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Maruti Suzuki Chairman Bhargava: Extension of nationwide lockdown will be a body blow for economy

He said the onus of creating demand in post-COVID 19 era rests on both the government and industry.

April 13, 2020 / 12:42 PM IST
 
 
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RC Bhargava, Chairman of Maruti Suzuki India, the country's largest passenger carmaker, has strongly recommended resumption of economic activity and voiced his opposition at any further extension of the lockdown period beyond April 14.

In an exhaustive interview with Moneycontrol, he outlined the measures the government should take to recover from this massive setback and said the onus of creating demand in post-COVID 19 era rests on both the government and industry.

"Any blanket extension of lockout is not logically required. It was required to identify the hotspots. In 21 days, the hotspots must have already shown up. In rest of the country, start the economic activity but with caution and if there is an inadvertent violation, treat it as a hotspot and cordon it off. But don't shut down economic activity," Bhargava told Moneycontrol.

Asked to detail his plan of action for resumption of economic activity, he said: "I am saying that seal all the hotspots and then open the areas which are free of infection. In those areas, anyone who starts an economic activity should be legally compelled to take certain safeguards related to employees, vendors, transporters and dealers. Point here is that safeguards have to come into play for next few months."

In reply to another question on whether India Inc was ready to take up the challenge, he averred that there was no other option.

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"Otherwise, if the industry is not found compliant, it should be penalised. People should be educated," he said.

Compliance will become much better, especially, if the Prime Minister says we are lifting the lockout but for your own sake and for nation's sake, this is what we have to do, prescribed Bhargava.

He asserted that Prime Minister Narendra Modi commands a unique respect among the citizens.

"I think it is quite unique because I have not seen this kind of rapport between a political leader and the people. Earlier, India's first Prime Minister, Jawahar Lal Nehru had it. We are in the same situation now. The common man will follow PM almost blindly now," he said.

Bhargava sees merit in people's trust in PM being actually put to good use.

"That everyone becomes an eye for the government to ensure safety measures are being implemented and complain about lack of compliance, if any, at economic entities across the country," he said.

Asked to draw a balance between looking after the poor and offering fiscal stimulus to the industry, Bhargava said, “Just giving money to the poor isn’t the solution. If required, it can be done for a short time, but it cannot be done for a long time. We need to start the economic activity, especially those economic activities that will create productive employment. Because when more people find work, less people will require financial support.”

He argued for a simultaneous government attention to the poor and the industry.

"The government, while looking after the poor, must simultaneously think about what needs to be done to revive the industry. You have to look at those industries that create employment. Employment doesn't mean only in factories but employment means activating it in the entire ecosystem," he opined.

Drawing his recipe for creating demand, Maruti Chairman outlined his two pronged agenda for the business and the government.

The industry, itself, has to look at all ways of cutting costs –top management pay cuts – are among good steps and should continue for longer period, personally I should say forever. And that money goes back into the company, because these are all overhead costs.

All measures which will improve productivity so that production costs can come down – travel, entertainment expenses, advertising budgets - should all come down. All these will help reduce cost of production. The demand creation is a function of the price for the customer, he explained.

Everybody must take it up as national duty to cut down cost of production to cheer up demand.  Bhargava’s agenda for the government (Centre and States) is to look at seriously reducing taxes that enable reducing cost of acquisition. “On a small car, a customer today pays about 40 per cent as taxes. Demand creation is essential and demand creation is to be done by not giving doles to people but by reducing cost of acquisition. This is the real stimulus.”

He recalled that the RBI had already reduced the repo rate and increased the liquidity. “RBI has done its best. What other stimulus can government do except reduce taxes?”

Follow our coverage of the coronavirus outbreak here
Rakesh Khar
first published: Apr 10, 2020 05:36 pm

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