Dr Frank Jurgen Richter Views on Future of Indian Economy and Impact of Covid-19

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Interview of Dr Frank-Jurgen Richter,Chairman Horasis with Mr Deepak Khattar (DK) ,Editor ,Business Sphere Magazine

DK :  In how much  time do you think India’s Economy will grow back  and  recover  from the loss of Covid-19 pandemic which was caused  during  the months of  March to June 2020  and later on ? What  are the steps that should be taken by Indian Government to accelerate the growth again ?

Dr. FJR : In countries like Czech Republic and Belgium, the numbers of infected people are sky-rocking. It is the same in United States where there is a lot of controversy now, two weeks prior to elections. India, too, has experienced sky-rocketing numbers. The Indian Government tackled the first wave successfully: India was among the countries with the most severe lockdowns. But, of course, India is a large country, and it is difficult to contain the virus. Hopefully,the vaccine will come in the markets sometime in the first quarter of next year and, hopefully, things will look better and augment the Indian Economy back to its normal and Pre Existing Growth.

What foreigners usually forget is that India is not just New Delhi but India is a continent of very strong states run by their own local governments who have developed their own local constituencies. So, I am very optimistic for India. But maybe what India could do is ease FDI to have more investors and I think that is part of the government’s policies but it needs to be more in practice. There are still hurdles for companies to come in. India is taking leaps forward in digitization and over taking maybe one step of development and whole digital process is so, important for India. When the demonetization happened, there was a lot of debate whether it was right or wrong – it was definitely shock therapy but in the long term, it was the right thing to do even so there was a cost to pay on GDP growth on the short-term. In the long term, digital is the way to go, there is no way back and Covid is accelerating digitalization .So digitization is the best step taken by Indian Govt.

DK : What do u think will be India’s GDP figures in 2021 ?

Dr. FJR : India’s economy is all set to recover from the losses caused by the coronavirus pandemic; however, there are a few roadblocks that may make the process slow. It is expected that India’s GDP will grow at 9.8 per cent on-year in 2021, after contracting 5.7 per cent on-year in 2020, said a report by Morgan Stanley. “We estimate the economy to have recovered to the pre-pandemic level of output in 4Q CY20,” it added. However, the growth outlook has upside risks too, particularly evolving from the spread of coronavirus and the availability of the vaccine.

The resurgence in COVID-19 cases domestically or globally may lead to stricter lockdown measures and thus increased risk-aversion will potentially weigh on the growth outlook. Apart from the trend in COVID-19 cases, uncertainty stemming from faster tightening of domestic financial conditions, higher-than-expected stressed asset creation, and slower recapitalisation of PSU banks are likely to weigh on the growth trend.

I have mentioned elsewhere that growth is a relative phenomenon – it depends on the measurement base. In India’s case we are often talking of GDP growth in $/capita – but with a massive population and in absolute terms with India commencing as a poor nation, growth stimulated by its new High Tech mode is impressively high.  It is not surprising the government talks-up its world-beating growth rate as soon it will be announcing it is the world’s third largest economy after the US and China, surpassing Germany and the pair UK/France (who are usually neck and neck at 4th or 5th).

India has, though its recent government initiatives, broken with its dilatory past and is seen to be a nation opening up new horizons, notably in its wish to become a large democratic digitized nation. If there is no radical upset through the forthcoming elections, we will see a continuation of encompassing reforms that ought to benefit all of its citizens well past 2020.

DK: What are the major industries that can expect  some boom in India in 2021? Perhaps may be Automobile Sector ,IT Sector or some other ? What are your comments ?

Dr  FJR :The $118 bn Automobile industry is expected to reach $300 bn by 2026.India’s annual production has been 30.91 mn vehicles in 2019 as against 29.08 mn in 2018, registering a healthy growth of 6.26%India is expected to emerge as the world’s third-largest passenger vehicle market by 2021. In FY 2018-19, sale of passenger vehicles has increased by 2.70%, two-wheeler by 4.86% and three-wheeler by 10.27% as compared to FY 2017-18.

In April-March 2019, overall automobile exports grew by 14.50%. The overall Commercial Vehicles segment registered a growth of 17.55% in April- March 2019.


DK: What is the impact of Joe Biden winning as President Elect  of  U.S to Indian Economy in the whole,will it indicate a positive trend and What about  the H1B visas from India to U.S in IT sector ? Will the Visas increase?

Dr FJR : U.S President Elect Joe Biden plan to increase the High Skilled Visa’ s including the H-1B and eliminate the limit on employment  based Visas by the country , both of which are expected to benefit  the tens of thousands of  Indian professionals impacted by some of the policies of outgoing Trump administration. With Kamala Harris as his deputy,Joe Biden is expected to reverse the move of the Trump administration to revoke  work permits to the spouses of H1-B Visas, which had adversely impacted  a large number of Indian Families in the U.S


DK: Do u think India has any chance of becoming a Super Power  in next  5 yrs that  after knowing  China to be an originator of Covid-19,lot of count ries will be shifting base to India leaving out China and will  that be a blessing in Disguise for Indian Economy ?

Dr  FJR : India has a good government, PM Modi is well respected in the world, he is trying to mitigate the risk of conflict, he is engaging his government – he is very visible on the multilateral scene of the UN and that is the way to go. On the economy, India’s economy like others has been impacted. I believe India, in the long term, 0can be the new global engine of economic growth with luck like China or even better than China. Maybe five years from now, India will overtake China when it comes to exports. Of course, India’s main advantage is the system of democracy and China is more top down while India is bottom up. Currently, processes in India take longer. The Chinese just decide and do it, while in India it takes longer, but in the long term, it is a main advantage for India. The democracy and exchange also have a very strong stake.

DK : India has stopped lot of Imports from China and focussing on Make-In-India Initiative . Do you think tats a benefitting step for India in the long run and  will it be good for Indo-China trade relations ?

Dr FJR:  At a time when a sentiment in favour of boycotting Chinese goods is gathering steam, companies across import-dependent sectors such as automobile, pharmaceuticals, electronics, telecommunications, etc have said that any move in this direction could be counter-productive and impact the overall competitiveness of the Indian manufacturing sector.

They attribute two main reasons for this: One, automobile and pharmaceuticals companies have invested deeply in building a supply chain that traces back to China significantly and disrupting that supply chain could adversely affect their competitive situation in the export segments. Two, for companies in the telecommunications and electronics segments, the disruption could come from the lack of domestic manufacturing capabilities and significantly higher input costs.

China accounts for around 14 per cent of India’s total imports, and major items in the import basket being components for smartphones and automobile, telecom equipment, plastic and metallic goods, active pharmaceutical ingredients (APIs), and other chemicals.

According to official data, India’s pharmaceuticals industry is the third largest in the
world in terms of volumes. The country exported around $14.35 billion worth
formulations and $3.91 billion worth bulk drugs and intermediates in 2018-19.
However, the country also depends heavily on China for various crucial ingredients used to make formulations. Around 68 per cent of the $3.56 billion bulk drugs or APIs imported were from China in 2018-19.

DK:What are your views on Indo- Germany Business  Relations ?

Dr FJR :Germany has actually a quiet and active approach and friendship with India. Manufacturing is happening and India should be a main partner in manufacturing. Traditionally UK should be the alliance partner but friendship with Germany should be improved.

DK ; Tourism Industry has suffered Worldwide and India also and we had lot of retrenchment in this sector indicating huge Job losses.How do you think tourism will progress worldwide and in India in 2021 and  will it be  able to employ back all people who lost Jobs ?

Dr  FJR:  With lot of Domestic Flights in India and Worldwide opening and some international flights and travel across the globe opening up with the Hotels ,the tourism sector should make a comeback by June 2021.We are looking towards positive sentiments in this sector from  the next financial year i.e April 2021.


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