The gross domestic product (GDP) data for the January-March quarter, which showed that the economic growth slowed down to 3.1 per cent, may be an indicative of the impact the COVID-19 pandemic and subsequent lockdown has had on the economy. With the lockdown having been in place for more than 60 days now, and likely to continue in some form or the other till June 30, some businesses have suffered insurmountable losses.
A large number of MSMEs and corporates have had to either shut down operations for the time being or let go of employees. Some such as the DCM Shriram Group, which has a diverse portfolio of business, have seen the impact soften due to its spread over a wide range, the company’s chairman & senior managing director Ajay Shriram told AASHISH ARYAN. Edited excerpts:
How has the COVID-19 pandemic and the subsequent lockdown, affected the operations of your company and its personnel?
The COVID pandemic can very well be here for the next 3-6 months, and we will have to be cautious for a long time to come. So that is one side of it. On the other side, so if we take the agriculture businesses, they continued working. We have four sugar factories, they have been operating throughout the lockdown period. The state government was very helpful in helping factories get their inputs because the biggest problem with the lockdown from 24th of March was that trucks were not able to move.
So our sugar factories ran throughout the lockdown period. And similarly our distilleries. We have two distilleries attached to our sugar factories, they also continued running throughout the period without any stoppage at all.
However, if we take our other businesses, let us say our Kota complex, we have over there our urea fertilisers, we have caustic soda chlorine chemicals, PVC plastics, and power generation and cement. For the first time ever, we had actually had a 100 per cent close down of the complex after 24th of March, which was a very disturbing experience. But considering the severity, we had no choice. But I am happy to say that around the first week of April, our urea plant started working and within a week, 10 days, it came back to full capacity. Then in the middle of April, our chemicals business, which had also closed down completely, also started and our plastic business also started in Kota. Gradually, we started the operations with about 30 per cent capacity in mid-April, and by now have inched up to over 60 per cent capacity in our operations of chemicals, plastics, and our power generation requirements for the business.
What would be the three basic aspects on which government can support your company and the industry in these times?
I think ultimately, the fear or the reality is that the entire economy size will come down. And one of the very important factors which will keep it moving up and give an impetus to the industry to start is going to be consumption.
So one is, we would urge the government through the RBI and the banks to help the MSMEs and the other corporates to come back to business operations as soon as possible, because that is only way.
Fortunately, agriculture has moved, its not got disrupted as adversely. Yes, there are pockets where the prices are very low, which is happening because of logistics, etc. But at the same time, at least the movement is there.
We will have to be realistic to see how we can get economy back on track. There are economies where the costs of energy and inputs are much lower than in India. We have requested the government that to give a boost to Indian industry, relook at the import levels and increase them. So that domestic industry gets support for at least the next six months. That is one way in which we can then increase employment, production across the board.
The third, I would say, that even among the issues that the Finance Minister has talked about, a large section was on agriculture. We do feel agriculture is a very crucial part of India’s economy considering the numbers involved.
They have given Rs 2,000 under Kisan (PM-KISAN) scheme etc. We would urge that they do a little more to give liquidity in the hands of the farmers. Because they are the ones who are in villages who have a very difficult time if the product does not move.
We also support removal of at least 7-8 commodities from the Essential Commodities Act list. These policy changes are very important to be implemented. You know there is no point having it on paper without implementation. Ultimately, it has to be a collective approach. It cannot be mandated, it won’t work.
What are your expectations on the performance of your company and the industry in the current financial year?
I think, for the economy, if one sees in totality, there are very mixed messages coming in, whether it is going to be a zero percent GDP growth or -2 per cent GDP growth.
These are all guesstimates people are making based on various formula and experiences. There is no doubt that during the first two months, which is almost over, there has been tremendous stress on industry.
We are seeing things are moving up more in some sectors. I think it will take at least 6-8 months before we can come back to any balance of economic activity. The impact of that is going to be lower turnover, profitability, tax collection by the government, revenue on Goods and Services Tax. So it will have an impact on India’s economy.
The good thing is that India’s economy is not that export oriented as other countries like say China. Though we must improve exports and this is an opportunity to capitalise on that. The impact is going to be there. We will have to wait for six months to see how it pans out.
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