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Don't incentivise inefficient businesses; stimulus will deliver medium term growth: Uday Kotak

Uday Kotak says that he believes that there is more stimulus coming but adds that the government must ensure not to lose all the bullets at one go or it will have nothing left for the medium term

Rajeev Dubey | Joe C Mathew | June 6, 2020 | Updated 18:00 IST
Don’t incentivise inefficient businesses; stimulus will deliver medium term growth: Uday Kotak
Uday Kotak appointed as new CII President

Confederation of Indian Industry (CII) is not in favour of incentivising inefficient businesses, new CII President Uday Kotak told BusinessToday.In right after taking charge. Kotak was responding to the growing demand from the government to provide industry-specific sops to bail out badly affected industries.

"For inefficient businesses, and businesses that have a structural change because of a change in the world, the consumer will decide about the future of that business and not the government. So if a consumer decides that he or she wants to buy online and doesn't want to go to a mall, that is a choice that the government should not intervene in," he added.

CII expects more stimulus to help domestic businesses grow stronger in the medium term. The apex industry body believes the government measure will be selective, targeting the most deserving sections of the industry and not a bailout for all. The COVID-19 hit 2020-21 may show a negative GDP growth, says Uday Kotak.

Also read: Is billionaire Uday Kotak on a hunt for M&As in a post-COVID world?

"I am a firm believer that there is more (stimulus) coming. But you must be clear that if you lose all your bullets, you will have nothing left for the medium term. There has to be a trade off between here and now, and what should be used here and now v/s what should be for the medium term," Kotak says in connection with the prudence the government should show while announcing a bailout package for the industry.

Kotak says that whatever the size of the next stimulus, the government will have to spend smartly. "You should be able to demonstrate that this spend will lead to medium term growth. We need to give a convincing story that the additional spend we are going to do this year, which may be a loss year, or a negative GDP year, is the year when we are making investments for the sustainability of our growth in the future," he said.

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The CII president agrees with the government's decision to restrict its direct stimulus measures to the most vulnerable sections of the society. Saying that there is no negotiability in mitigating the immediate pain, he wanted the government to spend more in priority areas even if that results in an additional fiscal deficit of 1 to 1.5 per cent. "We have to be very clear where to use the money. There will be interest groups. What we have to be careful about is very clear prioritisation for the bottom of the pyramid, for the poor people, for people who run the risks of having no jobs and no income," he said.

The CII has taken note of the fact that despite having spent Rs 10 lakh crore (both central and state spend, and estimated dip in revenues) the government may need to spend more in areas like healthcare and education. "India is woefully underinvested in healthcare and education. We (healthcare spend) are at 1.3 per cent of GDP. Germany has saved itself (from COVID-19) because of its investments in healthcare. We must right now give all the stimulus to invest in healthcare," he said.

Also read: Kotak CEO Uday Kotak takes over as CII president

Also read: Uday Kotak ends long standoff with RBI; sells 2.8% stake in Kotak Mahindra Bank

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