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Defer taxes, relax loan servicing norms for immediate relief, says Harsh Goenka

Fitch Ratings puts its estimate for India growth at 2 per cent in FY21 from 5.1 per cent estimated just 18 days ago. Moody's Investors Service has slashed India's 2020 GDP growth estimate to 2.5 per cent from 5.3 per cent earlier

twitter-logoNevin John | April 15, 2020 | Updated 16:22 IST
Defer taxes, relax loan servicing norms for immediate relief, says Harsh Goenka
RPG Enterprises Chairman Harsh Goenka

As the nationwide lockdown paralyses the operations of Indian corporates, Harsh Goenka, chairman, RPG Enterprises, has sought the support of the government for a fast recovery when the market reopens. "The immediate need is a significant relief to all businesses in the form of tax deferments and relaxation of loan servicing norms," he told Business Today.

"Cash is the lifeline that is required now. All measures that will enable conservation of cash within the businesses will be critical for the survival. We will have to focus entirely on tiding over the crisis before we can start looking at the rebound," said Goenka, who is hopeful that the economy will rebound.

The whole business cycle, which consists of sourcing, value addition and its eventual conversion to cashflows has presently gone into a total freeze for most sectors. The World Bank expects the Indian economy to grow at 1.5-2.8 per cent in FY21, the slowest growth rate recorded since the economic reforms of 1991. Asian Development Bank (ADB) sees India's economic growth slipping to 4 per cent in FY21 from 6.5 per cent projected earlier. S&P Global Ratings has further slashed its FY21 GDP growth forecast to 3.5 per cent from a previous downgrade of 5.2 per cent.

Fitch Ratings puts its estimate for India growth at 2 per cent in FY21 from 5.1 per cent estimated just 18 days ago. Moody's Investors Service has slashed India's 2020 GDP growth estimate to 2.5 per cent from 5.3 per cent earlier.

In terms of losses, the fact that lot of fixed costs are still continuing, there could be under-recovery, he pointed out. "Sales revenues for the first quarter are going to be negligible for most manufacturing operations. Besides the airline and hospitality industry, which are the most affected, consumer durables, textiles, auto and many others into discretionary demand would face hardships," Goenka added.

The cash-strapped aviation sector in India is expected to post losses of $3-3.6 billion in the June quarter because of coronavirus pandemic. The lockdown to contain virus spread in the country has had disastrous impact on the hospitality sector, especially on hotels. "The impact is disastrous. The hotels are businesses which are very capital intensive and also have high fixed costs," Lemon Tree Hotels Chairman and MD Patanjali G Keswani told media.

Niranjan Hiranandani, founder and MD of real estate giant Hiranandani group, said that the real estate off-take will fall 20 per cent in three weeks.

Going forward, the companies need to manage the liquidity aspect quite astutely, said Goenka. "Commodity prices have fallen which can be helpful for a brief period during the recovery phase. But overall, businesses have to focus on cash," he added.

Also Read: Coronavirus India Lockdown Live Updates: COVID-19 Guidelines to be issued today as migrant crisis hit nation

Also Read: Coronavirus lockdown 2.0 guidelines issued: Check full list of relaxations, restrictions by MHA

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