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BW Businessworld

It’s Actually The Economy That’s In Quarantine

Inspite of the fact that COVID is still not done fully !! So let’s not underestimate its further impact on health issues or the economy or the need for emergency funds that the states and centre might need to provide for.

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With creative liberty, the popular song titled “The Actor” from the band “MLTR” (with all credits to them), can be reworded as follows :

“I am not an economist. Am not a star.I don’t even have my own wealth.But am hoping so much that you (economy) stay.That you will love me (market) anyway”.

The Indian economy is in a state of utter confusion ! Different English alphabets are being ascribed to its perceived-recovery in the economic graph. Different logic are being given and narrative applied, to “prove that the shape is correct”. Until the recovery actual happens and credible-data showcases the visible results, it will remain as “perceived”. Sadly, such is the state of public belief in the various narratives about the economy and its actual-state.

Citizens - both employed & entrepreneurs - both active in the market or those who just lost their livelihood - can vouch that economy is in poor shape and in dire stress. No amount of comparison with other global economies would offer solace to those suffering. For that matter, no data would offer consolation to those hurting in this economy.

Showcasing different kinds of fancy PowerPoint slides with nice pictographics is for a specific section of the population. Jargons, slogans and “other viral news” are pastime of a few more. It’s the worry about surviving yet another day or another month or the year ahead, that’s the biggest worry for most others.
The big elephant
In short, let’s address the ‘elephant in the room’ - actual economic situation. For that matter, one of the toughest jobs today in the market and probably not with enough sense of gratitude from the market for that role, is that of managing the GoI finances. It’s like a large multi-generational joint family household with huge outstanding debt; with great expectations from the family (many of whom have lost their jobs) to outperform their roles and get more income, to expect to sell some of family assets (which are in bad shape) at a nice valuation. And with some of the siblings expecting the patriarch to pay their dues on time, when the family knows that its resources are constrained.

Tough decisions on what to sell at what (market driven) pricing, without any punitive outcome is essential. And to do all of the above with a smile, and also to take along many detractors or cynics or critics or even their own family & friends, is a harsh reality.

It’s fair to say that the COVID-induced stress in the economy has taken a high socio-economic toll ; and will continue to, for next few quarters. But it’s also data-led & experience-vouched that almost every corporate honcho / banker would accept in an off-line personal chat, like many of us have heard over the past so many quarters, that the Indian economy has been in a massive slowdown. And now we have the shroud called COVID to cover it with. We can’t “shrug it away”, pun deeply & sadly intended !
 Many of the businesses in sectors in travel & tourism, retail, hospitality, SME, MSME are probably impaired for a long time to come; the demand for them can’t be predicted easily. The sectors like realty, non-banks like few others are in far precarious condition. While there is the sense that “strong players will become stronger & bigger”, it still would create hiccups in the overall system and few industries might end up in the control of just few stakeholders, including foreign investors.

Harsh reality. Soft words. Cuts no ice.

Shattered dreams. Broken aspirations. Beaten economy. Low self-confidence. Pitiable condition. Not just across EWS / Low Income Groups, but also in middle / upper middle class. These are the indicators of the slump across sectors. While there are many good samaritans who have risen above their expected behaviour and helped many others, it’s not possible to expect that all around, without building on strong economic foundation.

It’s good to see the cost-cutting measures of the GoI - while some of them might be brushed aside as “optics” (like no stationery printing of annual calendars etc), it still showcases that someone is noting these, with attention-to-minute-details. It would be useful to shower similar attention and efforts, in reviving the economy. Tough policy decisions have to be tried, even if some of them fail. After all, this Covid-catalysed-economic-slowdown is of larger magnitude and is unprecedented.

While many economists have various ideas and opposing views, let’s cut out the politics around their views. It is in those coloured lens (of philosophical difference hue) that we kill the idea with the intent of hurting the messenger ! And let’s have not (yet another) undue debate or trolls about “I told so”, “GDP contraction is less than what we were scared about” (does not mean we should not be alarmed now !).. Narratives seem to change, to suit the rhetoric.

The credit flow & the economic impact to the formal sector is tracked and measured. It will be worrisome to assume that credit flow to informal sector is happening normally or would happen at the same level as the formal sector. We should celebrate those who create jobs as well. That means we should work with our industry / corporate houses who have showcased their resilience by investing large capital and set up shop; and with our tech & digital entrepreneurs who have created jobs with differently-skilled and talented individuals and those who will continue to do so.

“Feedback” : Selection-bias is the starting trouble

Apart from robust data, a strong feedback mechanism is always useful to understand the sentiments. Our industry bodies / associations have been sharing their feedback with the policy shapers and makers. The design of such a feedback is that only those connected or networked get to share feedback.

One of the ideas that may bring home-truth could be this: Can’t those in position put some of the government databases to a feedback-test? ; Using databases like GST / ITR, generate stratified sample of about 5,000 individuals / companies and call them up directly, to talk to them about their pain areas, issues, faults or feedback about the govt packages, suggestions etc.

Despite & Inspite, there’s no respite

Despite the RBI efforts to infuse additional liquidity in the markets.

Despite RBI move to have debt restructuring ideas to avoid large scale defaults.

Despite the GoI fiscal stimulus package whose actual impact and cash infusion is still in debate; and the all-out efforts to kickstart the economy.

Despite all the gloomy projections of various credit rating agencies and global advisories on our GDP projections.

Inspite of the fact that COVID is still not done fully !! So let’s not underestimate its further impact on health issues or the economy or the need for emergency funds that the states and centre might need to provide for. And more importantly when the public precautions of face mask, gloves, sanitisers have slowly been abandoned in many parts of the country, despite penalties that exist.

Can’t we simply accept that there is a situation and it’s serious; as cinematically shown like “Houston, we have a problem” and deal with it calmly and with maturity of taking inputs from all wise and experienced ? The family that works together in a crisis and hear each other’s ideas, despite their differences, have a higher probability of wading out of a crisis, as there would be cohesion and buy-in.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Srinath Sridharan

The author is Independent Markets Commentator

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