Home Interview It will take long for economy to revive: Dhawan

It will take long for economy to revive: Dhawan

DEHRADUN, 9 May: Leading industrialist and founding Chairman of Uttarakhand Confederation of Indian Industry (CII), VK Dhawan is a name to reckon in Uttarakhand. His portfolio of products and services is very wide and he is a very well respected name in industry, having business interests in several countries. He feels that Corona pandemic has adversely affected the Indian and global economy in more ways than is being generally seen and that it would take long to get over this crisis. He recommends a balanced approach between the lockdown restrictions and opening of all trading and business activities.
Garhwal Post spoke to him on matters related to economic crisis resulting due to Corona pandemic. Some excerpts: 
What is your general opinion in respect of the current pandemic led situation particularly in respect of the economy?
Corona pandemic has led to worldwide lockdown for an extended period of time and a resultant economic crisis. It will be a major challenge for countries like India to make their economies bounce back early. Take the example of Middle East for instance, because of the closure of the industry and the fall in economy of these countries, the three four month long period of lockdown will result in taking more than 2 years to make up if everything else starts normalising early. Exports to Middle East are badly affected. Unfortunately, higher petrol cost for the Indian people and companies in particularly will also be a factor behind this. While the world over, the petrol prices have crashed, the government has increased the prices and as a result, input costs are going up for the industry at this hour of crisis! Throughout the world, power and fuel costs have gone down for the industry, but here they continue to be high. I have my business interests in US and Singapore too. While most countries like US, several European countries and Singapore have waived the rents, and interest on loans and some cases the loans themselves. In US, at present the salaries of employees of the companies are being paid by the government and though, they are in form of loans to the companies, they are most likely to be converted into subsidies. Our company already received money for payment of rents and salaries on the third day of the decision in this respect. In Singapore, 75 percent of the salaries during the period of lockdown have been received by our company from the government in form of aid till April. In contrast, In India, merely some instalments have been deferred till first week of June but the liability remains and the interest continues to accrue. Mere deferment of instalments is merely an interim relaxation which will not help the companies in the long run. Exporters are facing bigger crisis. For example, with airline operations badly affected due to travel restrictions, they have increased the freights up to four times. Just to give an example, it was costing Rs 200 kg for inbound and outbound cargo in respect of US, and Rs 100 in respect of UAE. Now freights in respect of UAE itself have gone up to Rs 600 per kg. These factors have made the exports unviable and uncompetitive. 
How to come out of the lockdown period towards revival of the economy?
I think that it will take long time for streamlining of broken manufacturing chain. Though, industries have been allowed to operate now, the chain of transport remains broken. Raw materials are not coming for the manufacturing to start in full swing even for the exports. Many of the raw materials come from zones that are currently red. So transportation is badly affected and the broken chain is yet to be restored. 
I don’t intend to blame the government for this, as petrol is a major source of revenue for the government. The gold, which is the other major import of the country does not yield much revenue for the government as custom duties are low. For this reason, petrol prices remained high even before the Corona pandemic when the petrol prices had crashed from USD 70 per barrel to nearly USD 20 per barrel. I therefore don’t see petrol becoming cheaper in the country for some time to come. 
I believe that the government is in dilemma and in some confusion which is quite natural under the given circumstances. The government is consulting all leading industry organisations like CII, FICCI, Exports Council, Jewellers Council and even the organisations that represent MSMEs. Many suggestions have been given to the government for it to provide a stimulus package. In fact several rounds of discussions have taken place. However, the bigger question is where is the money with the government to really implement all the relevant suggestions? 
Do you expect some stimulus packages in near future from the government?
Stimulus packages are expected. They need to come. I have heard several leading economists like Raghuram Rajan, Abhishek Banerjee and Montek Singh Ahluwalia and all of them were of opinion that money must be brought in market in order to reactivate the economy. The government has held at least four rounds of meetings with the industry representatives in particular about stimulus package to MSMEs. Again the bigger question is where is the money? It is a very dicey situation. Unless enough money comes into market, the salaries are not paid and the demand also remains low which is bound in the long run to affect the manufacturing. At the moment, companies don’t have money to pay salaries and no employer likes to retrench old staff but when they are not getting any money from anywhere and can’t sustain for long if their fixed costs and other expenditures remain same without matching revenue and income. At the moment the economy is in reverse sprial. 
What sort of steps from the govt do you recommend in order to kick-start the economy?
The solution is in striking a precarious balance between things but it is not easy. No one has any clue so far what that balance is and how to achieve it. If the economy is fully opened, then the pandemic spread will rise and if the lockdown continues, the country will not be able to sustain economically even to be able to manage the control of Corona.  We have already undergone more than a month and half of the lockdown and still, the number of Corona positive cases continues to grow. If our per day rise in number is seen, we are among the top five or six countries where the numbers are growing every day. So there has to be a right kind of balance. The question is of streamlining the entire chain of any particular sector. For example the government allowed opening of Brick kilns and mining but the construction remained banned! What is the use of opening brick kilns or mining if there is no construction activity to create demand for bricks or sand, etc. Again I must say that the government is trying its best to normalise and even to strike a balance, but it is a rough road ahead! No one has a clear cut solution to offer. Yes, collective efforts are must from everyone in the government, trade and industry in order to boost the economy. 
What about the steps taken by the Uttarakhand Government?
Not much has been done for the industry by the state government so far. Some states have in fact taken a lead in announcing several measures and reliefs for the industry and the trade as the shopkeepers are among the worst hits. Some meetings have happened as reported by Garhwal Post also. But some concrete steps are must for example in respect of power costs and other reliefs.