Govt spending should go on, says Tata Steel’s TV Narendran

Narendran, also president of the Confederation of Indian Industry (CII), said the fact that businesses are using 70-80% of production capacities and planning new investments should not stop the government from continuing to spend.

Narendran’s appeal comes at a time the government is preparing the Union budget for the fiscal starting 1 April against the backdrop of buoyant revenue collections and the fiscal deficit position staying well under control. The fiscal deficit in the April-November period is 46% of the ₹15 trillion budget estimate for this fiscal, having overshot the full-year target at the same time a year ago.

In an interview on Wednesday, Narendran said the policy response to the pandemic’s third wave needs to be well-coordinated between the Centre and states and the government and industry, as unprepared lockdowns could cripple supply chains and consumption.

The need of the hour is policy stability and sustained government investments in infrastructure, he said, adding that private investments will follow.

Citing a December CII survey, he said most businesses were at 70-80% capacity utilization and were positive about the future. Most businesses felt they were at pre-pandemic levels or better, were exporting more, that capacity utilization and profitability were good, and they were planning investments, he said. “It is evident in some sectors like metals, for instance. But at the same time, we urge the government to continue to spend on infrastructure. Government expenditure should not get cut as private sector investment will need more time to come back to the levels we have seen in the past though it is already better than what it was two years ago,” Narendran said, underlining the importance of higher spending in economic recovery. He pointed to improving demand, profitability and healthier balance sheets as favourable factors for fresh investments. Infrastructure, he said, drives demand and cost competitiveness.

Industry, he said, is well prepared to deal with the third wave, and protocols are in place. But businesses would like the public policy response to be well coordinated. “We said there should be a coordinated response between Centre and states, and between government and industry, so that we find that balance of making sure lives are not impacted, and at the same time, livelihoods are also not impacted,” Narendran said. Industry’s submission to both central and state governments has been to avoid uncoordinated lockdowns in local areas because that disrupts supply chains, he said. According to Narendran, the budget should continue the schemes introduced to support the less privileged sections of society and should have adequate allocations for them.

Lockdowns impact incomes and consumption, he said. After the second wave, consumption has not picked up as much as the industry would like because people are afraid about the income impact of the third wave, he said.