India Inc. in a spot over lack of measures to boost consumption or direct steps to support sectors such as aviation that have been worst hit by lockdown
Uncertainty around long-term demand revival could dampen growth prospects as companies may now freeze spending, experts said
The government’s much-hyped ₹20-trillion fiscal package disappointed companies who were expecting big-bang stimulus measures to revive the economy that has remained almost idle for most of the past two months, leaving stock markets vulnerable to a swift pullback.
The key concern for a sizable section of India Inc. was the lack of measures to boost consumption or direct steps to support industries such as hospitality and aviation that are the worst-hit by the nationwide lockdown that has now been extended to the end of this month.
As part of the final tranche of the stimulus package, finance minister Nirmala Sitharaman on Sunday announced a series of measures, mainly structural in nature, aimed at creating a conducive environment for businesses through ‘ease of doing business’.
The measures included a year-long waiver in fresh insolvency filings, relaxation in compoundable offences under Companies Act and additional funds allocated to the states for healthcare and containment efforts. Although Sitharaman’s announcements included an additional ₹40,000 crore for the rural jobs guarantee programme, a measure that can stoke rural demand, overall, the measures fell short of industry expectations on several counts.
Kiran Mazumdar Shaw, chairperson and managing director of Biocon Ltd, didn’t mince words. “The healthcare sector has been short-changed. No stimulus for hospitals who have to bear increased operating costs due to covid-related protocols," Shaw said in a post on Twitter. “Most disappointed at the lack of bold measures in stimulus packages -don’t think demand will be created and consequently economic activity will be stifled. ₹20 trillion was a huge amount and it was meant to stimulate economic revival and growth."
The announcements also gave a wide berth to the tourism and hospitality industry, which pinned its hopes on a bailout. “Indian tourism industry goes into a state of shock and disbelief,’’ the Federation of Associations in the Indian Tourism and Hospitality said on Sunday. “The industry has gone numb from a lack of any umbrella direction from the government or without any fiscal and monetary support," it said. “Ten weeks of constant discussions have come to a naught".
Similar sentiments were expressed by the Retailers Association of India (RAI), the industry’s apex body which had lobbied the government for a bailout. “The association is of the view that the steps taken under the Atmanirbhar Bharat economic stimulus will help the country in the long term but the emergent issues facing the retail industry have not been addressed. What retailers needed was wage support; moratorium on payment of principal and interest, and support in the form of working capital," said Kumar Rajagopalan, chief executive of RAI.
Without specific measures to boost demand or support the worst-hit sectors, many firms may now decide to fire or furlough employees until there is a clear economic revival.
In a separate development, the government extended the flight ban to the end of May.
“Banks will now have to take the blow and get ready to restructure airlines loans outside IBC or we will have more failures of great brands like Jet Airways," said Vishesh C. Chandiok, chief executive of Grant Thornton India. Cash-strapped airlines need funding of as much as ₹35,000 crore till 2022-23 as profitability may be hit by lower revenue and higher fixed costs in the near term, according to credit rating agency Icra Ltd.
Uncertainty around long-term demand revival could dampen growth prospects as companies may now freeze spending, experts said.
Disappointment over the package may weigh as the markets open on Monday. “The market has already discounted most of the announcements after day one. The streets have understood that all the measures are long-term sops and not immediate reprieve," said Prakash Gadgani, chief executive of 5Paisa.Com, a brokerage.
Suneera Tandon and Jayshree P. Upadhyay contributed to this story.