Rebuilding India: KV Kamath, Kiran Mazumdar-Shaw, Manish Sabharwal share their blueprint for recovery

The second wave of the COVID-19 pandemic has derailed India's growth momentum, with its full-year GDP contracting for the first time in four decades.

India's consumer confidence index too fell to a record low of 48.5 in May 2021 from 53.1 in March 2021, according to the Reserve Bank of India, as respondents turned pessimistic about the prospects going forward. An estimated 10 million Indians have lost their jobs because of the COVID-19 second wave, with household incomes coming under pressure, according to data from CMIE.

Against this backdrop, how can India march toward its ambitions of becoming a $5 trillion economy by 2025? What should the Government do to ensure a bounce back and recovery? What policy prescriptions does India need to rise to its full potential? Will an accelerated vaccination drive help?

Three of India Inc's most respected business leaders and policymakers- KV Kamath, Kiran Mazumdar-Shaw, and Manish Sabharwal shared their blueprint for recovery on the ninth episode of Moneycontrol Masterclass, on June 11th, 2021.

"Central procurement makes it much simpler but my request is that there should be a very clear timetable and scheduling of supplies to every state.  We should try and have a very efficient logistics and supply chain that ensures that the time between the moment the vaccine leaves the warehouse of a vaccine producer to the time it gets deployed at a vaccine center into the arm of a person should actually take not more than 72 hours if possible. Vaccination is the only way we can actually get the economy back to normalcy

KV Kamath, former President, New Development Bank "Indian industry is not fazed this time around. They have understood and set up the protocols that were needed to be set up to run business and the consumer has also understood where the pain point is.  So while there will be pain I think the pain is not going to be as severe as it was last time and manufacturing India will come back also faster this time.

"We expected that last time balance sheets would be destroyed for a large part of India. Be it banks, be it corporate India the balance sheets are in a healthier state than they were last time. So I think that we are well-positioned to face the recovery this time.

"I don't want to speculate whether growth will be 9% or 10%. I think growth should be healthy if we are able to contain the third wave. If we have a third wave then I think we will need to reassess. My own view is given what Kiran indicated about vaccinations and the learning’s that we have had we will probably be able to contain the next wave and because we have learned what needs to be done to be safe. So I am optimistic, I am bullish about the economy because the balance sheets are clean, I think the consumer will come back, and then we should have a smooth runway.

"The second wave for migrants has not been as bad, for us certainly as a company in the first quarter of last year we went down 20% -30% this year we have not and that is why I would submit that there's a lot of noise and bias in unemployment data. I have made the case to you for many years that unemployment is the wrong metric for India because it has stayed between 4% and 9% since independence. So I'd say don't look at the unemployment data look at GST data it's the ninth month of more than one lakh crore"

"India also needs to make sure that it continues to dominate the world when it comes to biopharma and from that point of view, I think the government has introduced this PLI scheme to make sure that we continue to invest in expansion and I think a lot of things have been done to the policy so that the individually fully benefits from this scheme. We’ve also wanted the government to mirror the PLI scheme in an R&D incentive plan because I think that's where also India needs to invest a lot more than it has been doing these years."

"CapEx certainly will happen in the infrastructure sector. As Prime Minister Modi said,  India is yet to be built, and we have 25 years of building ahead of us. The second area is going to be in areas which were not invested in enough, I think we can probably be the pharma to the world.  The next area where a lot of spends will happen is what I call the whole digital supercycle."

"With corporates deleveraging more, they can use that cash to invest as an asset. Corporate India by and large is self-financing and apart from the small and medium industry where also I think they're learning very quickly that equity is king. The borrower is going to be retail India."

"I think there are limits to fiscal and monetary policy.  I don't think we can pretend to be the U.S. The U.S. per capita income is really high so this year the U.S. fiscal deficit is more than our GDP. We need to be careful with trying to do helicopter money substituting for genuine consumer demand consumer confidence. So I would say that some of the structural reforms around labor, farms, privatization, and civil service reform should be accelerated because fiscal and monetary policy does have limits. I mean I know it feels like we're under siege right now but  India is the only country in the world with 20 years of growth ahead of us."

"It's always easy to adopt this kind of helicopter cash incentives or whatever you want to call it. I think I would rather depend on the economy itself to revive to generate that consumption because you need to get jobs back. But starting to hand out this kind of cash compensations or direct cash compensation I don't think is going to be good in the long run."

"The terminology in helicopter money is typically associated with throwing your money basically to get demand in consumption and then you have a situation where you try to consume things which you don't need. The government has behaved in a very prudent manner right through this crisis."

" Weak consumption, data on defaults should reflect in hard statistics- it should reflect in the default rate of banks it should reflect in the numbers that the system throws up in terms of NPAs on a quarterly basis. I do not see massive pain."

" I believe that we do have a fairly large talent pool when it comes to biopharma. I also believe that we need to basically focus on not just expanding our present base but also aspire for value-added growth through R&D. There's a huge number of incubators with very smart companies but again I think they're starving for access to capital and I think that's where we also need to focus on"

"I think India's brand is more damaged because of the stupid regulatory cholesterol that we have. And I think labor codes are an important first step and I hope we will expand the labor code project to a compliance project which will get rid of almost sort of rationalize, digitize and decriminalize India's compliances and I think that is actively being worked on. "

"If you look at the performance of corporate India the last quarter there was a blockbuster quarter compared when you compare it to the 2019 last quarter or the 2018 last quarter this was still a blockbuster quarter. I think the market is also factoring in the sort of efficiency gains that corporate India has gotten out in the last year again. When I talk to let us say a larger cross-section of industry clearly are talking about 15% to 20% productivity gains that they have been able to claw during the last year"

"The Reserve Bank Governor clearly indicated that through the year we will look at keeping liquidity in a good shape. That's a big statement I don't remember having heard that sort of statement ever earlier, it's a bold statement and you have stuck to your gun through the year."

"COVID is a wonderful opportunity to just bring down the glide path for the new education policy from 15 years which was proposed by that report to three years"

Kiran Mazumdar-Shaw, chairperson, Biocon "The urban centers should take priority at this point in time because they are the gateways of infection, they are the ones who are actually spreading infections to the rural heartland of this country. So if you can actually stop the spread contain these urban centers with the densest urban centers if you can vaccinate 70% to 80% of these urban centers I think you will actually find a lot of benefit out of that.

"I think there has to be formal, non-farm job creation. And I think in 20 years we could easily be the world's third-largest economy in total GDP."