Like every senior executive of India Inc, Harsh Pati Singhania, Vice Chairman and Managing Director of JK Papers, and President of All India Management Association, is keenly awaiting the upcoming Union Budget 2021-22.
Singhania has also been the President of industry body FICCI in the past. In the last role especially, he worked closely with policymakers and hence concedes that Finance Minister Nirmala Sitharaman in presenting a post-pandemic budget.
Speaking exclusively to Moneycontrol, Singhania says that while the Centre’s economic response to the pandemic has been satisfactory on the supply and welfare side, more needs to be done on the demand side.
In his budget wishlist, Singhania lists out infrastructure push, support for smaller businesses and informal sector, an urban jobs programme, push for divestment, and a focus on growth rather than fiscal targets. Excerpts:
How do you think the government has handled the economic response to the pandemic in 2020?
Let us understand this was a pandemic, which induced as a collateral an economic crisis. Now, this is not unique to India, it has happened with each and every country. Nobody knew what would happen. So you couldn’t have thought out a package response. And based on how fast things were moving along, the government came out with several measures and the finance minister made several announcements over a course of a few months of various responses. So if I look at it overall, I think the focus of the government’s response was more directed towards sort of the bottom of the pyramid and facilitating the urban and rural poor, which is actually right. However, the only difference between what the government of India did, and perhaps some other countries have done is really on the demand side.
I would say the response was measured and calibrated. And I would also say that it was very well supported by the Reserve Bank of India’s initiatives. So actually, if you look at the response in totality, there was a great measure of what we would call a monetary response. Whether it was a guarantee for MSMEs, easing of credit, a whole lot of other easing measures. So it was the Reserve Bank’s response on the monetary side. On the fiscal side, it was, as I said, a supply thing. So I think overall, the response was good. However, to be frank, I think it left many people wanting more from the demand side of the equation. We want money in the hands of the consumers, whether they are business consumers, or individuals because that will bring back the engines of growth for the supply side.
What are the three things that you would really like the Finance Minister to announce in the budget?
I think the Finance Minister has an extremely, extremely tough job. For this budget in particular. No budget making is easy, but this one is unique and particularly challenging, because she has to revive the economy, and at the same time find resources to spend. On one hand, she would like to spend money, but where is she going to get the money to spend it? So it is going to be a very big challenge. And therefore the budget will have to balance out both the revival side as well as the resources side.
I would only urge the Finance Minister and the other policymakers that we lay down the issue of fiscal deficit and be bold to say that it doesn’t matter if we are going to have a higher fiscal deficit. It doesn’t matter if there are other risks involved with that higher fiscal deficit. We but we want to go back on the path of growth and therefore demand revival is really the key.
Then I would say, coming up of some kind of an urban job guarantee scheme. When the pandemic broke out and the government went on, there was a migration that happened from the open cities to the rural areas. We had MGNREGA which was almost fully utilised, the demand was very great and that became a very big support at that time for people who are gone. Now, what we are realising perhaps consciously is the importance of the urban informal sector.
Then, there is a need for an infrastructure push. I saw recent statistics and saw encouraging figures in terms of railway spending, some other government agencies spending. And there has also been a fair amount of spending, which has happened from the PSUs. So, when we talk of infra push or spending there with infra, it means there are many other industries associated. So, if you’re going to build roads and railway lines, we’re talking about steel demand for a whole lot of other industries, and then that gets into their own ancillaries.
A fourth one would be a special emphasis on small businesses and MSMEs. And by small businesses, I don’t mean only manufacturing, take smaller enterprises, somebody who’s running a small eatery or a shop. That is very important, because that is where a lot of the damage is, and frankly, a lot of that is not visible, because a lot of that is not captured in the formal economic data.
If I can expand also beyond that, the government should very aggressively push on the disinvestment programs, on privatisation, or even market offerings. Today, the stock market is booming. So you take advantage of that.
Do you think MSME and the rural sector need more support, or industry and manufacturing, in order to create jobs?
On the priority, I would again vote more in terms of the smaller MSME. And I want to include the informal sector, as MSME by connotation still means an organised manufacturing. Now, whether it’s a workshop repairing cars, or a foundry, or a larger enterprise, producing something. I want to include the informal sector. A large number of jobs are created in the informal sector. And if they get their incomes, they will become the consumers. So, I would say if we had to prioritise between, I suppose that is where we would have to be there. Having said so, of course, the larger businesses will have to get some relief or support. Because at the end of the day, they are very large contributors to the GDP.
Do you see a sharp recovery in 2021 or a slow and gradual one?
It’s a complete alphabet soup out there. Everybody has been talking about U, V, K. The real thing is that I think it will be a more gradual kind of recovery. However, it may be a little see-saw. We saw a burst of pent-up demand and festive spending recently. So, if let’s say in the budget, the government comes out with certain incentives, you might see a spike towards that area where it is directed. But till the whole demand cycle kicks in the whole process a steady sustained recovery. So I would think that is going to be more gradual recovery.
There are many factors. On the positive side, there is inoculation of vaccination that has now started globally. But the new strains of the virus mean those economies which had opened have gone into shutdown mode, many countries in Europe, including the UK have announced more lockdowns. So, our efforts towards exports, and a whole lot of other things are also uncertain.
So, I would think that the recovery is more likely to be gradual and also, it is going to be sector-specific. Some sectors are seeing a good patch. In fact, some sectors are probably seeing as good as it was. But there are others which are negative. Take the paper industry, for example – with the closure of education, with a whole lot of companies working from home, and a lot of other things, the industry has taken a hit. Now, for the moment, they will come back. So, all of that has an impact on the consumption of paper. And similarly, there may be many other businesses.
