We will get our growth back, PM tells India Inc
The bank’s chairman says there is money available to lend to businesses, but there are no takers for it
NEW DELHI: Prime Minister Narendra Modi on Tuesday voiced confidence in the economy’s ability to return to a path of rapid growth, listing it among his government’s top priorities and pledging its commitment to systematic reforms amid concerns that the coronavirus disease (Covid-19) pandemic could plunge India into a prolonged slowdown.
“Yes! We will definitely get our growth back,” Modi said in his speech to a conference on ‘Getting Growth Back’ organised by the Confederation of Indian Industry (CII) to mark the organisation’s 125th anniversary, as India emerges from the Covid-19 outbreak and subsequent 68-day lockdown.
“Some of you may think in this time of crisis how could I say this with such confidence? There are many reasons for this confidence. I’ve confidence in India’s capabilities and crisis management. I’ve confidence in India’s talent and technology; I’ve confidence in India’s innovation and intellect. I’ve confidence in India’s farmers, MSMEs [micro, small and medium enterprises] and entrepreneurs,” Modi said in Hindi through a video link.
Modi’s first major speech on the economy since the post-Covid-19 lockdown began on March 25 came a day after Moody’s Investors Service cut India’s rating by one notch to the lowest investment grade with a negative outlook, citing growing risks that Asia’s third largest economy will face a prolonged period of slower growth.
According to official data released on Friday, the economy grew 3.1% in the three months
› There are many reasons for confidence. I have confidence in India’s capabilities and crisis management; in India’s talent and technology; in India’s innovation and intellect; in India’s farmers, MSMEs and entrepreneurs NARENDRA MODI, Prime Minister
ended March 31, 2020, and 4.2% — the slowest pace in 11 years — in the financial year 2019-20. The prolonged nationwide lockdown in the aftermath of the Covid-19 pandemic is expected to dent growth further.
Moody’s said the lowering of India’s rating reflects its view that “the country’s policy making institutions will be challenged in enacting and implementing policies which effectively mitigate the risks of a sustained period of relatively low growth, significant further deterioration in the general government fiscal position and stress in the financial sector.”
MUMBAI: India Inc. will need to overcome risk aversion and start investing if the economy has to pick up, said State Bank of India (SBI) chairman Rajnish Kumar. Speaking at the Confederation of Indian Industries (CII) Annual Session 2020 on Tuesday, he said banks were flush with funds but corporates are not coming forward to borrow.
“Is risk aversion only among lenders? Is there risk aversion among borrowers also? Are they willing to invest? Are they willing to leverage?” asked Kumar. “As the chairman of the largest bank, I’m saying I have the money, but there are no takers.”
Brushing off criticism that banks have been parking ₹7 trillion with the Reserve Bank of India (RBI), Kumar clarified that there was no correlation between this and risk aversion among lenders. SBI, for instance, received as much as ₹2 trillion worth deposits in April and had to lend to the RBI under the reverse repo window, as there were not many avenues for lending.
Kumar said corporates should look at opportunities for investment, and should not wait for the government to further support the industry. He said the government does not have enough fiscal space and is currently focused on supporting the bottom of the pyramid, which has been worst affected by the Covid-19 crisis.
The government has already announced a ₹20 trillion stimulus package under the Atmanirbhar Bharat Abhiyan. This current fiscal year is also going to see a sharp rise in the gross borrowing programme to ₹12 trillion against the budgeted ₹7.8 trillion. Half of this is expected to be raised by the end of September. Economists expect the fiscal deficit to cross 6.4% in fiscal year 2021, compared to 4.6% of gross domestic product in FY20.
Kumar said corporate investments have not picked up despite the government’s effort to open up new sectors.
However, he was bullish on the recent measures by the government to infuse nearly ₹3 trillion into the system by way of guarantees to banks against loans to micro, small and medium enterprises.