Change in attitude, out of box thinking will bring churn, says renowned finance wizard
GN Bureau | August 28, 2020
Hailing prime minister Narendra Modi's Atmanirbhar Bharat package of Rs 20 lakh crore and terming it extremely well directed to the poor who need it the most, financial wizard Vallabh Bhansali, co-founder of investment bank ENAM and social initiative Desh Apnayen Sahayog Foundation, has said that the government must bring back business sentiment.
"Now we need out of box thinking and think ahead. Can we act in the manner that you have huge confidence in economy?” he asked.
Bhansali said that while the government has been very active on political front and won the confidence of people and brought in reforms like GST by proactive thinking, when it came to creating business confidence they have been behind the curve. “Right from its first term we have seen that the government has been very conservative. Since 2008 the business climate has been damaged so massively and the NPA cycle has got hugely extended that it will take a long time for this to change which only the govt can do," he said.
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Bhansali was in a webinar conversation with Kailashnath Adhikari, MD, Governance Now, as part of the Visionary Talks Series held by the public policy and governance analysis platform.
To see the previous episodes of the series, click here:
“Unfortunately in our country the governments doesn’t like to lose. If some tax regime or provision goes against the govt, it changes the law. The citizen is so battered that there is no way his innovation can work and he must always lose. Subsidies, arbitration awards are not paid fully and therefore there is lack of confidence. We have gone beyond ease of doing business and come to a stage where the government has to say, 'please do the business'. A change of attitude is now needed specially when there has already been so much reform like in sectors like agriculture and education policy. We now need business sentiment policy without changing for say next three years and that will bring around a churn and restore business confidence," he said.
Bhansali added that there is enough liquidity in the system and the RBI has been doing a phenomenal job of liquidity not only during Covid but also before it. "… the problem is the confidence of the banker to release liquidity to people, which will happen only when the banker is very confident. The banker has been hit by several problems like the changing norms on asset quality reviews etc.’’
On moratorium offered by the banks, he said that even now the moratorium is not creating comfort for borrowers as once the moratorium period is over the money has to come to the bank. For businesses that have been shut down or slowed down, how do they pay back to the bank? The confidence of the banker on asset quality to change will take time.
He added that that while looking after most vulnerable section of society is commendable and the agricultural reforms can bring about a huge difference, a caring granny attitude by 4-5 ministers where the government adopts citizens, despite some challenges that will come and where few will fail but many more will succeed, will help revive economy.
On the new-age tech startups becoming huge enablers during Covid-19 and if this has boosted entrepreneurship, Bhansali said a certain segment of the society has received a big boost of entrepreneurship. He cited the examples of Bangalore and Mumbai which now are hubs of startups and talent in the world and biggest investors of the world now wanting to invest in new companies are coming to India to invest -- be it tech giants or companies like Alibaba, Softbank and others.
The ace investment banker and stock market expert added, “I would say we need a splurge into the economy of Rs 10 lakh crore. Getting that money by monetizing foreign exchange, getting money from RBI, selling some stakes in PSUs and bringing that money to push economy and to have trust in people. Many new businesses have started due to Mudra loans and many are old wine in new bottle. I would not say that floodgates of entrepreneurship in technology have opened at all levels. The technology startups are doing very well!”
He pointed that many economic reforms and disruption particularly of supply chains, e-commerce etc; proliferated into many small players coming and doing new things that environment of entrepreneurship has taken a setback due to Covid and other issues.
On economic growth, Bhansali said there will be a de- growth of between 5% and 10%. The loss of economic activity for weeks during the lockdown has devastated different economies and citizens have been hit hard. It will take some time and effort to recoup these losses.
Responding to a question if he sees a V shape economic recovery happening, he said the virus will not go overnight. “Even if things open up purchasing power and momentum will take time to recover. Only if the govt comes out with a magical stimulus and its gets immediately monetized and the money starts flowing into the economy…. we have not see anything like this. At best it can be U shape but I don’t think it can be V shape," Bhansali said.
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