Published: 4th Aug, 2020
Confederation of Indian Industries recently said that rural lending reviving, agri given hope of recovery.
Context
Confederation of Indian Industries recently said that rural lending reviving, agri given hope of recovery.
About
- According to the Confederation of Indian Industries there are early signs of a V-shaped recovery in the economy in the immediate aftermath of the lockdown, driven mostly by agriculture and rural lending, as well as positive trends in FMCG, pharma and even construction.
- However, the uncertainty of mini lockdowns and unnecessarily wide containment zones continue to affect business operations.
- Terming the agriculture sector a “beacon of hope”, CII noted that rural lending by non-banking financial companies (NBFCs) is at about 80% of the usual levels.
- Stressed sectors include aviation, hotels and commercial vehicles, which show no signs of recovery yet.
- However, the information technology and health sectors are likely to hold steady even if they do not show much growth.
- An increase in people eating at home and a greater demand for sanitation and hygiene products is likely to drive 15-20% growth in the FMCG sector.
- With most construction sites resuming operations, CII is predicting a bounce-back in the sector which employs the largest number of people outside farming.
- CII also added that commercial real estate is holding up on lease renewals, though new leases are not being signed.
Reasons for the recovery
- Positive indicators include GST collections, railway freight traffic, petrol consumption, peak power demand and electronic toll collections, as well as expectations of a bumper harvest in the wake of a normal monsoon.
Suggestions
- In order to nurture the nascent signs of recovery, it is important to mitigate the uncertainties that are currently prevailing regarding restrictions. Corporates are unable to plan beyond a horizon of a few weeks, which is in turn affecting all operations.
- Given that it was not possible to predict the course of the pandemic, it recommended a dashboard approach, where the progression of infections would trigger predictable responses in a way that would reduce uncertainty and boost consumer and industry confidence.
- Containment zones need to be limited to micro areas to ensure that supply chains function seamlessly; and business activities must be allowed to function by removing the uncertainty associated with imposing mini lockdowns.
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Confederation of Indian Industries (CII)
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