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Recovery is ‘two-speed’; stressed sectors, people need a safety net: Uday Kotak at eAdda

Speaking at the Express e-Adda organised by The Indian Express, Kotak said sectors including consumer goods, e-commerce, IT, digital, telecom, and pharmaceuticals were doing much better, while aviation, tourism, hospitality, and some general services were facing challenges.

By: ENS Economic Bureau | New Delhi |
Updated: October 30, 2020 8:19:26 am
Uday Kotak at the Adda

The Covid-19 pandemic has brought about a deep structural change in the economy, leading to a “two-speed” recovery, where some sectors are benefitting immensely while others face enormous challenges and need support, Uday Kotak, MD & CEO, Kotak Mahindra Bank, and President, Confederation of Indian Industry (CII), said on Thursday.

Speaking at the Express e-Adda organised by The Indian Express, Kotak said sectors including consumer goods, e-commerce, IT, digital, telecom, and pharmaceuticals were doing much better, while aviation, tourism, hospitality, and some general services were facing challenges.

“We are seeing a two-speed world as we go forward. What we have to be clear about is the organised sector in general is in a better position than the unorganised sector,” Kotak said. Stressed sectors and people who were facing challenges should be offered financial support and safety nets, he said.

The government should use the funds that are left out of the Rs 3 lakh crore MSME lending scheme to support stressed sectors like aviation and real estate, Kotak said. Banks have sanctioned 62.52 per cent of the targeted Rs 3 lakh crore under the Emergency Credit Line Guarantee Scheme for stressed MSMEs as of October 5.

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“This is as deep and dramatic a change as probably the industrial revolution was. It really changed the way humanity worked. It did lead to a lot of displacement but also led to a lot of opportunities. At the same time, we have to find a safety net for the people who will be left out of this,” Kotak said. Many people in the country will require training, re-skilling and financial support, he said.

Kotak said the “broader financial sector is in good shape” to support the recovery process that is taking hold, even though there may be pockets of pain, especially in the Non Banking Financial Companies (NBFCs) space.

In response to questions on risk aversion among banks, he noted that even corporate borrowers were risk averse, prepaying loans and not fully using existing credit lines. Within the financial sector, he said, banks would need to utilise technology at a much bigger scale – with technology moving from being an enabler of business to something that drives business in the post-Covid era.


Kotak was in conversation with Anant Goenka, Executive Director, The Indian Express, and P Vaidyanathan Iyer, Executive Editor-National Affairs, The Indian Express.

Also Read | Uday Kotak gets 1-year extension on IL&FS board

In response to a query on strong companies gaining market share after the pandemic, Kotak argued that typically at such turning points in history, the classic Darwinian principle of “survival of the fittest” works, normally leading to “the strong becoming stronger”.


However, he cautioned that “even the so-called successes better be on their toes…because the speed of disruption is going to be much faster in sector after sector.”

This is also reflected in rising stock market valuations, which usually reflect the strong organised business, while many unorganised, informal, and smaller businesses that are shrinking may not be captured in the benchmark stock indices. Very low interest rates globally, and a massive injection of liquidity have led to a premium for risk assets like stocks, Kotak said.

“The amount of money which has been thrown into the economy is mind boggling. In 2008, (the US Fed Chairman) Ben Bernanke talked about helicopter full of money. This time around it’s massive air cargo, multiple jets full of money, which have been offloaded into the economy, which is keeping short term interest rates close to zero (globally), pushing investors towards risk assets,” he said.

Compared to the situation in May, in October there is confidence in many parts of the economy – the construction equipment sector, tractor industry, passenger cars sales, and residential housing sector are making a gradual comeback due to low rates, higher discounts, availability of ready to move in homes, and stamp duty being cut in states like Maharashtra, he said.

Also Read | Deepak Parekh, Uday Kotak push for one-time restructuring of corporate loans


To questions on the need for government stimulus and lower Goods and Service Tax (GST) rates, Kotak said there is a challenge for the government on the fiscal side, even though India’s external financial balance sheet is robust and resilient with high foreign exchanges reserves and a current account surplus.

The Express Adda is a series of informal interactions organised by The Indian Express Group, featuring those at the centre of change.


Union External Affairs Minister S Jaishankar, Union Minister for Road Transport and Highways and MSMEs Nitin Gadkari, Union Minister for Education Ramesh Pokhriyal, AIIMS Director Dr Randeep Guleria, and former Chief Economic Advisor Arvind Subramanian have been guests at the E-Adda this year, as these discussions moved online during the pandemic.

Among prominent guests at past editions of Express Adda have been Finance Minister Nirmala Sitharaman, Nobel laureates Abhijit Banerjee and Esther Duflo, Chief Economic Advisor Krishnamurthy Subramanian, cancer specialist and Pulitzer Prize-winning author Dr Siddhartha Mukherjee, and cricketer Cheteshwar Pujara.

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First published on: 30-10-2020 at 04:45:15 am

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