Measures to revive India from Economic Depression

By Niranjan Hiranandani-Assocham President Amidst the bleak scenario of COVID-19 pandemic and the economic impact of the lockdown, there is a silver lining: if India supports its business organizations and ensures that they survive, the economy will bounce back. This in all probability, is the last chance to try and head off the recession, which is visible on the horizon.   “The solution stated by Dr. Niranjan Hiranandani, President, ASSOCHAM and NAREDCO says that,  “It is about managing debt and enhancing the availability of credit at lower rates of interest. The fine print includes allowing companies to merge and restructure debt; suspend credit ratings as also enable transmission of rate cuts from the Central Bank to Financial Institutions to the end-user,” he added.   The sequence, suggests Dr. Niranjan Hiranandani, starts with a one-time roll over or restructuring of debt; then we have the regulatory aspect, which would include putting on hold the Fiscal Responsibility & Budget Management (FRBM) Act for a period which may last for two years; a pause in inflation monitoring as also a pause in implementation of Basel norms for the banking sector. The third aspect is about enhancing liquidity, for which two major steps needed include transmission of rate cuts from the RBI to banks to end users as also release of funds by the government, PSUs and government organizations – including refunds. Last would be taxation related, Goods and Services Tax (GST) and local taxes need to be reduced for a period of six months, so that the impact of lower rate of taxation will spur increased spending.   Domestic demand in the Indian economy is more than enough to sustain GDP growth, the challenge is to empower business organizations to overcome the impending slide into economic depression. This bouquet of measures being speedily implemented constitutes the last opportunity of preventing the slide into depression, we still have this last chance.   The Indian economy, in recent years, has been going through a metamorphosis in the form of economic, finance al and taxation reforms, which impacted the GDP, with a direct effect on buyer sentiment across industries. As business organizations grappled with the changed scenario, and worked at solving the ‘challenges’ which the metamorphosis resulted in, the realization came in that the problems were not just industry-specific, and there was a need for consolidated solutions while taking a holistic view.   The challenges for business organizations moved from slowing down of sales through credit squeeze and last mile funding challenges, leading to debt issues. Even as Indian business organizations tried to deal with these, we have another addition to the list of challenges: the COVID-19 pandemic. This one is a killer, in more ways than one.   The lockdown is necessary to save lives, but it also strangles all economic activity. As a result, the economy will slide into something much worse than a recession, and the recovery will take too long, and will come at a high cost.  Job losses, insolvency and bankruptcy will result in irreparable damage to the Indian economy, the resulting NPAs will strangle the banking system. The resulting social chaos and unrest can lead to major problems, which we may not able to solve right away.   Support for India’s business organizations which ensures that they survive will ensure that the economy bounces back, we can head off the recession, which is visible on the horizon. As of today, we still have the opportunity, the chance. If we miss the bus this time around, the process of recovery from recession will take long – perhaps too long