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Economy

Restarting India: Experts discuss state of the economy

Updated : September 10, 2020 06:37 PM IST

India's gross domestic product (GDP) growth has contracted to historic lows. The pandemic has ravaged almost every sector of the economy as many companies are gasping for breath.

The government may wait till December to decide on additional borrowing for the current fiscal, senior government officials told CNBC-TV18. The government has room to borrow Rs 12 lakh crore for the whole of this fiscal.

According to the official, the aim is to exhaust the limit first, and then take a decision on additional borrowing. The gap in revenues and expenditure as of July end is over Rs 8.21 lakh crore, and so the government does not feel the need to announce additional borrowing just yet.

On the likely quantum of additional borrowing, another senior official said, "It's yet to be decided, we will have more clarity may be closer to December." By then, the government would have a clearer picture of tax collections. Also, the second quarter GDP figure will be announced on November 30.

If need be the Centre is ready to undertake the additional borrowing only for 1 or 2 months, the official said, adding that signs of a pick-up in the economy were visible.

So, what does the future look like? When does India Inc expect a recovery? According to a survey jointly conducted by FICCI and Dhruva Advisors, about 62 percent firms polled in August believe that the economy will return to normalcy in 12 months.

Weak demand continues to be the biggest challenge. In June, 59 percent companies said they were struggling due to poor demand, while in August 68 percent companies said weak demand is the key bottleneck.

44 percent companies said that they continue to operate below 50 percent capacity in August even after unlocking and only 20 percent expect over capacity utilization above 80 percent in the next three months. 25 percent companies said that they will consider salary cuts of more than 10 percent while 58 percent said they will not cut salaries of their employees.

However, there's also a slight improvement seen for certain parameters in August as compared to June. For instance, in June, only 25 percent of companies reported improvement in order books due to lifting of lockdowns. In August, this number increased to 44 percent. Sangita Reddy, the president of FICCI and Dinesh Kanabar, the CEO of Dhruva Advisors discussed more about the findings of this survey.

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