To mitigate the impact of the pandemic, the second wave of which has seen an unprecedented loss of lives and livelihood, Uday Kotak, CII president and a leading industry voice, has called for strong fiscal support measures from the government — from income support to individuals to an additional emergency credit line guarantee scheme (ECLGS) for the stressed MSME sector.
Kotak, MD of Kotak Mahindra Bank, also emphasised the “need to be very cautious” about opening up the economy even after June, calling it a “very difficult dilemma” for states, and saying a lot depends on the progress made on the vaccination front.
“I believe the time has come for the state to get more active and I would strongly support fiscal support coming in for protecting livelihood and minimum requirements of individuals and households. I am quite comfortable if we go and spend from the fisc and expand the position. There is absolutely no issue as I see it and that’s what we need to do… Time may have come for the government to be looking at an additional ECLGS scheme, including increasing the size from Rs 3 lakh crore to Rs 4-5 lakh crore,” said Kotak.
On May 13 last year, Union Finance Minister Nirmala Sitharaman had announced Rs 3 lakh crore collateral-free automatic loans for businesses, including MSMEs, at concessional rates.
Calling for fiscal support to the lower end of the economy, be it in the form of direct benefit transfer or ECLGS scheme for small and medium businesses, Kotak said, “At CII, we support fiscal support to the lower end of the economy… We need to do what it takes. We will figure out how we manage our books down the road but right now, we have to ensure that the economy remains in reasonable shape in the next six to nine months,” he said.
Even as some state governments consider relaxing lockdowns amid a dip in cases, Kotak said he feels the “need to be very cautious on that front” and that opening up even after June is a “very difficult dilemma” that state administrations and individuals face.
Stating that the answer to that is linked to vaccination, he said, “We are probably three to four months away from being fully convinced that a large part of the population is vaccinated or has become Covid-proof…. If we can vaccinate a significant number of the population by September or so, then the question is hanging in (for) the interim period of three months… I think I would do it in a very careful, calibrated manner, rather than rushing in to open up,” said Kotak, adding that the country must be prepared for a third wave of the infection.
Earlier, in April, as states started announcing weekend lockdowns or curfews, Union Finance Minister Nirmala Sitharaman had said, “Even with the second wave, we are very clear that we are not going in for lockdowns in a big way. We don’t want to totally arrest the economy.”
On the much more debilitating second wave, Kotak pointed to India declaring victory “too early” and being caught unawares by the new variant of Covid-19.
“We, as a nation and each one of us, lowered our guard. By January, we declared victory and we started going out, holding meetings, saw gathering of crowds, social activity and whole host of things across the nation. We probably declared victory a little early.”
Incidentally, even as the Centre decided not to announce a nationwide lockdown, the CII took a decision in the first week of May, urging the industry to voluntarily curb non-essential economic activities over the next two weeks in a bid to break the chain of transmission.
Kotak said the call was based on feedback from members of the CII across the country. He pointed to the fact that in his company itself, the number of lives lost between April and May was 2.5 to 3 times higher than in the whole of last year.
“On our side, our call was very simple. The employee balance sheet is more important than financial balance sheet… As far as Central and state governments are concerned, it is up to them to have taken a call… and so, it really depends on them how they saw the situation across their different parts,” he said.
Kotak took over as CII president on June 2 last year. His term comes to an end on May 31, with T V Narendran, MD, Tata Steel taking over on June 1.
