A new economic growth model needed
Domestic investors have been continuously investing and put in almost Rs.90,000 crores back in the stock markets in the past few months though, creating a lot of enthusiasm and optimism which is leading to boom, according to Dr Ajit Ranade, president and chief economist at Aditya @Birla Group
“This is really amazing,” he told the Webinar organized by The Associated Chambers of Commerce and Industry of India (@ASSOCHAM) “Economic Outlook: Post Pandemic”.
However, foreign investors have pulled out almost US$16 billion from the Indian markets as the April-June quarter saw 15% contraction in the economic growth, added Ranade.
But there would be a sharper recovery to the tune of at least 6% in the financial year 2022 due to several factors, he believes.
“The agriculture sector is doing very well and is expected to grow at least to the tune of 3% to 4%. The minimum support price (MSP) program by the government was a huge hit not only in good states like Punjab and Haryana but also in other smaller states. This will give some momentum in the next year,” he said.
The rural employment guarantee program was a huge success and saw the numbers almost doubling, he noted. “Also, the #MGNREGA program was a huge achievement.”
“The Fiscal stimulus package 2.0 will play a big role in shaping up the things to come and help in reviving the growth momentum,” he hoped.
But the industry leaders would need to take the lead and chalk out a three-year plan and present it to the government, added Dr Rathin Roy, Director, National Institute of #Public #Finance and #Policy, and a former member of the Prime Minister’s Economic Advisory Council.
“The role of the government would be limited and it’s the industry that would need to take the lead. Let it work on the reverse,” he stressed.
Despite the negativity seen earlier on the stock exchanges, it took very little time for it to bounce back, shared Dr Tirthankar Patnaik, the chief economist at the National Stock Exchange (NSE).
“From 20 March, the stock markets started going up, that is because the global and the Indian stock markets look at the short-term nature of the coronavirus,” he believes.
“The NPAs are likely to be in the tune of 12% to 15%,” said Dr Patnaik.
However, the markets do not see this continuing in the long run. Also, for the FY22, the earnings have not yet been downgraded and expect the earnings to catch up, he said.
There is a lot of transformation going on in the country at the moment, observed Dr Shekhar Shah, Director-General of the National Council of Applied Economic Research (NCAER) stated that
“#Digitalisation is going to be the key factor. In the last four months, most employees while working from homes have managed to get around 80-90% of productivity, think about the saving it would have on the external factors. This would propel a huge leap in certain critical areas,” he said.
He also informed the webinar that it is time to reset our thinking on health policies.
“Due to the pandemic, the fault lines in the society have been revealed. While we have been concentrating too much on the rural areas, it is also time to think as much for the urban safety nets as well. While we think about the cure, we need to think much more about the prevention,” advised Dr Shah.
There is a need to prioritize the relief, recovery and reform structure and deal with the issues in a sequence, according to Dr Suman Bery, Global Fellow Asia Program of the Woodrow Wilson International Center for Scholars, Washington DC.
“The Atmanirbhar Bharat, global linkages and search for a new growth model are the need of the hour. The medical, humanitarian, economic, and political differences need to be resolved.
“The framework of government’s focus should include supply side, demand side, and terms of trade,” said Dr Bery.
Upasna Bhardwaj, Senior Economist & Head Economic Research Kotak Mahindra Bank explained that there is a risk-aversion in the willingness to lend at present.
“The big corporates still have enough funds but it is the smaller corporates that are suffering the most. Banks are reluctant to lend them. The pandemic has increased a lot of risk in the financial market,” she said.
The opening of agriculture to the private investment will significantly contribute to growth, in the near future, added Dr Charan Singh, Chairman of ASSOCHAM’s National Council for Banking and Non-Executive Chairman of Punjab & Sindh Bank.
“We are way ahead than most other countries. The government needs to rethink the macro-economic policy and reshape the market.
“There is a need to rethink the fiscal policies that ensure health, food, and education. Education is the leading sector that is suffering largely in this lockdown and it should be digitized. The budget on the education sector needs to be revisited,” elaborated Singh.
The government due to its various financial announcements has adequately taken care of the supply side of the economics and owing to its various policy announcements set the path for long term reforms, according to Dr Niranjan Hiranandani, National President, ASSOCHAM and Co-founder of the Hiranandani Group.
“What we also need at this hour is land and labor reforms. The power costs in certain states are very high. Companies are moving out of Maharashtra to Gujarat to get the advantage of lower power bills,” he said.
Out of the textile units which moved out of China, almost 23 went to Vietnam and only two came to India, according to Hiranandani.
“We need to have a comprehensive policy to address these issues,” he reminded the government and business community. #banks #finance #loans #economy #shares #markets /fiinews.com
