With the nationwide lockdown extended, the fallout from the suspension of nearly all economic activities is expected to be massive, as experts are predicting a significant slump in India’s growth for the current fiscal. In an interview with The Indian Express, M S Unnikrishnan, MD and CEO of Pune-headquartered Thermax Limited, spoke about how the present pandemic is going to effect the economy, and shared suggestions for the way forward
What, according to you, will be the effect of the lockdown on the Indian economy? What will be its effect say six months from now?
What we have to understand is that we are facing a situation where it is life versus economy. The focus is now on saving lives and then the economy. The government has understood that the present lockdown has to continue for some time, which would mean very strong enforcement for the people and to see if industries can function in some way.
Coming to the question of its effect on Indian economy, it will be huge. Last year, India was a $3 trillion economy. Other than agriculture, all other sectors will be hit. In the first quarter, even if we reopen manufacturing partly, it will not be able to function more than 25 per cent during the lockdown. Similar would be the case with construction while services might function around 30-40 per cent.
Overall, in the first quarter, Indian economy will lose out 50 per cent of its value addition. It is a humongous amount of loss to the economy but we are willing to pay the price for the country. In case there is no further lockdown, mathematical modelling shows that this disease can infect crores of Indians and the number of deaths can be very high… which we can ill afford.
This losses are obviously going to trigger a crisis in the economy. Do you see large-scale job losses as companies grapple with demand loss? Already, there are reports of lay-offs in the IT sector. Can’t we have measures to tackle this?
The government has already issued an advisory asking companies not to lay off people during this period. Good companies are already following this. The MSME sector, which is the largest employment generator after agriculture, requires help. The government has already announced additional working capital for them and also companies will be given interest-free loans to pay salaries for three months.
We have to remember it is not the intention of the government to convert a good balance sheet into red. All companies will be facing the stress … the work of the companies is to convince its employees that this is inevitable, for white collar workers it might mean giving up on luxuries and being content with the basics. For those who already only have the basics, there has to be some sort of government help.
What is your opinion about the projected 1-2 per cent growth rate post the pandemic?
I do not subscribe to the projections and there are reasons for it. In case of GDP, usually in the Indian economy, the second and fourth quarters are bigger than the first and third quarters. If a major loss is happening in the first quarter, then in the next three or four quarters the recessionary trends due to corornavirus will be evident. My take is that the Indian economy will see a degrowth of 8-10 per cent in the current year and we should be willing to live with that.
This does not mean all companies in the country are going to be in red. Imagine Thermax’s top end is to come down by 10-15 per cent in the current year… I am not going to be in the red. What will be impacted in the coming year is that new projects other than infra-oriented ones, I have doubts about them… But we should not be scared about these numbers. Please remember profitability of India Inc, whether service or manufacturing, will come down just for a year. India Inc will have to learn to live with this with a nationalistic fervour. We have to wade through this and we can get through the difficulties.
What opportunities do you see for India in a post-Covid world? Also, will work from home become the new normal then?
India is sitting on a $500 billion foreign exchange reserve, so even after a flight of foreign investors from the country, our currency did not tank. We have resilience to counter this as well as enough food grains in our stock. Also, we have a pool of sufficient medical professionals to manage the spread of a certain nature.
If we are able to withstand this and go through it for a year, India can emerge as a major gainer in the post-Covid world. There would be opportunities for the country, but we will miss them if we do things in a short-sighted manner.
I feel that work from home will be taken up in a higher way than is happening now. It is going to improve the overall environment and the happiness quotient will go up.