The deadly second wave of Covid-19 may lead to some reassessment of India's economic growth rate in the current fiscal but the long-term prospects for the country continue to remain robust, Aditya Birla Group Chairman Kumar Mangalam Birla has said.
The silver lining, however, was the lesser severity of disruptions to production and supply chains during the second wave of the pandemic than during the first wave, said Birla in the latet annual report of group firm UltraTech Cement Ltd.
Moreover, a pick-up in vaccination would support faster normalisation of mobility levels and of related economic activities, the veteran industrialist added. While the government is thus far stuck to its estimate of around 11 per cent GDP growth in the fiscal through March, rating agencies such as Moody's as well as Asian Development Bank (ADB) have already cut growth estimates.
"Continued accommodative monetary policy of the RBI and the expected increase in capex from the government are factors that will support growth recovery," said Birla while addressing the shareholders of UltraTech. In addition, global growth prospects provide an opportunity for exports as an additional strong driver of growth, he added.
"The longer-term prospects for the Indian economy continue to be robust," he said. "various initiatives, including privatisation of public sector enterprises, monetisation of assets, implementation of National Infrastructure Pipeline, targeted investment incentives through the Production-Linked Incentives Scheme and the new Labour Code are likely to spur a virtuous cycle of investments and growth in the medium term," he added.
According to Birla, the Indian economy was "firmly on the path of recovery" in the second half of FY21, and then was hit by a rather unexpectedly virulent second wave of COVID-19. "That caused a severe strain on healthcare facilities in many parts of the country, leading to localised lockdowns and a fall in mobility to levels seen a year ago," he said adding "this may lead to some reassessment of growth estimates for FY22".
While talking about the global situation, the Aditya Birla Group chairman said in response to the pandemic, central banks resorted to strongly supportive monetary policies in most developed economies, causing interest rates to go down to record lows. "At the same time, another consequence of this policy has been a surfeit of liquidity.
That has led to a strong rally in prices of many industrial commodities, which has also been supported by the evolving economic recovery, stimulus-related demand expectations and certain supply-side disruptions," he said. This has caused inflationary pressures on the cost dynamics of several manufacturing industries, Birla added. "The latest IMF forecast suggests a strong 6 per cent growth in global GDP in 2021.
But the occurrence of second and third wave of COVID in different parts of the world and reports of virus mutations have created downside risks to the outlook of a strong growth rebound," he said. Recovery remains "uneven and uncertain", with the extent of fiscal support and level of vaccination being key differentiators of the short-term economic outlook across countries.
Aditya Birla Group, the multi-comglomerate which operates in sectors such as - metals, pulp and fibre, chemicals, textiles, carbon black, telecom and cement, get over 50 per cent of its revenues from its overseas operations spanning 36 countries Talking about the pandemic's impact on his group companies, Birla said, "Like for many other organisations, the COVID crisis brought out challenges of many forms" as economic impact and business disruptions apart from health emergencies faced by its employees and its value chain partners.
"Notwithstanding these challenges, our employees have displayed the highest possible resilience in coping with personal concerns and yet staying focused on the customers and the business. Our business results convey only a small part of the story of our employee courage, compassion, community spirit and cultural strength," he added.