As per the new guidelines, most of the businesses are getting ready to start their operations from 20th April. Continuing with our series, The COVID19 Impact on Indian Business, this article will discuss business recovery and the approach.
There will have to be a huge reconstruction and rebuilding project which will have to lay down a comprehensive long term path, further split into immediate, short term, medium-term and long term measures to enable proper alignment of the needs of all stakeholders particularly the citizens of our proud country i.e. India. This will really require our leadership to think out of the box, to be audacious, to challenge set principles – globally and locally, and to be able to take radical decisions enhancing the national capacity.
If thinking inwards is good, today is the time to do it. We have to become self-sustaining and be global suppliers that will require a celebration of quality and timeliness and not a celebration of mediocrity. We have to show similar resilience as a nation as we have shown for the lockdown. It is the right time for the National Character to go several notches up.
The Indian Lockdown has been a role model for the world, our Fiscal Revival Plan should be similarly so. There will need to have a look beyond the band-aid or immediate solutions touted as a cure-all.
An example of solutions in silos or a band-aid solution is, for instance, the EMI deferment. There is an article headlined “Pain for customers, gain to banks” in The Hindu Business Line: Extracts from the same are illuminating:
It takes time for things to unfold. More so in bank schemes and welfare measures. When Finance Minister Nirmala Sitaraman had announced Garib Kalyan along with three-month deferment of Equated Monthly Installments (EMIs) for all term loans, there was merry all around. An Aam Admi was obviously happy given the loss of earnings, pay cuts and delays in salary payments. But now there is clarity. The facility, which has been dubbed as a saviour of the middle class by some analysts, is actually a punishment.
When a loanee avails the deferment of EMIs for months (March to May 2020) that amount will get added to the total principal amount and the interest on the loan will increase………..For instance, the impact of deferment in case of a home loan of ₹30 lakh with a remaining maturity of 15 years, the net additional interest would be approx. 2.34 lakh equal to eight EMIs. So, for non-payment of three months installments, the loanee would end up paying interest for eight months.
Even the RBI solutions that seem to be there are only for existing borrowers (i.e. businesses who work on borrowed funds). Further, these businesses may have not borrowed right – lower or higher amounts, depending on their business conservatism and risk appetite. So, wrong eligibility may come out based on the RBI norms that are generally linked to existing limits.
There will be many “on the brink” businesses that would have been unable to borrow. Many would have not borrowed at all or borrowed less due to prudence. They will need to be reached out, too. Livelihoods depend on their continuity and sustenance.
Very critically, there is a need to have a holistic review of the Indian businesses and more particularly MSMEs.
There has to be guidance and support from the government and all stakeholders plus associations covering all aspects – employee payments, vendor payments, statutory payments, operating expenses, cost of restarting operations particularly in Continuous Process Industries, recovery period, frivolous litigations (protection therefrom), increased health and safety costs (very essential), and so on and so forth. We are sure that many will have actually worked on this and maybe working.
For MSMEs Business Continuity Plan has generally not been an integral part of their business processes, unlike many large corporations and businesses. Even they have not been spared by this pandemic. So, to repeat a very holistic review of all businesses leading to support guidelines across all ALL items is very essential.
Mr. Ramanan to another question in The New Yorker answers “Think of restarting the economy as multiple gears and cogs all connected to each other. Someone supplies goods to someone else, and they have to get paid in order to supply, but that person needs to get paid by someone else. So, to start an engine like that, which has so many gears moving, is complicated, and it takes a huge amount of effort to start that churn back. Certainly, the government’s trying to do what it can to ease things by saying that you don’t have to pay for your loans, you don’t have to pay your mortgage for three months, and the mortgage lenders won’t be considered to have nonperforming assets if they wait for that three months.”
We are sure that the government will be working on a strategy that ensures the alignment of all the gears and cogs in the demography that India has. They have a much larger perspective and way much more detailed data. This is not an overnight exercise, yet the government will surely welcome inputs from all affected parties, that will be ALL. Very confident they will take a holistic view from the nation's perspective. Their task is unenviable; whatever they do there will be disgruntlement. If likeminded citizens give unbiased inputs, we are sure that these will be well appreciated and will address larger bouquet of pain points.