‘Encash part of the forex reserves to fund infra’

While supply-side interventions have been made, India needs a huge demand push to sustain the economic green shoots, says Sanjay Aggarwal, president, PHD Chamber of Commerce and Industry (PHDCCI), and chairman and chief executive, Paramount Communications Ltd. The central government is the only entity that can help revive demand, says Aggarwal, considering that neither the private sector nor the retail consumer is in a mood to loosen their purse strings. Edited excerpts from an interview:

Where is the Indian economy headed this year, and how will the recovery path be?

For FY21, a consensus is building up that India’s gross domestic product will contract by 9-11%. At the same time, the high-frequency indicators at the end of September are encouraging—GST (goods and services tax) collections, exports, and manufacturing PMI are up. One does get a feeling that the worst is behind us. But how much better are we going to do? That is a matter of guesstimates. There will be a lot of pent-up demand because of the closures, and that will be serviced. However, the third and fourth quarters will be very crucial for the path the economy takes.

Which sectors need more attention to sustain the green shoots in the economy?

The biggest impact was caused to tourism, aviation and hospitality, besides businesses that are dependent on footfall such as malls and closed air-conditioned spaces. Sectors directly hit definitely need better support. If you allow a good part of the tourism and hospitality sector to sink, you won’t be in a position to help them recover later—the loss for the year might become a permanent loss.

Overall, it is the demand in the economy that needs support. That is PHDCCI’s view and my personal view as well.

The supply side has been given good support, but we are looking at a war-ravaged economy and this is the time we need to take some large-scale measures. People are saving for harder times. It is very difficult to expect either the consumer or the private industry to be investing, except for necessities.

The economy cannot grow unless there is a push on the demand side. For that, we need a front-loading of the National Infrastructure Pipeline, which was announced in December 2019. We are supposed to invest ₹1.02 trillion over five years. Now is the time to talk about this plan.

We have to inject a lot of money into the economy for productive purposes, to build assets. That is going to bring optimism back. And, today, the central government is the only agency which has so many options.

Where could the government raise the money from?

There should be a funding plan for infrastructure investment. We are of the view that it might be a good idea to consider encashing a part of India’s forex reserves. Do we need such large forex reserves? Even for borrowing, there is sufficient scope. There is so much pension money lapping around the shores across the world; there is so much liquidity that has been generated that has no destination right now. Why can’t the government guarantee a return?

You float a National Investment Corporation or something similar, which takes funds for investments into infrastructure projects.

Let the government guarantee that the interest and the principal will be paid on time. I don’t think there will be any limitation on the money, considering the size and strength of the Indian economy.