Avoid knee-jerk reactions, local lockdowns: CII president

The Confederation of Indian Industry (CII) has cautioned against "knee-jerk reactions" to the Covid-19 pandemic such as localised lockdowns being imposed by states, saying these could be disruptive.

The government should opt for coordinated restrictions to ensure recovery is not hit, said TV Narendran, CII president and Tata Steel managing director and CEO, urging the government to spend more if required to support the economy.

"The request from industry to the Centre and states is to not have knee-jerk reactions... Our request is that we should not have too many localised lockdowns," he said in an interview to ET.


'Coordinated Response Needed'
The Omicron variant of Covid-19 "is a concern and is spreading very rapidly" but requires a coordinated response.

"That's why I say it's important to avoid local disruptions because sometimes there are different interpretations locally, could be at a district level or at a level of a city or a town. That can be a bit disruptive," he said.

India reported 90,928 fresh cases of Covid on Thursday, 56% higher than the previous day. A total of 2,630 cases of Omicron have been detected in 23 states and Union territories so far. Many states have already imposed night curfews and restricted public places. They are now escalating their response as the pandemic spreads with some announcing weekend lockdowns as well.

Narendran said the industry is well prepared to deal with the situation. "Even during wave two, the supply of essentials was not as disturbed as it was during wave one... all the online delivery systems, the companies, the ecosystems they are all working with very strong protocols. So, we can make sure that the supply chains are well-oiled and going on," he said.

The high-contact intensive sectors like tourism and many services sectors have been impacted by the pandemic and there is a need to address that to solve the consumption problem, he said.

"The personal balance sheets have been impacted by Covid. Many people have either had shrinkage of income, loss of jobs and an increase in expenditure because of the health spends... consumption is struggling to come back on track," he said, adding that the CII has said that an eye should be kept on livelihoods and measures should not make it worse.

CII expects India's gross domestic product (GDP) to grow 9.5% in FY22. "We are sticking by the 9.5%... the first three quarters have been consistent with that," Narendran said, adding that the areas of concern are Omicron and rising interest rates.

On the fiscal deficit target of 6.8% of GDP this year, he said the country is on track despite the additional expenditures as tax collections have been robust.

"Corporate profits will be strong as well and formalisation of the economy is also leading to better recovery on the tax front. If there is more headroom, stick to 6.8% but spend more if required to make sure that the economy is back on track," he said. "And then thereafter we can move towards 4.5% (fiscal deficit), which could be a more of a longer-term number to chase." He said private investment was picking up.

"It is led by some sectors where the capacity utilisation is high, profitability is high and leverage has come down," he said.

While electronics manufacturing is getting a lot of foreign investments, the investment in metals is largely domestic and the production-linked incentive (PLI) schemes would drive investments further. Similarly, "strong" investment is coming in the cement, steel and chemicals sectors, he said. "And if you look at the NPAs (nonperforming assets), they've come down including some of the perennial problems sectors like infrastructure NPAs have come down."

Narendran said India is on track to hit $400 billion of merchandise exports this year, which has been underscored by recent trade numbers. As India's exports grow, its dependence on imports will decline because of local manufacturing, he added.

Industry favours a tariff structure where duties on raw material inputs are at the lowest.

"So, if you say raw materials are at zero and intermediate products are 2.5% and finished products are at 5%, that's pretty much the CII philosophy," he said. For ease of doing business, Narendran called for self-certification to reduce the compliance burden. "If 90% of the industry wants to be compliant and is compliant, allow them to certify and get on with it, rather than penalise everyone for maybe 10% which is not doing it the right way," he said.

Ahead of the upcoming budget, CII said that in some areas like mining, the effective tax rates are quite high which has hurt competitiveness.

Terming inflation a "big issue," he suggested index contracts for micro, small and medium enterprises (MSMEs) as it reduces their risk and gives the government headroom to deal with it.