'Contribution made by MSMEs at heart of Indian economy'

Declaring that economic policies in India were being formulated by those who did not have adequate knowledge about the country, noted columnist S Gurumurthy on Friday said that Prime Minister Manmohan Singh could compete to get a Nobel Prize for making policies that were unsuitable to the nation.

He was speaking on ‘Current Economic Crunch and Problems of Industries Particularly MSMEs’ organised by National Confederation of Small Industry (NACOSI) and Industrial Estate Manufacturers Association (IEMA) in the city.

“Economists such as Manmohan Singh, Montek Singh Ahluwalia and Raghuram Rajan were all trained abroad. They do not have any knowledge about our country and they are the ones who formulate our economic policies,” he bemoaned. “In 2002-2004, our current account had a surplus of $22 billion after 24 years because of the previous regime,” he pointed out.

In 1992, when Manmohan Singh was Union Finance Minister, there were differences of opinion on how to improve the economy, Gurumurthy observed. At that time, Dr Jagdish Bhagwati, an American economist who was a teacher to Nobel laureate Paul Krugman, was invited to India to provide some ideas on policies. “The ‘God of Free Trade’ (Bhagwati) then gave a 72-page report, which said that people in India saved a lot, a habit they imbibed through generations. Of the savings of the entire country, 19 per cent were family savings, according to the report,” Gurumurthy said. Bhagwati argued for reorienting the economy as ‘spending-driven’, adding that foreign companies would only start investing here once people started to spend, Gurumurthy recalled. However, the reality turned out to be different. “The 19 per cent of ‘family savings’ has increased to 29 per cent. Between 1993-2013, a mere 1.2 per cent contribution was made by foreign investors and the remaining by Indian investments,” he added. Gurumurthy opined that the contribution to GDP by companies listed on the Sensex was a mere one per cent. It was 5 per cent by all listed companies in the share market while the share of non-listed companies was 14 per cent whereas agriculture contributed 18 per cent.

“The remaining contributions are made by micro, small and medium enterprises. Only they provide huge employment because our society has a culture of doing our own  entrepreneurial activities,” he noted.

“I travelled for six years with my associates from Ludhiana to Thoothukudi and studied business practices of small enterprises. One place that attracted me during that study was Morvi district in Gujarat where Ajanta wall-clocks are manufactured. Even after facing calamities like floods and an earthquake, it was still able to grow and export  products across the world,” he said.

In 2002, India joined the Global Entrepreneurship Monitor Study, which was sponsored by the London School of Economics. The study found that the nation has 18 per cent entrepreneurs whereas developed countries like the US and China had only 11 per cent and 10 per cent, respectively. Because of this, India got a name as “entrepreneur-led economy”, he said.