Updated: June 21, 2021 6:59:23 am
As the second Covid wave is tapering off and the economy is opening up, TV Narendran, CII president and Tata Steel MD, told Sandeep Singh that we should be prudent about opening up and if you open up too fast, there is a risk to it. He added vaccination is key to economic revival and growth and, if we don’t do it quickly, we run the risk of derailing the recovery. Edited excerpts:
As the economy and markets are opening up, what are the key aspects to focus on?
First and foremost is vaccination and that’s the starting point. If we don’t do that quickly, we run the risk of derailing the recovery. If we do that well, then growth will get supported. So, in the short to medium term, the focus should be on vaccination and getting growth back because if we grow at 9-9.5 per cent, which we should, then you are on track for $5 trillion economy by 2025.
Does India’s progress on vaccination give you the desired comfort?
The first thing we have to see is to get the supply going because if that is not there, then whatever you do, it doesn’t really matter. I think the producers are ramping up. The second is to get vaccinations up. India was doing around 3 million and then came down to 1.5 million, and we are now back to 3 million a day. At CII, we are saying that it needs to go to about 7 million, if we have to reach where we want to get. Third is, people should get atleast one dose as that itself reduces the chance and, ideally yes, have to get two doses. The issue is that while most people in urban India are ready to get vaccinated, there is a lot of hesitancy in rural areas. In a couple of months, we may reach a situation where there are more vaccines than people willing to get vaccinated. And, so, we have to work on that. CII is also working to drive a campaign. You can’t have a situation where a large part of the population is not vaccinated in 3-4 months.
How do you see business activity and demand revival after the second wave? Will it be slower this time?
I don’t see reason for it to be slower. About 2-3 weeks back, we were concerned about the impact of second wave on rural economy, but over the last week or 10 days, we have seen that it has not been impacted as bad as we had feared. If that’s the case, I see no reason why the recovery should not be faster. Last time, the rural economy led the recovery and the monsoons were good and, this year too, the monsoon is expected to be 30 per cent higher as of now.
Secondly, for the auto sector, it picked up momentum after September and we are hoping that the momentum will get picked up and recovery will be as fast as last time. Thirdly, the global response was not there last year, but this time it is there and most major economies are forecasting good recovery and that should help exporters. On the flip side, there are concerns on oil price, higher input cost, among others. But we are optimistic and believe that 9.5 per cent growth is possible in FY22.
Do you think because of the fear, people are saving more and reluctant in spending? How do you see it having an impact on recovery ?
It is a factor and people have spent more on medical expenses than they planned to and I would say that the second wave was more a humanitarian crisis than an economic one. So, there is a dent on sentiment. The first wave was more economic and the humanitarian issue was because of the migrant crisis. That is the reason why it is so important to have vaccination going strong.
In terms of the fact that there could be a consumption or demand shock, we have asked for more stimulus and more money on the table. Infrastructure push is already there and we have also said we must consider for 2-3 per cent reduction in GST just to push consumption of consumer products. We feel there is a need to support hospitality and travel industries, as they employ a lot of people as the confidence needs to come back. When people have jobs, they have confidence to spend.
CII has called for Rs 3 lakh crore in fiscal stimulus. Can you take us through your assessment?
The fiscal deficit is around 6.8 per cent and, in our view, 8 per cent deficit is okay and that’s how 1.3 per cent or Rs 3 lakh crore number comes from and which should be material enough. On monetary policy, there is only so much that you can do and with inflation picking up there is a thought on interest rates too. While India has had consumption-led growth, infrastructure growth planned by the government is very important as it not only drives demand but also leads to job creation in more remote parts of country. Infrastructure investment also reduces the cost of doing business.
While we need to support the retail and hospitality sector, we also need to look at people below the poverty line. Over the last one year, a lot of people have slipped a notch below where they were. We must see if we can raise MGNREGA spend to last year’s level of over Rs 1.1 lakh crore.
We think it should come sooner and we will work with the government to see how to move on this. Am sure the government is as much concerned and they may have a different view on how to achieve this. So, we will have that conversation with them.
What’s your view on opening up?
We should be prudent about opening and not open unnecessary contact events. Open up in a manner that factories run, supply chain is moving. We have seen in UK and other places, if you open up too fast the risk is coming up.
Do you think the rising commodity price is hurting the MSMEs? What can be done for them?
I think with MSMEs, the biggest issue they have is liquidity and in areas that they work with the government, they have fixed price contract. We need to see how we can help them on that risk. Can we have some sort of indexed pricing. At CII, we will reflect upon it and look at ways to reduce this risk for MSMEs who may not have that much of headroom to deal with this kind of volatility. Since the volatility is inevitable we have to look at good practices that some countries follow to reduce the risk for MSMEs.
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