Government, corporates as well as the social sector joining hands is the need of the hour to help the economy bounce back, said Nobel laureate Dr Esther Duflo (MIT Professor), in a webinar titled 'Leaders With Purpose' co-hosted by Samhita Social Ventures and IDFC Institute.
The biggest challenge that COVID has posed is not just businesses shutting down, but also a large segment of people losing their jobs. Duflo said that it is the responsibility of the government as well as corporates to ensure that people don't get into the ultra poor bracket, from where it becomes difficult for them to get out. "If people don't have the money, they are going to stop buying. India is lucky as it is a large economy. The ratio of import-export to the GDP is lower as it is a large economy. Therefore, India has the opportunity to insulate itself from a lot of what is happening in the world if it can maintain demand and avoid a collapse in demand," she explained.
In order to bounce back and kick off demand, Duflo said that it was important for corporates to lobby with the government to transfer cash to the people in the bottom of the pyramid. "They need a serious nudge to get restarted."
Renana Jhabvala, National Coordinator, SEWA, agreed that cash transfer from the government to the poorest of the poor during this time will make a huge difference to their lives. "We did a large experiment in the rural areas of Madhya Pradesh where money was transferred to the bottom 25 per cent of the society. They used the cash transfers productively and not just for consumption. When we went there after five years after doing one year of cash transfers, we found that the effect was lingering and they were just as well off."
Sanjiv Mehta, Chairman and MD, HUL, said the two important ingredients for a consumer story to progress is money in the hands of people and consumer confidence. "We need to have direct transfer of money to the marginal sectors. In the last 20 years, 20 per cent of our population on an average of 1 per cent a year have moved up from the bottom of pyramid to lower middle class. The risk is that they could fall back to bottom of pyramid and we shouldn't let that happen."
"We are not a $8 trillion economy,. Within our means we can stretch much more so that the economy doesn't stall. Once that happens we will perhaps come out stronger," Mehta added. He also said that in order to protect their business model, HUL has brought heightened focus on costs and liquidity. "We are a cash-rich company, we have zero debt, but it's not just about us running. We have 3,500 distributors, we have hundreds of suppliers and we have to ensure that the whole ecosystem runs."
Nisaba Godrej, Chairperson, Godrej Consumer, talked about the emergence of a shared value system. "We have to keep our business running against all odds. I have to give my ecosystem COVID insurance not just because it's the right thing to do, but because I need them to be safe to come back to work. Safety is not just about physical health, but also mental health. The fact that you have a job and you will be able to move forward with life and livelihood," Godrej said that they will not let go off a single employee in any of their businesses.
Godrej also expects geo-political shifts that could lead to higher manufacturing and more job creation in India."If 80 per cent of a product comes from China or Italy and that has stopped because of COVID-19, then supply chain will get distributed. If India thinks about that, we can get more manufacturing going as a country. There will be a big opportunity to build jobs." Godrej said that she has already been getting enquiries from American companies wanting to set up in India. "They have asked us if we shall be interested in manufacturing for them."