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Government must step up spending to boost demand: India Inc


Business during the Covid-19 pandemic has taught India Inc many lessons, the most important being, how to be nimble to outmanoeuvre uncertainty. However, they are now looking to the government to step up spending to lift demand. During a panel discussion at the ET Global Business Summit, some of the CXOs shared their views on what needs to be done.
Edited excerpts:

ET: How tough were the initial days of the Covid-19 outbreak and what challenges did your sector go through?

Sangita Reddy, President – Ficci, and Joint Managing Director, Apollo Hospitals: None of us thought it would take so long. Our response was multi-dimensional. Adaptability, resilience, technology, innovation and most importantly, I think when the acceptance came, we came away with one thing — forget about the financial aspect, this is not about making money, it was about doing the right thing. Many industries stepped forward to do the right thing — to protect staff, be credible and maintain business.

Saugata Gupta, Managing Director and Chief Executive Officer, Marico: We started making a contingency plan before the lockdown. We decided that we will put people’s safety first and business next. We took care of the safety of the entire supply chain; that assurance led to each one of them becoming heroes and slowly getting the supply chain back. Today, we are trying to maximize safety while trying to maximize business.

Guenter Butschek, CEO and MD, Tata Motors: We put a team together, led by our chief risk manager, to set up a business continuity plan (BCP), which had to be holistic. It was important that the steps we took for the lockdown could be stopped, and we had a system in place for ramping up if the situation allowed. We were in the middle of the transition to meet emissions norms. The BCP covered the entire ecosystem, we put people first, business second. The lockdown effectively granted an opportunity to significantly accelerate the adoption of digital to different aspects of business.

Sunil Duggal, Group CEO, Vedanta: We have gone through a rollercoaster ride. Communication was the key; we told people and communities that we are there with you. The number of people reporting for operations was meagre — at 20%-30% in the beginning, but as time went by, we could maintain 80%-90% utilization of production capacity. We stepped up the use of some technology that was underutilized, and people became more receptive to it. We drew up new templates of cost parameters to protect margins. We have become smarter and sustainable.

Piyush Singh, Senior MD and Lead – India Market Unit, Accenture: Everyone is speaking of resilience and reinvention, add to that the relevance of your customer, because a massive social and economic change occurred. Customer preferences have either been forced to change or are going to now evolve at a faster pace. People who did not know how to use technology have done so, but now we have to reinvent ourselves by giving them the right tools and digitising the supply chain. This requires long term reprioritization of investments for accelerating digital. We need to be resilient and nimble because nobody knows what the new normal is.

ET: What is the path to recovery looking like, given the economic environment and measures taken by the government?

Sangita Reddy: This was a long and difficult lockdown. When you bring the economy into an almost medically induced coma, there is going to be a contraction of GDP. The government is carefully manoeuvring between the FRBM, fiscal deficit, and playing a very careful role between interest rates and inflation and growth. One good signal is that they have still kept some powder dry. Now, what we need is a stimulus to significantly ramp up demand, because the consumer sentiment is still extremely low and without that the economy will not bounce back. We’ve also lost 20 million jobs, there is fear of the unknown. The government needs to pump-prime the economy with more spending. Ficci has also recommended consumption vouchers. Ensure that the lifting of the lockdown is perfect, reverse isolate the vulnerable, continue to protect the healthcare system and the economy on all fronts, ensure committed schemes on the debt and restructuring packages, and then do a demand stimulation boost. Also, continue macroeconomic reforms, because the opportunity is definitely upon us.

Saugata Gupta: Compared to the last few years, when rural sales were sluggish, we are seeing a reasonably stable demand, especially if you see in two-wheelers, tractors, some of the essential FMCG products. In urban areas, the demand has shrunk as people have anxiety about going out due to Covid-19, and due to job losses and migration. Things are normalising a bit, but it will take some time. In the FMCG sector, if you take out the discretionary, we are more or less getting back on track to pre-Covid-19 level but that itself is going down. We may see significant growth only by April-June next year.

Guenter Butschek: FY18-19 for the automotive industry was the so-called record year, when we thought there is effectively no limit. We learned about the limits shortly after that; the taxation was the same, but all of a sudden, we faced the pivot of subdued demand. There was also structural change in customer behaviour from ownership model to the shared mobility concept, and this, combined with the overall economic decrease was a difficult period.

The volume of newly registered vehicles will be close to that in FY2010-2011. The problem with that is this industry stands for 8% of the GDP and for 49% of the manufacturing GDP, and for 50 million jobs provided in India. We were growing and were expected to be the third-largest market globally and an automotive hub. If the automotive industry is an economic engine, do you want to run slow or does it need a complete revamp of the taxation scheme? The initial cost of acquisition has gone up; we need to bundle the overall package to make the product more affordable.

Sunil Duggal: Demand is back to, say, about 70-80% of the normal demand. The question is whether it will stay. The government has the responsibility to kickstart the economy; they should not worry about inflation but look at more spending. They should pump in more money into the economy. The government has to take a call, even if they have to borrow money. The whole cycle will become better when somebody pumps in money into infrastructure. The government is trying to do a lot, they have been brave in bringing these reforms.

Piyush Singh: We need long-term stability. The consumers need stability and handholding. The industry needs some long-term policy assurance. But this time has taught us we need to be nimble about instability and you have to invest to become nimble. It’s a drain of capital in order to utilise capital better. Where will the government get the money from? They will have to trade off strategic priorities. It’s not a question of short-term fiscal stimulus only, it’s a long-term strategic investment that you’re making in healthcare. So, you’ll have to think about strategic priorities.





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