Do you think the prime minister has set the tone for path breaking reforms going forward? Could his independence day speech unleash the animal spirits?
Over the past year, the prime minister and the government have talked about Atmanirbhar India, especially after the outbreak of Covid-19. On independence day he talked about Atmanirbhar all around. It is about being Atmanirbhar whether it is going to be done at the border or to the farmers. One simple change done in the last year has been that farmers produce can now be sold all over the country, rather than being restricted where they could buy and sell. Linking it digitally can completely change farming in India. Then there is the agricultural fund.
Infrastructure is another big area and a job multiplier. The Prime Minister also talked about make in India, make for the world. As he said, how long are we going to import finished goods instead of making those finished goods and exporting those all over the world?
Look at the whole digital health mission. This is something that the government has been working on for some time and I am glad that the prime minister has announced it today. A national digital health ID for all, putting all our health records together can have a profound impact in the coming years on how health services are made available to the average Indian, quality, reach, cost across and there are so many other things that he has talked about.
We have a very well rounded plan and concrete ideas. As we know, God is always in the execution but these are clearly achievable areas and it is for us together with the government to go ahead and achieve these areas.
Should one now focus on moving up the value chain, try to focus on aspects where the productivity and the digitalisation would be higher rather than focussing on pockets like foot wears, sports wears and even low ticket to entry level items?
You can break up what needs to be done in three areas. One, it is really the last 20 years where the benefits of a very large domestic consumption economy have become evident and they are more evident in certain sectors than others, probably driven by need.
We are the largest manufacturers of two-wheelers in the world, and we make the right quality at the right price that sells all over the world. Why has this happened? It is because we had a very large consumption base here and the price point and the need of the product suited our requirements. Our money power has been in the hands of the middle class Indian for the last 15 years. So you will see those sectors which have built significant strength and capability in the last 15-20 years, did it here first and then ventured overseas.
Of course, some sectors like IT services naturally ventured overseas first because that is where the demand was but again leveraging the fact that we had low cost but high quality engineers who could do coding work fairly simply. So this is the first part — leveraging what got built in India in the last 15 years. Our opportunity now is to do it in a far more planned way.
As a country and with our government we need to get together to say where is the supply-demand mismatch? Where are the political opportunities to produce and service for the world and identify those 20-25-30 sectors.
But then comes the third part of it and that is the role of the government. There was always this whole argument over the last 30 years that let us internally liberalise before we externally liberalise. Now those times have gone. We have internally liberalised a lot over the years but we externally liberalised earlier. Now the role of the government is that if we have to build an Atmanirbhar economy and a set of businesses, then what is the roadmap over the next five-seven-eight-ten years because this is not short term?
This will require significant alignment of government policies, of the government opening up further on ease of doing business, of private sector putting in significant amounts of money either importing innovation or building innovation and creating a roadmap of capability of capacity for all that produce. So many Chinese companies can underprice us so easily. If that happens in three years time, will we give up on atmanirbhar India? I hope not. The private sector needs to be confident that the government is with it on this for the next 10 years and onwards and fully back them in the identified sectors. But the private sector has to build up competitiveness. They should not take it as protection. They should build up innovation, efficiency, scale and then we will see this happening.
Where are we now for the moment as it looks like the worst of the Covid crisis is behind us? Are we currently far away from growth or do you think growth has started?
We are very clearly in the area of revival. We have started seeing some growth from June but let us also be cautious about that growth and realise that it could be pent-up demand. So I would not try to run ahead of ourselves at this point of time but we clearly are in the revival stage.
We have to ensure that as far as re-growing our economy is concerned, states have to take on the responsibility to coordinate with the centre and ensure that business stays open. We focus on health. We have new medical protocols in place and we treat those that are serious but we have to open up India and we have to keep it open.
The government had to come out with the guarantee scheme to make sure that the SMEs survive and banks, NBFCs lend to these SMEs. You have seen a lot of debate around the loan moratorium as well. Given all this, how is the big supposed to get bigger?
It depends on what you mean by big. If it is a big problem, we clearly do not want it getting bigger. A combination of factors from what the government has already done and what the financial services industry — banks, NBFCs — have done to beef up their own capabilities. Look at the speed. The Rs 3 lakh crore line to MSMEs that the government announced, has been there for just a few months and I believe already Rs 1,30,000 crore has been committed and almost Rs 90,000 crore is disbursed. This is the speed with which banking and NBFCs have moved ahead.
But yes, at the end of the day we are an organisation or a set of businesses that lend Rs 100 and if we get back 102m we make Rs 2. If we do not get that from one borrower, we lose the entire Rs 100. So credit is always going to be fundamentally important to a lender. The equally important issue is at times like this, you just freeze over and shut shop, I do not think that is what banks and NBFCs are doing. They are re-evaluating customers. They are re-evaluating risk. They are trying to see how they can support their existing customers further by giving them additional loans. They are looking at new opportunities in low risk spaces and as we see the economy growing, they are there to support that business as well.
While everybody is suffering, there are still certain sectors like hospitality, travel, leisure which are hurting a lot more than others and something needs to be done there. On the other hand, there are sectors the government has talked of – -infrastructure, housing, auto — that can have a multiplier effect on building the economy and that is where whether it is banks, NBFCs are all ready to lend when they see growth happening over there.
So something more needs to be done to ensure that we are protecting those that really have been hurt in addition to smaller businesses. We are also enabling those that can grow or help us out of the current problem.