After being in a state of lockdown for an entire month, with another week to go before the deadline of May 3 set by the government for lifting restrictions implemented to deal with the Covid-19 pandemic, India is in a relatively safe place to resume economic activity and should do so at the earliest, says Kiran Mazumdar-Shaw, executive chairperson, Biocon.
The head of the Bengaluru-based biopharmaceutical company stated that India had done well to contain the spread of the novel Coronavirus, which has afflicted 2.71 million people worldwide and resulted in 191,000 deaths; and the government should now focus on reviving the economy, which has been “decimated” due to the “unexpected event”.
“Just as we had a rapid response to the spread of the Covid-19 virus, we should now have a rapid response to economic revival as well,” Mazumdar-Shaw told Fortune India.
The business leader said that India had done well to quarantine citizens and prepare for the outbreak during the lockdown period by ramping up the number of tests done, ventilator production, getting industry to repurpose capacity to manufacture personal protective equipment and add hospital beds to treat patients. By May 3, India would be in a lockdown for a little over five weeks and that should provide a fair indication on “whether we have been successful in containing the spread of the virus”.
Mazumdar-Shaw said that it appeared that India was in control of the situation and the time was opportune to reopen the economy and quickly revive growth to mitigate the impact of massive job losses over the last few weeks. “I personally believe that India would be in an advantageous position if we open up the economy sooner than later since our economy can then revive much faster than many other countries who will take time to return to normalcy,” Mazumdar-Shaw stated. “We have a young demographic with 80% of the population below the age of 50 and most of the cases reported in the country are either mild symptoms or are asymptomatic.”
The world economy, estimated to be worth $90 trillion at the start of FY21, would have lost $5 trillion and moved into recession by the time the next fiscal starts. India’s GDP growth is expected to suffer as well with most domestic and international research agencies pegging growth in 2021 at between -0.6% to 2%.
Commenting on the specific measures that the government should take to revive the economy and protect livelihoods, Mazumdar-Shaw stated that the stimulus package announced for the poor strata of society should be extended to give a small amount of money–a “few thousands”–per month to bank account holders under the Pradhan Mantri Jan Dhan Yojana till the economy returns to normal.
“I also think there needs to be some amount of quantitative easing and we need to print more currency to bring more liquidity into the system, along with a stimulus package for small, medium and large industries,” Mazumdar-Shaw added, echoing what India Inc. has been asking for from the government over the last couple of weeks, but hasn’t got so far.
The Reserve Bank of India has taken some measures like facilitating a ₹1 lakh-crore liquidity window for banks to avail and reducing the reverse repo rate; and finance minister Nirmala Sitharaman had earlier announced a ₹1.7 lakh-crore relief package for the economically weak. But the government hasn’t announced any such measures for industry yet. A report released by the Federation of Indian Chambers of Commerce and Industry (FICCI) and Dhruva Advisors on April 21 had concluded that unless the government immediately intervenes with a large relief package, large sections of industry were at risk of permanent impairment.
Mazumdar-Shaw said that the government needs to announced some investment-like incentives tailored to the unique needs of different industries to facilitate the creation of new jobs.
A silver lining to the current crisis will also be the emergence of new competencies in the biotechnology, pharmaceutical and med-tech sectors, Mazumdar-Shaw said. “When it came to developing a vaccine or a test kit or a therapeutic drug, suddenly we have seen that there are a great number of companies who had huge capabilities, even though they were small in size,” she added. As these companies scale up and grow larger in size they will help save India save precious dollars through import substitution for such products.
With China under the scanner for its alleged role in suppressing the nature and extent of the pandemic when the outbreak began in Wuhan, it is also a good time for India to attract manufacturing investments into the country, Mazumdar-Shaw stated. A lot of governments around the world are offering financial incentives to their companies to scout for manufacturing opportunities outside China, to mitigate the risk of overdependence on one single country as far as the global supply chain is concerned.