‘If There Is One Time When You Have The Reason To Print Money, It Is Now’

Indian economy, which was already on downward spiral for last six consecutive quarters, could register the lowest growth in the post-reform period in 2020-21. India’s leading economist Omkar Goswami in a conversation with BW Businessworld’s Manish Kumar Jha, talks about Indian economy, the impact of lockdown and the measures to revive MSMEs. Edited Excerpts:

The impact of coronavirus on the economy is humongous and the list is comprehensive, as no sector has been spared. What is your estimation of losses? What could be the sector wise economic package/relief to keep the economy running?

I had the benefit of listening to three of the finest Indian economists today — young economists. I won’t mention their names but I listened to their presentations in great detail. I interacted with them and discussed about each and every sector. How they were estimating and what would happen in FY20-21. The general consensus and this is what you can put down, is that we would see a drop in the GDP growth from 5 per cent in FY20 to something minus 0.5 per cent growth in FY20-21. In other words, there would be a drop in the growth rate from 5 per cent to minus 5 per cent, which is a dip in the growth rate of about 5 and a half   per cent points from this year. 

It would be the second-worst drop in the GDP growth since 1979-80 and 1980-81, where there was a massive decline in the growth. We are looking at this virtually, as no activity happened in the first quarter because the month May is shutdown, April was completely shutdown. May will be shutdown till 17th and then the lifting will be in such gradual phases that the first quarter will see virtually no activity. 

The second quarter will see some activity but very little because the biggest problem is going to be to get a lot of labourers back to work, especially for the Micro, Small and Medium Enterprises (MSMEs). It is not going to be easy to get them back to work. Maybe in the third and fourth quarters, you will see some growth, that is the second half of the fiscal year. But the general sense overall is that we would probably see a GDP growth of about minus 5.5 per cent, which by the way if that has to happen it would still be better than most of the other countries. 

The Indian economy is expected to languish in the 1-2 per cent falling in the next year. What according to you will be the immediate measures, and second the long-term measures?

The first thing would be to get the people back to work. I mean that firstly what is essential is to get MSMEs working capital and must get their workers back, to start business back again. You see the larger firms will lose business for a quarter, but they are okay. However, the huge number of micro, small and medium enterprises in India is the largest-employment earner in the manufacturing and services sector. They have to get back in work because whatever savings they have had is completely wiped out. So it is important for banks, mainly public sector banks to lend money to these people, which everyone is saying but nothing has been done yet. The government must announce, the government of India owns over 60 per cent of credit in the public sector banks. 

MSMEs sector is almost crippled and that adds to  more than 11 crores workers,  including migrating workers at large? What is the way forward?

At least for 6 months, public sector banks which are owned by the government, should provide a special credit facility to MSMEs with a 15 per cent backstop in case of a default. I believe that MSMEs are at a far lower default risk than larger industries. So put a 15 per cent backstop, which is backstopped in the Budget, by the Central Government. The money should be given to MSMEs at least for 2 rounds of their working capital. 

There are two constraints for MSMEs to get back to work. One is finance, which can be solved by banks. The other is, how to get the labours back to work. Again, there is a straightforward solution. Think of the best way the labours can come back to work. That should be getting them on train. Indian Railways is outstanding and 50 routes can be identified to get the labours onboard. For example, if you want the labours back in Surat, most of them are from Odisha. You must have trains twice a week going to the points, where the labourers are and then to where they work. Maximum 50 such trainlines will suffice, no tickets, only they will be sanitised when they enter the train, RPS and then they can go to where they work. The Labour has to come back. Normal buses won’t work. Trains are the answer. MSMEs will get first and second round. 

Basically, the government does not want to put in money and this is stupid at this time. If there is one time when you have the reason to print money, it is now. They are reluctant to not doing it. This is the worst situation, we have ever faced, and this is the time when we need to think out-of-the-box. 

Do you see the silver lining in the agriculture sector, which accounts for almost 14 per cent of our GDP and what do you suggest to the government in terms of policy response? 

I wouldn’t worry about agriculture. The kharif crops will be safe.