The Indian banking technique would not be hit by the pandemic as a great deal as feared by numerous Sanjeev Sanyal, principal financial advisor, stated.
“The IBC (Indian Bankruptcy Code) process related cases are getting solved. The NCLT system has continued to function. The banking channels mostly remained muted for financing. Some NPAs will pop up but the shock will be smaller than feared,” Sanyal stated at a session of the Merchants’ Chamber of Commerce and Industry.
He stated as the government was opening up more and more avenues for private investments. The booming stock markets could be a supply for meeting the financing demands via more equity participation.
The capital expenditure, which the government began ramping up from October last year onwards to build more assets, has resulted in a sturdy financial recovery for the January-March quarter last fiscal. Sanyal stated the FY22 Budget focussed on expanding the economy and that is what the government is implementing.
The second wave of Covid has a deeper psychological influence on people today with the quantity of deaths getting substantially larger than the initially wave. But a national lockdown would have been “blunt and costlier and so lockdown by the states have given a headroom to deal with the economy more efficiently”. Response to the scenario was more sufficient via quicker creation of the essential overall health infrastructure, although the nation is nevertheless dealing with a lot of uncertainties, Sanyal stated.
While he refrained from commenting on the preparedness of a probable third wave, he stated a far better surveillance and a situational awareness was essential rather than prejudging how the economy would behave in case of a third wave. Though there could be numerous possibilities, the government at present was viewing 3 possibilities based on which the economy would behave.
The initially possibility would be to eliminate all restrictions and lockdown and get into financial activities. But this may well not be sustainable even though pumping up the economy a tiny and then once more slowing it down. The second possibility is of the economy coming back roaring given that exports, agriculture, building, non-contract services and other people alike are performing effectively and increasing. But concern would shift from development to inflation. The third possibility is some components of the economy would turn out to be red hot and inflationary, and some components like the hospitality market and tourism may well not recover.
“The government would be required to give a targeted response to the third possibility, while the second possibility would require a generalised response,” Sanyal stated, adding that avoiding switching off and switching on the economy was the will need of the hour and quicker vaccination would pave the way to a faster financial recovery.