Kotak Mahindra AMC managing director Nilesh Shah said while the intention of the government has been right in framing policies to fight the impact of Covid-19, these must be followed by execution.
Kotak Mahindra AMC managing director Nilesh Shah said while the intention of the government has been right in framing policies to fight the impact of Covid-19, these must be followed by execution. Speaking at The Indian Express E-xplained, Shah said: “It should not happen like the real estate fund, which we announced last year, or like partial credit guarantee schemes, which did not result in much traction on the ground because of various rules and regulations.
On the stock markets, Shah said, “Obviously, markets are forward looking. They will bottom out way before the economy actually bottoms out. Markets will move from pessimism to optimism and from fear to hope that swing volatility will continue.”
Equity markets are bound to be volatile in nature and that is the reason they give better returns in longer term than other asset classes,” Shah said.
He said the package for MSMEs is a good one as it allowed banks to lend without worrying about non-performing assets, and this move will go a long way in improving credit flows. “There are three ways to contain this damage – one is attracting foreign direct investments, second is (by) providing fiscal stimulus and the third is (by) providing monetary stimulus. These three steps together, along with medical solution, can reduce the damage to the Indian economy.”
Shah estimates that the loss of output during the 47-day lockdown to be $190 billion at 50% capacity utilisation. India can save $40-45 billion dollar in oil imports bill if they persist at current level, and look to save another $20 billion by replacing ‘Made in China’ goods with ‘Made in India’ goods.
gEconomy is not power, which you can switch on and switch off. So, there will be cost of restarting the economy added to this number,” he said, adding that markets could see a ‘V-shaped’ recovery if a medical solution emerges quickly and if the fiscal and monetary stimulus is large enough. However, the recovery would be ‘L’ shaped if a medical solution is delayed and fiscal and monetary stimulus is lower than expected.
Shah, a part-time member of the PM’s Economic Advisory Council, is of the view that India can be a big beneficiary of supply chain disruptions in China because of the trade war, followed by the pandemic. He said, “Today is the best time as the world is suspicious of China. While we have been considered positively as we have been supplying hydroxychloroquine tablets to the world and God willing, we will supply vaccines from Serum Institute, Pune, to the world. Now, we must encash this goodwill in establishing a manufacturing base. We are today the back-office to the world. Why can’t we become the factory to the world?”
India isn’t the only country that is looking to attract investments from global companies looking at an alternative to China, as other countries have better policy, environment and infrastructure. But none of them has a large domestic market like India, he said. “We have to leverage our brand with the world, we have to leverage domestic market to the word and we have to be part of the global supply chain management. This is how we can become ‘atmanirbhar’.”