Agriculture a ray of hope for economy amid Covid chaos

If India plans to replace China as the most preferred investment destination, then the government needs to attract more investments in the country. "I totally believe that with the collective efforts of all the stakeholders, India is on its right path in its target of becoming a five trillion economy really soon.," says Sanjay Aggarwal, president, PHD Chamber of Commerce and Industry in an exclusive interaction with Bizz Buzz

The country's exports of agricultural commodities in the H1 of 2020-21 surged by 43.4 per cent compared to the last year. In the October-December quarter (Q3), India's GDP grew by 0.4 per cent after contracting for the two consecutive quarters. These numbers are a clear indication of the gradual recovery ahead

For sectors like the micro, small and medium enterprises (MSMEs), liquidity was a major concern even before the pandemic; the lockdown just aggravated the situation. The Reserve Bank of India took proactive steps like a sharp reduction in the key interest rates to boost the liquidity during Civid crisis

What has been the overall impact of the lockdown, due to the pandemic, on the industry?

The total lockdown had an adverse impact on several sectors. The economy witnessed its worst contraction ever, minus 24.4 per cent (revised estimates) in the April-June 2020 quarter. The sectors which created maximum job opportunities witnessed huge contraction- 50 per cent in construction, 47 per cent in trade, hotels, and other services, 36 per cent in manufacturing and 18 per cent in mining. The only ray of hope in the whole exercise was the agriculture sector which even during that period delivered a positive three per cent growth figure.

The central government had announced a string of economic reforms during the lockdown, did these reforms play a pivotal role in aiding the industry recover from the impact of the pandemic?

After the initial total lockdown however, the Centre progressively announced several proactive measures to minimize the negative impact of the lockdown on the economy. The central government announced one of the largest fiscal stimulus packages in seven instalments to the tune of around Rs 30 lakh crore since the announcement of the lockdown. The government also initiated a series of reforms and incentives in several key sectors like agriculture, defence manufacturing, and space research. By opening up these sectors, the government paved the way for attracting investments in these sectors and also creating additional job opportunities.

The government also announced a three-lakh crore Emergency Credit Line Guarantee Scheme for MSMEs which was later also extended to 27 stressed sectors. Besides, fiscal stimulus, the government also announced tax rebates for growth-critical sectors, such as housing, to ensure a spill-over effect with an objective to boost demand-led growth.

In a bid to boost India's manufacturing capabilities and enhancing exports, the central government also introduced the Production Linked Incentive (PLI) scheme worth up to Rs 1.97 lakh crore for 13 key sectors. This will result in long-term benefits for the economy.

How were the businesses supported in regard to liquidity condition?

For sectors like the micro, small and medium enterprises (MSMEs), liquidity was a major concern even before the pandemic; the lockdown just aggravated the situation.

The Reserve Bank of India took proactive steps like a sharp reduction in the key interest rates to boost the liquidity during the pandemic to help the stressed sectors gain access to low-cost credit. Other than offering a loan moratorium for a period of six months, the government also announced a one-time loan restructuring to ensure easier repayment terms on outstanding loans, the central government also temporarily suspended the Insolvency and Bankruptcy Code for the duration of the pandemic thus taking all defaults of the Covid period outside its purview.

What was the impact of economic stimulus package along with various reform measures undertaken by the Centre on the growth of economy?

The initiatives did have a positive impact on the economy. The second quarter backed by government reforms and a good monsoon witnessed a much reduced 7.3 per cent contraction (revised estimates) due to sharp recovery from several sectors. This was one of the best recoveries and beats the global average of 12.4 per cent. The reforms announced in the agriculture sector too helped the country reap fruits. The country's exports of agricultural commodities in the H1 of 2020-21 surged by 43.4 per cent compared to the last year. In the October-December quarter (Q3), India's GDP grew by 0.4 per cent after contracting for the two consecutive quarters. These numbers are a clear indication of the gradual recovery ahead. The economic survey had indicated that the country is expected to grow at a rate of 11 per cent for the financial year 2021-22 due to the above-mentioned reforms.

Has the PM's vision of building an Aatmanirbhar Bharat helped local manufacturers build up strong businesses?

The central government's initiatives like the Aatmanirbhar Bharat or self-reliant India or the 'Make in India' programmes have encouraged a lot of local manufacturers to grow locally and at the same time be competitive to make a mark globally by elevating their standards.

What has been the impact of this year's Union Budget in uplifting the industry amidst the pandemic?

In the Union Budget, the Finance Minister continued with its objective of announcing an initiative to boost demand in sectors that would have a trickledown effect. To reduce the cost of logistics and make the manufacturing sector more competitive, the government has increased its focus on infrastructure projects for ensuring better connectivity through the use of roads and railways. In this year's budget, the government has earmarked a sum of Rs 5.5 lakh crore as capital expenditure on infrastructure development. This was a hike of 34.5 per cent over last year's budgetary allocation of Rs 4.12 lakh crores.

The central government in the past had identified both social and economic infrastructure projects that need to be completed over a period of the next five years and have earmarked a sum of more than 100 lakh crores for the same.

With an intention to set up a robust healthcare infrastructure, the government has increased the healthcare budget by 137 per cent to around Rs 2.23 lakh crores this year. India has also launched the world's largest Covid-19 vaccination drive with a goal of vaccinating 300 million people included in priority groups.

Is the Indian economy on the right path to attain the objective of $5 trillion economy?

If India plans to replace China as the most preferred investment destination, then the government needs to attract more investments into the country. I totally believe that with the collective efforts of all the stakeholders, India is on its right path in its target of becoming a $5 trillion economy really soon.