The government has begun a journey of fiscal inclusion by formalizing the economy through: direct benefit transfer; tackling corruption; transaction reporting; tax intelligence strengthening; tax linkage and demonetization. Examining the other factors affecting the slowing of credit, Mr. Viswanathan opined that this is due to: the collapse of the non-banking finance sector; PSU banks not well geared to accelerate retail credit; introduction of accountability in banks; introduction of credit scoring system; and reduction in unorganized credit.
Explaining what is needed in the short term, Mr. Viswanathan said that, individuals should have more disposable income; rural incomes should rise; GST rates to be lowered selectively; government to increase infrastructure spending; re-introduce investment incentives; aggressively drive exports and provide confidence on policy stability. While long term course corrections should focus on privatization; position India for a China plus one strategy; promote tourism aggressively; encourage labour intensive exports; revamp education and organize overseas placement to countries such as middle Europe, Japan and SE Asia.
While speaking on the recovery path, Mr. Viswanathan stated that social sector reforms in employment generation; health care delivery; quality of education and social security are of great importance and no economy can grow without attention to this sector. He said that the government has taken many measures in this connection, some of which include: pumping liquidity into the lending mechanism; bank weddings; rollback of FII surcharge; DA increase for government employees; release of government payments; implement major infrastructure projects and rate cuts. He added that the long term fundamentals remain intact and is an advantage that India has.
Dwelling on what companies should do, Mr. Viswanathan said that businesses should remind ourselves on the long term fundamentals and stay positive; manage cash well; cut back on working capital; cut back on discretionary spend; improve internal efficiencies; be lean and agile; continue to focus on growth strategies; negotiate for better rates; talent acquisition and development and that MNC units in India should promote India as the next manufacturing hub. More importantly, he added that companies should not: cut back on product development; allow talent drain; let short term setbacks derail long term thinking; freeze long term capex plans; lose connect with customer and market and not pull out of the country.
In conclusion, he said that this slowdown is different from the earlier ones and that it is a mix of cyclical, structural and episodical factors. The impact he said is widespread with many key industries contracting, some decelerating and few still doing better. He went on to say that the economy can get back to over 6% growth in the next two quarters, but that is not enough for India. A range of short term and long term measures are needed to put the economy into a higher trajectory as the long term fundamentals are intact. Giving the last punch Mr. Viswanathan said that as companies, “We need to think simultaneously about surviving in the short term and thriving in the long term.” The meeting ended with a Q&A session and Mr. Rajan Aiyer thanking Mr. Viswanathan for this very detailed presentation on the state of the economy.
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