Uday Kotak for calibrated unlocking of economy, another credit guarantee scheme

New Delhi: Uday Kotak, president of Industry body Confederation of Indian Industry, made a case for immediate fiscal stimulus for sectors worst-hit by the pandemic to revive the economy. He suggested cash transfers to protect those worst hit by the second wave of the pandemic, saying data coming out after May, particularly from rural India, could be worrisome. Kotak also batted for a calibrated opening of economy, with increased vaccinations, and said the situation should improve by October.

In an interview to Economic Times, Kotak suggested another credit guarantee scheme for micro, small and medium enterprises (MSMEs) and other affected sectors, with a corpus of Rs 2 lakh crore.

“There will be pockets of pain which will come out over the next few months. There will be pain, particularly in rural India and unsecured consumer and lowerend SMEs, even microfinance corporates,” the outgoing CII president told the business daily, adding that this unexpected situation requires more shortterm measures.

Kotak stressed on a more thought-out reopening. “If we open (in a) more calibrated (manner), we think we will minimise the risk of 3.0,” he said, referring to the impending third wave of Covid-19.

“We will see tentative movement back to normalcy between the end of June and end of September,” he said adding that if by September there is reasonable vaccination and vaccines work on the variant, then “October onwards, we should start feeling a lot better.” “Let us not be caught off guard for 3.0 as we open up. Our opening up speed depends on our ability to handle that as well,” he added.

Uday Kotak calls for fiscal support

The Kotak Mahindra Bank MD said if the government lent fiscal support in this interim period, it would help in a softer landing. He said the government should ensure that the bottom of the pyramid gets direct fiscal support. “Whether it’s food, cash transfers, NREGA (Mahatma Gandhi Rural Employment Guarantee Act), or whether MSMEs get another ECLGS (emergency credit line guarantee scheme) package. I recommend that the government may want to consider a package of ECLGS… I would recommend an incremental Rs 2 lakh crore package; so, you take it probably to ₹5 lakh crore and give the support to the economy,” the business daily quoted him as saying.

On the vaccination front, he said, “My frank view is, the ideal policy of vaccination should be one (Central) quota, and the Centre allocating to states and private sector. Instead of three buckets, we may be better off with two buckets,” he said, pointing out that the current three-step formula was creating challenges.