term measure would be to encourage Indian businesses to use IT to improve product quality. Currently, 95 per cent of the total IT work done in India is for foreign clients. Indian businesses, by and large, have remained consciously immune to the IT revolution.

Finally, corrupt officials should be given swift and certain punishment. This, perhaps more than anything else, would go a long way towards building trust between the state and business, and would leave businesses free to create value.

This article was first published in the Indian Express print under the title ‘Creating value after Covid.’ The writer is an IAS officer of the 1990 batch. Views expressed are personal

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