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Talking To

Published on: June 17, 2020, 10:26 a.m.
"We have to prioritise our spending"
  • Photo credit: Sanjay Borade

By Daksesh Parikh. Executive Editor, Business India

What is your view on the Atma Nirbhar initiative of the government?

A I genuinely believe it is an excellent initiative but it must be construed in the right context. For CII and for me, Atma Nirbhar Bharat is a self-reliant India which is competitive and engaged with the world. Not an India which is protective or protectionist but a competitive India which engages with the world with confidence. It means building a strong foundation of India, around healthcare, education, skills, knowledge, expertise and dealing with nature to ensure sustainability.

Q What is the agenda you have set for CII during your term?

A We have done two or three variations. A few days ago, CII celebrated its 125-year annual function where the PM was the chief guest. Post the event we took cues from some of the messages and had a detailed discussion with the CII team. We drafted a broad agenda for the year. Thereafter we went to the National Council with this broad agenda which saw participation from 180 CEOs. Thereafter, we finalised the agenda. This agenda revolved around building India for a new world. Lives, livelihood and of course, growth. We laid down 10 points for the future of India. Interestingly, though I may be president for a year, the agenda which we are laying down for CII is not just for the here and now. That is important but the agenda for the medium and long-term perspective is for building India. Much of the 10-point agenda is not just for the here and now.

Q Can the government spend its way out of the current crisis?

A We are not a reserve currency. We need to do what it takes in some areas. We then have to prioritise our spending on what is important. The decision to spend can be prioritised in three categories; the first is urgent and important; the second should be only important and the third only urgent. Protecting lives and livelihood is urgent and important. Prioritising healthcare and building a good healthcare system is urgent and important. Education and mother nature are important. Trying to protect industries which are not competitive and not future-ready is urgent but not important. It is for the consumer to decide. If a consumer decides to buy goods digitally and not go to malls, it may affect the viability of the mall business. The government has to think very hard if it wants to protect malls or spend more on healthcare. India spending 1.3 per cent of its GDP on healthcare is unacceptable. We have to reprioritise our choices and get it right. Healthcare is more important. Germany has done much better than other countries because it had invested heavily in building a good healthcare system. We have to build a good healthcare system. Certain industries in the post-COVID world will have to change.

  • My approach to the whole situation about growth and fiscal deficit is to think about it as the market does

Q Do you foresee a lot of consolidation happening across Industries? Even before COVID, many companies were struggling and COVID would have been the last straw?

A We have to keep in mind two famous authors, Darwin and Malthus. However much we as humans fight it, nature has a way of ensuring the survival of the fittest. We, as a society owe to people the assurance that they can become fit – whether they can become fit or not is the question. I genuinely believe It is one of those times. People who are not fit have to work overtime to become fit. I am talking both personally and for business. This is Planet Earth’s way of saying – this time I am taking the call: shape up or shape out.

Q There is enough liquidity in the markets. Do you think it is time for industries to look at markets, rather than the government, for funding their needs?

A Markets offer significant opportunities for businesses and industries to raise risk capital. Many people are asking who is right, what the economy is saying or what the markets are saying. I am saying, I am not concerned. If markets are giving me risk capital, is it better to take risk capital rather than depend on the government? Markets are weighing the risk. Take capital and become future-ready. Don’t depend on the government to bail you out. The government is already taking huge pains with its balance sheet. Consolidated fiscal deficit is already mounting from 6.5 to 11.5 per cent.

Q Do you think public-private partnerships will work? Government always seems to think it is the big brother and there is no real partnership.

A I would like to believe that the earnestness of the Government, especially the way I see it this time, is real. I will take it at face value. If the government is saying it will get out of non-strategic assets, I will look at it. Yes, it is bad timing but the government has demonstrated that it desires to get out of BPCL and Air India – in a very public very transparent manner.

Q Does it make sense to divest assets in any market in a bid to lower deficit, instead of waiting for a better value in more conducive times?

A My approach to the whole situation about growth and fiscal deficit is to think about it as the market does. What are the markets telling us? We know markets are saying that earnings for this year will be a washout for 2020-21. We are looking at earnings for the year 2020-2022. And making a decision based on the earnings for the medium and longer-term and not the short term. The same thing applies when we take a look at government policies and take decisions – whether as an industry or society as a whole. Of course, we have to take care of the here and now. Don’t waste resources in the short term. It is time to take decisive steps, to build India for the medium term.

  • If markets are giving me risk capital, is it better to take risk capital rather than depend on the government?

Q What can be done to increase employment? Will the focus on SMEs and MNREGAs provide employment?

A I firmly believe that the guarantees they have given to SMEs and the Rs3,00,000 crore earmarked for MNTREGAs will work. Money to SMEs will also flow in the next few weeks. One of our points on the agenda has dealt with this issue. I believe that India needs to create a safety net even as the industry needs to think about it. How is society going to create it? Is it the government going to fund it? What is the way towards it?  These are some of the questions that require to be debated and answered. We have to create some form of social security for labour. Many of labourers migrated because they were concerned about being infected. There was no job security and they preferred to risk everything and go back to their villages where they felt they would be safer. They will certainly not be coming back in a hurry. Unless the corporates provide some security to them, making it worthwhile for them to return. Provide security of jobs, housing, otherwise it will be difficult to get them back. The government and industry will have to look at decongestion in cities and see if jobs can be created closer to smaller towns. Broadband connectivity across India will open up opportunities for them. Education will also play a key part in ensuring jobs in a digital India.

Q What do you think about banks. We are extolling banks to lend across the board, knowing fully well that three years down the line we will see more NPAs.

A In my career as a banker, I had to make decisions based on prudence and proper underwriting. No one is telling them to lend indiscreetly. Even today it is not the government that is pushing banks to give credit to anybody. However, I admit, we have a challenge. There will be a need for risk capital and there will be some amount of problems; 4-5 per cent in the banking system may go bad. There is a need to raise capital. The government has to make a difficult choice – whether it should give more money to PSU banks, all the PSU banks. The private sector will also require capital, so will NBFCs. The raw material for all is risk capital. Irrespective of valuation I feel it is necessary for them to go out and raise capital.

Q Is the lower credit outflow of the banking system due to lower risk appetite?

A Activity has collapsed and the need for money has gone down. Good corporates do not need money as of now. It is not about risk appetite but the need for money. For those who need money banks are saying is my money is safe. It is a two-way issue. PM said we have to instill confidence and revive the animal spirit to get back growth and I think it will happen.

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