Vaccination key to bring India's economy back on recovery track

India's economic growth in the current financial year 2021-22 may suffer a setback due to the ongoing second wave of the Covid-19 pandemic but industry experts are optimistic that sectors such as agriculture will beat Covid blues and perform well in the Kharif and Rabi seasons. Deepak Sood, Secretary General, The Associated Chambers of Commerce and Industry of India (Assocham), in an exclusive interview with Bizz Buzz elaborated on the challenges that rural economy and unorganised sector are facing in the current financial year

Second Covid wave is taking heavy toll on the rural economy, how do you think the agricultural sector will fare in this quarter and also this financial year?

When you broadly compare last wave and this wave, last year everything was shut down, at the stroke of hammer. Yet there was enough procurement, there was sowing that took place. Therefore, enough business came up. Government have taken lot of footsteps to ensure rural economy continues. The rural economy is robust with financing schemes, inputs from central government, from fiscal and monetary side and also because of the avid sense of the agriculture. This time the rural areas are hit but logistic chains have not stopped, supply chains have not broken, processed food, food industry, everything is in order.

So, you may find a small dip during the first quarter possibly because of the disease that has gone through into rural parts. Kharif and Rabi crop will be much more than what we had in the past. What will be more important is not just the cereals but horticulture, flowers and non-farm prospects that one has to look at.

Should the central government come out with a relief package for agriculture, fisheries and other related sectors?

When we talk about non-agricultural items not just fisheries (farming), I think we can add dairy and poultry as well. We need more schemes to ensure that we are tuned to health standards, quality standards. Investment in technology is required in farming sector to improve output yield and productivity. This is the time to provide agricultural relief package so that rural people, businesses can get a boost. As all this produce is not just consumed within the country but are also exported, local level entrepreneurs need our help. These are the areas where the government should give emphasis. If you remember the budget announcements, the sector was given enough. But it can be given more support. There are quite a few things that are already being done through National Dairy Development Board and NABARD.

Manufacturing sector is seeking cuts in GST rates on raw materials. What are your thoughts on rationalisation of GST rates and lower taxation on raw material imports?

While the IGST has been reduced on a number of imported medical items, a Group of Ministers has been formed after the last GST Council meeting to suggest ways to reduce GST on the vital domestic manufacture of healthcare items in order to take the benefits to the end-users. There is an intention towards the same, as articulated by Finance Minister Nirmala Sitharaman.

Given the surge of cases in second wave, there is an immediate need to speed up vaccination drive. That can only happen if vaccine supplies increase. Why are industry bodies not mounting pressure on the central government to make efforts to ramp up vaccine production?

I don't think that the government is waiting for the pressure. The government is fully aware of the problem. There are allied issues that go with the vaccination. You can't produce only so much vaccine in one go. You have to gradually ramp this up. There are so many issues like raw materials, rules and regulations and IPR issues. Further, technology transfer takes time. So, ramping up is the top priority. But it will take its own course. More and more research is being done to see if there are more ways to vaccinate people, look for more alternatives to address the problem. The only solution for this disease is to vaccinate 60-70 per cent of population.

Where do you see India's economy heading in the current fiscal given the raging Covid 2.0 and the likely Covid 3.0 in near future?

Till now, we have not seen any industry largely getting impacted. The supply chain is intact, and consumption seems to be quite okay. This is a very distributive disease which is going on right now. But you will see certain impacts coming in the first quarter, you might see some dip in the first few months of second quarter. But remember demand is something that doesn't vanish. It can be only be postponed. The latent demand will kickback and bring this economy back.

This time the rural economy has been hit and the government in its wisdom should support the rural economy in a very large sense. We have been saying this since last year. Other chambers are saying it now. The government should support the urban and rural poor, go for direct transfer and should line up more loans for MSMEs. People who were impacted last year haven't come out and are getting hit again this year. So, they are the ones who need the support. As the world opened up, we will have to get our industries opened and as that happens, you will see that we will catch up with our numbers.

Which sectors will need the government support?

The smaller ones which would require help are restaurants, traders, shopkeepers, small business keepers, consultants, independent people, professionals who were doing small jobs, serving the industries, these were ones who are badly affected. This is where I think packages should be targeted. There is a lot of liquidity, monetary support that RBI has given. But money isn't reaching right people because some don't have good books. But that doesn't mean you don't help them. You have to find a way to help them.

How long it will take for the Indian economy to come out of Covid crisis?

I think, when 60-70 per cent of Indians get vaccinated, we will come out of the Covid crisis.

Despite being the pharmacy of the world, India suffered from the shortage of medical oxygen and life-saving medicines. In this context, do you think India should increase its R&D spend on the pharmaceutical sector?

The government has already announced the Production Linked Incentive (PLI) scheme for the pharmaceutical and medical device to scale up domestic manufacturing. However, there is always a scope to scale up the R&D in India especially in the wake of health emergencies. We need to scale up expenditure on R&D at all levels - in government labs, private sector enterprises and universities.