NEW DELHI: Many companies in the country will die unless the government immediately steps in in a big way to mitigate the economic fallout of the ongoing lockdown, according to former chief statistician of India Pranab Sen.
"It's futile to make guesses on the growth because even if the full lockdown is lifted on May 3, which I doubt, we will be in a situation where without the support of the central government now, not then, now, we would have lost something like 30% of our production capacity," Sen said.
"Companies would have simply died by then because most of the companies don't have the reserves to survive that long. That is fairly serious damage and that is the damage that is going to take years of rebuilding," he said.
The damage will be very substantial and growth in 2020-21 (Apr-Mar) will be negative without government measures, he said. The Centre has done nothing other than the initial stimulus package, which itself was pretty small to begin with, he said.
The Central government on Mar 26 announced a 1.7- trln-rupee relief package for the poor to mitigate the economic fallout of the lockdown to contain spread of coronavirus in India. "Essentially the whole burden is being carried by the RBI (Reserve Bank of India), at the national level, and by the states."
He said the RBI moratorium on loans would have been effective if the government provided some sort of guarantee or if it was made mandatory. "In a situation of very high risk aversion in the banking sector, the likelihood is that the banks will err towards caution rather than need.