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13 Jun 2024, Edition - 3257, Thursday

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Fear worse than recession

Ajay Menon


In the wake of talk about economic slowdown and a threat of recession, there is the need to instil confidence among the people. The country has succeeded in overcoming worse situations earlier and this is just a passing phase, says the financial analyst.

Fear of war is worse than war itself, says charted accountant and financial analyst G Karthikeyan about the dread of recession looming large over the economy.

Current sentiments seem to project a recession than the reality, he told The Covai Post. Certainly there is drop in economic activity. It is imperative that positive sentiments be infused into the eco system though we may have a trend of slowdown for next two quarters.

On indication of things not being favourable, drop in economic growth and rising unemployment and Union Finance Minister Nirmala Sitharaman asserting that there was no cause for panic, he says her saying there is no cause of panic certainly is concern that the nation needs to be aware of and get geared up. More than unemployment rates, what worries Karthikeyan is the layoffs and job cuts by several sectors, especially auto majors. “Imagine mid-career job cuts where the entire family of the retrenched employee is dependent on him for education health and other needs. Needless to mention the fact that his repayment commitments on home loans and vehicle loans in addition to maintenance needs of his family are causes for concern,” he adds.

Automobile majors have declared production holidays. The Government announced that it would allow Government departments to buy new vehicles. Layoffs, closure of showrooms are happening. The retail sector too has been feeling the pinch and is showering discounts and offers. But the fact remains that business is dull.

About the auto sector, he says, it has been hit by multiple reasons to include adoption of BS VI norms, preparedness to switch over to electric vehicles, slowdown of sale of commercial vehicles due to introduction of Goods and Services Tax (GST) that increased efficiency of operational time due to elimination of check posts coupled with enhanced allowance for load capacity etc. Certainly, the recent measures of the Government may help in boosting auto sales but will not commensurate the reduced demand. The austerity measures adopted by manufacturers and retails of the auto sector have already cost jobs. It is very essential to contain this at this level than allowing it to slip down further.

On hasty implementation of GST, Karthikeyan says GST which should have been implemented much earlier as this is an inevitable tax reform. More than 75 per cent of countries have it. However, there is a wide belief that the implementation could have been better.

Regarding demonetisation, he says the goal is good. However, many unorganised small businesses still have complaints and a few of them say they are yet to recover from its impact.

About the Union Government taking out of the RBI reserves, he says the role of the government during recession and through it was very important in any country. Public investment and spending happen during this time. To spend, the Government needs money in the form of non-tax revenue. At this juncture, utilising RBI reserves is the right move. On merger of PSU banks, he feels it is a long-term result-oriented one. Practical challenges associated with such a massive merger need to be dealt with diligently.

He admits that the Government needs to act to improve the situation, especially when the manufacturing industry has taken a beating over the last few quarters. “There is an unknown apprehension and fear prevailing in the minds of business owners. It is not only the duty of the Government but also the Opposition to remove this and infuse confidence in the minds of the business community. Tax reliefs will not only help but additional efforts have to come from the Government aligning with the need of the manufacturing sector. This will help bring comfort and confidence to assist in getting the economy back on the path of recovery soon. “India had experienced worse situations in 1991 and 2008 and recovered so quickly. We are known for our resilience,” says a confident Karthikeyan.

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