Green Money and Entrepreneurship Opportunities

‘Follow the money trail’, this adage from crime novels is proving true to look at the developments towards zero-emission economies. Literally, a sea change in mindset and flow of capital is needed to prevent reaching to the point of no return towards ecological damages. Finance Minister in her budget speech rightly pointed out that, “The risks of climate change are the strongest negative externalities that affect India and other countries.” Prime Minister had also said at the COP26 summit in Glasgow last November that, “what is needed today is mindful and deliberate utilisation, instead of mindless and destructive consumption.”

Presently around two-third of capital goes into high carbon emission economic activities, which need to be reversed completely towards low emission activities. The low carbon development strategy as enunciated in the ‘panchamrit’ that PM announced is an important reflection even of India’s strong commitment towards sustainable development. Further, This strategy opens up huge business and employment opportunities in multiple domains.

Consulting firm McKinsey identifies 11 domains with huge churning and opening up new business opportunities going forward. These are Transport, Building, Power, Water, Consumer, Agriculture and land use, Oil Gas and Fuels, Hydrogen, Waste, Industrials and Carbon Management. Some of these are surely on radar of budding entrepreneurs in India. With Gati Shakti promising to build unprecedented transportation infrastructure, electrification, micromobility and infrastructure for electrical vehicles are seeing increasing number of startups. It is becoming clear that automakers would cease to manufacture cars with internal-combustion engines and roll out EVs instead. Oil consumption would drop, in part because drivers would no longer need to fuel up—and electric-power generation would increase to help charge the world’s expanding fleet of EVs. A much greater share of that electricity would come from solar and wind rather than today’s coal- or gas-fired power plants. Similar opportunities are becoming viable in other domains too.

Capital to fund these have to increasingly come from Green Bonds. India issued $6.11 billion in green bonds in 2021, One of the strongest year since green bonds were first issued in 2015. India’s green bond issuance is set to reach a new record in 2022. Budget promised that, “As a part of the government’s overall market borrowings in 2022-23, sovereign Green Bonds will be issued for mobilizing resources for green infrastructure. The proceeds will be deployed in public sector projects which help in reducing the carbon intensity of the economy.”

What you monitor, gets delivered. Even in Exports!

Measuring Export Preparedness using an Index is a great effort in right direction for India, and timing couldn’t have been better. In spite of the shattering COVID-19 second wave, FY 2021-22 has proven to be a smashing hit for India as it has been tactfully upping its game to expand its global export footprint. In Dec 2021, India’s figures of exported goods stood at USD 37.29 billion USD, hitting an all-time high for monthly data, whereas its merchandise exports hit almost USD 300 billion in Apr-Dec, higher by 48.85% year-on-year.

NITI Ayog released The Export Preparedness Index 2021 which is going to assist states and UTs to carve ambitious policies to further ensure a conducive export ecosystem. The Index ranks the states majorly on four main parameters or pillars- policy, business ecosystem, export ecosystem and export performance. This edition of Index has shown that most of the ‘Coastal States’ are the best performers with Gujarat being on the top, followed by Maharashtra, Karnataka, Tamil Nadu, Haryana, Punjab, Uttar Pradesh, Madhya Pradesh, Punjab, Andhra Pradesh and Telangana. Among union territories, Delhi topped is on the top, followed by Goa, Jammu and Kashmir and Chandigarh. In this way, EPI also promotes competitive federalism and a fair contest among States/UTs.

A plethora of new catalytic changes and initiatives have been rolled out like increasing the number of GI tagged items in the country, introduction of PLI scheme, EODB reforms, rationalisation of duties, clearing some pending tax refunds to exporters to improve their liquidity, and extension of interest subvention scheme to boost textile and engineering exports. Some other measures include tightening the Rules of Origin (RoO) norms, releasing of more than Rs. 56 crores against pending tax refunds of exporters, notifying Remissions of Duties and Taxes on Exported Products (RoDTEP) rates, Rebate of State and Central Levies and Taxes (RoSCTL) Schemes, and launch of Common Platform for Issuance of Certificates of Origin to facilitate trade and to increase FTA utilization by exporters. Besides, enormous efforts have also gone into promoting districts as export hubs by identifying products with export potential in each district. India is also aggressively negotiating FTAs with the EU, Australia, the UAE, the UK, Canada, Israel and the Gulf Cooperation Council, GCC.

Going forward, the strategies should also be on lines of how to emerge as an alternative to China as India is rightly placed to benefit from the vacuum that has been created by the US-China trade tussle aftermath, COVID-19 Pandemic, rising labour costs in China and other domestic and international factors. Thus, countries like India, which offer less complex business and investment framework and cheaper labour, are becoming an alternative to importing countries like Japan, South Korea and many other South-Asian nations, who are more than willing to strengthen the trade ties with India. Every step of India, thus must focus on expanding more and more business, domestic and overseas.

PLI Schemes for Boosting the Economy

Productivity is the operative word for leap in New India’s growth story. Lagging productivity is one obvious domain but adaptability is the biggest strength which can be utilised. Taking these two key parameters as target, Product Linked Incentive (PLI) schemes have worked well in the country.

PLI schemes are aimed at enhancing competitiveness and leveraging the untapped potential of Indian industries to fulfill the vision of an Atmanirbhar Bharat. Reopening the application window for Production Linked Incentive (PLI) scheme for White Goods has put the spotlight back on this very significant economic reform of the Government of India. The scheme has enormous potential to transform the manufacturing sector by encouraging domestic and local productions further boosting economic growth and amplifying exports. Keeping in view this vision, Finance Minister Nirmala Sitharaman announced an additional allocation of Rs 19,500 crore under the PLI scheme for manufacturing high-efficiency solar modules in her Union Budget 2022-23, besides committing financial support to farmers to take up agro-forestry.

Coming back to the recent initiative of the central government, in pursuance of the Prime Minister’s clarion call for ‘Atmanirbhar Bharat’ to bring manufacturing to the center stage and emphasize its significance in driving India’s growth and creating jobs, the PLI Scheme for White Goods for manufacturing of components and sub-assemblies of Air Conditioners (ACs) and LED Lights, which was approved by the Union Cabinet in April last year with an outlay of Rs 6,238 crore, was notified by the Department for Promotion of Industry and Internal Trade (DPIIT) on 16 April 2021. Now, applicants were given the flexibility to choose the gestation period either up to March 2022 or up to March 2023.

The Central government also wants the states to take advantage of the PLI scheme, thanks to their relatively low labour costs and huge demographic dividend. Since all states can’t be good in all sectors, hence niche and specific areas are being suggested to excel by taking comparative cost advantage in key areas. Government support is also helping and inspiring AC manufacturers to switch over to CFL-free cooling technology, shifting to clean energy in the automobiles sector and indigenous production of magnets and electric motors.

The PLI schemes, presently in place for 14 sectors, are being implemented by the concerned ministries and departments. The PLI schemes for various sectors are helping a lot in the post-Covid industrial and economic recovery. There appears to be positive industry feedback about these schemes as textile, automotive and white goods have started giving a good sign of growth.

MMLPs for Logistics Efficiency

“Contracts for implementation of Multimodal Logistics Parks at four locations through PPP mode will be awarded in 2022-23”, announced Union Budget 2022. This is going to provide a much needed solution towards reducing logistics costs in India. It is well documented that as a proportion of the total value of goods, logistics costs are almost double in India (around 14%) as compared to developed nations( around 7%), hence there is a lot of room for improvement. This underlines the need and power of Modern logistics mechanisms, which is a lot systematic and integrated. It offers a full range of one-stop service through using IT and industry expertise extensively to support the entire supply chain, from transport, to warehousing management, to order processing, to delivery and customer service.

Multi-Modal Logistics Parks or MMLPs, a key policy initiative of the Government of India, is being led by NHAI and the National Highways Logistics Management Ltd under Ministry of Road Transport and Highways (MoRTH). It may be defined as a freight-handling facility with a minimum area of 100 acres, with various modes of transport access, mechanized warehouses, specialized storage solutions (such as cold storage), facilities for mechanized material handling, bulk and break-bulk cargo terminal, etc. In 2017, the Government of India launched a program to develop 35 MMLPs across the country. This was followed by India securing rank 44 in the World Bank’s Logistics Performance Index (LPI) 2018, wherein it competed with 160 other countries.

India has been able to climb up in the Logistics Performance Index riding on massive capacity investments made since last 4-5 years, in transport, in major policy reforms like GST and measures supporting Ease of Doing Business. Mega projects like the ambitious Bharatmala, Sagarmala, UDAN, Dedicated Freight Corridors, and other relief measures in transportation mechanisms have largely contributed in churning the Logistics and supply chain cycles.

In India, each segment of logistics encounters tricky challenges which lead to low efficiency and high cost. In order to bring this cost down MMLPs can facilitate freight aggregation and distribution, integrated storage and warehousing, seamless multimodal freight transfer, tech support, and value-added freight services. MMLPs aim to improve India’s freight logistics sector by lowering overall freight costs and time, reducing warehousing costs, cutting vehicular pollution and congestion, improving the tracking of consignments and more.

Entrepreneurship: Open Secret

Critics don’t want any failures to happen in the success story of entrepreneurs and start-ups. They claim the stories of failures are well-hidden as if a state-run media doesn’t want the truth to come out. The risk-taking ability of an entrepreneur is squarely equated to a gambling nature and anyone succeeding is just a rare occurrence.

They are not ready to accept that overcoming failures is the only way to success, not giving up. Did we not learn even the most basic activities by overcoming failures or giving up after the first few attempts of walking, eating, or dressing? Rather, making systemic changes to reduce the chances of failure and positively dealing with such failures to fight back should be prioritised. As Prime Minister Narendra Modi outlined, “First, to liberate entrepreneurship, innovation from the web of government processes, bureaucratic silos. Second, creating an institutional mechanism to promote innovation & third, handholding of young innovators, youth enterprise.”. Indeed, Wealth Creators need to be respected by doomsday predictors.

A simple yet powerful framework of risk assessment is a 2×2 matrix of known, unknown and manageable, unmanageable. No one has any issues with ‘known, manageable’ and ‘unknown, unmanageable’ can’t be planned for. You bring in experts for ‘unknown, manageable’ and build a protection mechanism in the form of insurance, etc for ‘known, unmanageable’. This is precisely how an Entrepreneur operates when deciding on team expansion and bringing in investors, she is not a habitual gambler.

What helps with this process is continuous learning opportunities and India is proving to be on the right track. India has the third-largest ecosystem for Startups and is the fasted growing ecosystem for Unicorns. “India has more than 1,000 universities, over 11,000 stand-alone institutions, 42,000+ colleges & lakhs of schools…India is constantly learning & innovating…it’s ranking in Global Innovation Index has jumped from 81 in 2015 to 46 in 2021… In a bid to spread startup culture far and wide across the country, 16 January will now be celebrated as ‘National Startup Day’”, said Prime Minister Narendra Modi in interaction with more than 150 startups which had been divided into six working groups based on themes including Growing from Roots; Nudging the DNA; From Local to Global; Technology of Future; Building Champions in Manufacturing; and Sustainable Development.

With the advent of the digital age collecting and handling a large amount of data has become possible and cheap as well in recent years. This allows any motivated youngster to look around and spot opportunities to solve problems ailing the residents of his family, mohalla, village, town, district, state, country, or internationally. The rise of entrepreneurship has been a big equalizer too as 45% of startups in India are from smaller cities, and 45% of enterprises are run by women. India needs to trust and support its young, they are leading the country to a better future.

Indian Management under scanner

Indian ethos of “Vasudhaiva Kutumbakam” ( world is a family) and “Janani Janmabhumischa Svargadapi gariyasi” ( mother and motherland rank higher than heaven) complement rather than compete any leader’s world vision, whether it is business, politics, sociology, governance or any other domain. Vivekananda is said to have inspired JRD Tata to produce indigenously rather than going for easy imports. Further, he is said to have been the inspiration behind starting IIS (Indian Institute of Sciences) at Bangalore, the premiere research body in the country today. Modern Management Schools work with the concept of Globalisation as one fundamental tenet. Yet they are not upto the vision of Swamiji when he said, “Even in politics and sociology, problems that were only national twenty years ago can no more be solved on national grounds only. They are assuming huge proportions, gigantic shapes. They can only be solved when looked at, in the broader light of international rounds.”

In this background Yale University’s news publications that “Lack of managers keeps India’s businesses small” requires a careful look at their approach and understanding of the situation. It says, “The study, published in the American Economic Review, uses a novel model to compare the relationship between the efficiency of outside managers and firm growth in the United States and India. It shows that the lack of managerial delegation factors significantly into why businesses in India tend to stay small and has wider implications on the country’s economy, constraining innovation, economic growth, and per capita income.” It further says that “The researchers found that India’s economy suffers from “a lack of selection” — the process of creative destruction through which successful businesses expand while unproductive firms close or are swallowed up by competitors — allowing unproductive businesses to survive because successful businesses do not expand.“

Perhaps there is some merit in this argument if one looks at India which supports positive discrimination, but like reservation, these factors have complex historic as well as present day nuances. In his book “Cast as a social capital”, Finance Prof R. Vaidyanathan develops certain themes on ‘caste and entrepreneurship’ and argues that support comes from caste groups acting as social capital. Entrepreneurs hailing from particular castes like Gounders, Marwaris, Chettiars, etc. set up businesses with caste members as workers and funding source. Hence, capital constraints seem to be a more pressing issue than accepting unproductive managerial skills.

On the other hand, Indians are increasingly occupying top positions for most of the well run US Tech, Financial and other companies. It is said however that taking up American Citizenship is must for any foreigner before he or she is allowed to occupy top position in any of the US firms.

Perhaps this analysis would have focussed more on capital availability as a principal component to remain closer to reality in India. As the USA needs top brains from India and the rest of the world to keep the economy vibrant and growing, Indian businesses need capital to unshackle through various constraints and thrive globally. Saying this, with exponential increase in the number of Unicorns in India, clearly points out that an appropriate business environment is available now here under leadership of PM Modi and India is on its way to excellence.