In an exclusive chat, The Quint’s Editorial Director Sanjay Pugalia interacts with Mahesh Vyas, MD & CEO, Centre for Monitoring Indian Economy (CMIE) to know more about the impact of the lockdown on the economy, jobs and business. Vyas is of the opinion that Centre’s Rs 20 lakh crore package is not the solution to the crisis.
‘The Package Is A Plan To Suppress One in Debt’
Dr Vyas argues that the Centre’s Rs 20 lakh crore package is not as encouraging as it is being touted to be. More importantly there is a provision of loans. So the problem is that people who are unemployed or who work in small industries are already in trouble, how will they take loans and then repay them as well. So, this is a plan to create a situation of debt.
“If the economy has to be restored, then you will have to provide employment, not create debt but demand in the market. Giving loans to MSMEs will not benefit, because they will not get customers due to lack of demand, and in turn, companies will not be able to provide employment when there are no customers.”Mahesh Vyas, MD & CEO, CMIE
What Is The Condition of Big Companies?
Dr Mahesh Vyas is of the opinion that the condition of big industries is poor, and has been so for the last 3-4 years. The net fixed asset growth rate of these companies was around 23 percent in 2008-09. But after that, it started falling. There was some growth again in 2015-16. But in 2018-19, this rate came down to 5.5 percent. This happened even when the companies had good profits, but there was so much concern about the future in the companies that they did not want to take the risk of creating new capacity.
“Companies are making profits but they are not investing. There were investment proposals of Rs 26-27 lakh crores in 2008-09, now they have fallen to only Rs 11 lakh crores. From this you understand where the economy is going.”Mahesh Vyas, MD & CEO, CMIE
‘Govt Should Learn From Vajpayee and Manmohan’
Dr Mahesh Vyas said in the interview that during the Vajpayee government there was a problem of low demand, following which he started the highway project and pulled up the economy. Similarly, in 2004, during the Manmohan government, the economy was started by increasing SEZ policy and increasing government spending.
CMIE estimates that the GDP growth rate may fall by 6 percent, but it could fall even further.
What Is The Solution?
Dr Vyas said that though the government is giving relief in tax, the problem now is with demand. The easy solution would be to give money in the hands of the poor.
“When we shut down the economy by announcing lockdown, we have to also restore at some point. The government will have to spend for this. If you want, take a loan, print new notes, if need be. If foreign agencies reduce the rating, then let it decrease.”Mahesh Vyas, MD & CEO, CMIE
‘Unemployment A Big Threat’
Dr Vyas estimates that in April alone, 12.2 crore people have lost their jobs. There is a possibility that the situation in May is worse. Out of these 12.2 crore, two crore were employed people and 9 crore were street vendors. If the economy comes back on track, then the shop of street vendors will open again, but if people do not get jobs, then who will come to the street vendors to buy the products?
‘No Explanation for Imposing Lockdown and Easing it’
According to Dr Mahesh Vyas, the country wants to know what fear led to the sudden announcement of lockdown and what led to sudden relaxations.
“The government should have told us why the experts suggested that there must be a nationwide lockdown. The government should have explained what would have happened if there was no lockdown, where are we now, and what are the predictions going forward. The country needs to know how big this fear was and how big it turned out. The poor labourers want to know what was the reason that a lockdown was imposed on their livelihood.”Mahesh Vyas, MD & CEO, CMIE
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