Liquidity for MSME Sector Key Behind Revival of Economy, Says BCT Digital CEO Jaya Vaidhyanathan

BCT Digital CEO Jaya Vaidhyanathan in conversation with News18 said that the current pandemic has given the Indian economy a chance to be more internally focused. Pointing out the key factors needed for revival of the economy, she said that liquidity access to medium and small industries needs to be looked into.

BCT Digital is the digital wing of Chennai headquartered Bahwan CyberTek. The company provides digital transformation solutions in the areas of predictive analytics, digital experience and digital supply chain management.

What is risk management and how can it help firms during the current times?

Active risk management is the need of the hour in the current economy. Risk management is not overall a spend area but one with a payback. If you take any annual statement of a particular company there is a section which says why we didn’t do well in a particular period. So when you say we didn’t do as well as expected, that’s an expected response but I want to know how you are you going to do going forward. So that comes from, for example, quantification of your loss. Whether that was due to demand and how can you attribute that to COVID-19 is the first part and the second part is how much can you attribute it to that. There is much noise about the vaccine been found but people are still unsure whether it will be found in October, December or March. Each of these scenarios will have different loss numbers and different recovery numbers as well. For examples active credit loss at 80% will put you at level A and 50% will put you at level B, so this is also modelling of different scenarios. Therefore, if vaccine is found in December, or if it is found in March, it will have different data. So different kind of scenarios are active modelling and this is no gut feeling, there is science behind it. It’s more about looking at past data and saying if this scenario happens, it’s more about quantification techniques, it’s more about predictive modelling. And saying what your loss could be and what part of it can be attributed to COVID and what’s your recovery going to be like.

What is your current outlook for the economy and how do you think industries can plan to revive after the pandemic?

My outlook towards the economy, more specifically towards India, is one of cautious optimism. Demand is going to take some time but it will come back. According to me, it is going to be a ‘v’ curve like a hockey stick like uptick. Demand that you see as of now according to me is held tight, it is going to return as long as we concentrate on a few things. One of them is that we need to keep an eye on the employment rate and that is not going to come only by private spending, there has to be a large scale government spending as well. All major economies around the world are based on government spending. For now, we need to forget fiscal deficit and concentrate only on large infrastructure projects. And the government is doing well on this front. Liquidity as such is not a problem, access to liquidity for certain sectors needs to be further looked into. Liquidity for MSMEs is a problem for now. Banks are not willing to lend because of NPAs. If these sectors are catered to, in terms of liquidity, then revival of the economy can be faster.

Do you see any significant changes in the sector that you are involved in post pandemic? How long do you think it will take to revive?

In terms of the sector as such there was a shift before the crisis from a largely corporate book to a retail book and the MSME route, largely that was the movement. But now you see MSME is badly affected, the retail sector depending on which industry you are in, is also affected and the corporates are anyway going to survive, so the short answer to your question will be very badly affected because the NPAs are on the rise. And the government said there is a moratorium, what does it mean, it means that you don’t have to pay your EMI today but that becomes a loan from the bank again, which means it increases your liabilities which further means that there will be somebody who is going to come after you for that portion of the money. Two, in the books of the banks it is more in terms of mismatch between assets and liabilities. So what is happening is your liabilities are of a longer duration and your assets are for a shorter duration. This can lead to liquidity crisis.

So, in the short term it is going to be affected badly but it is going to make a recovery provided, proper regulations are in place, there is ease of regulatory books, and if there is a lot of active intervention not only from the RBI but from the government as well.

Talking of very small businesses, for example street hawkers, who have been badly affected, the government has provided a one-time stimulus, what according to you is a roadmap for them to revive their businesses?

There is no getting away from the fact that livelihoods of the people have been affected. The cash stimulus is only going to put food on the table. The answer is in any crisis you transform. For example, if I am a street hawker of vegetables, so is my business vegetables or is my business hawking. Once you realise that maybe you can’t to hawking because of the imposition but the package industry is doing really well, so you can cut vegetables package them and deliver it from one door to the other. So you’ll find a very different kind of a system that’s coming and the overuse jargon of the new normal maybe the new form of life. Does the new normal include walking around it in masks? That too. Looking at the common vendor the business that he does in itself is going to undergo metamorphosis. Even buying and purchasing patterns are going to change, it is going to be a matter of the survival of the fittest.

How do you see the Indian economy transforming in the wake of the current crisis?

Like they say don’t waste a good crisis, I don’t think you’ve done that. We see momentum in terms of inflows coming to India. For instance, Google, Facebook are in talking of huge numbers. And why are they looking at such numbers because China does not seem like a good place for investment. So the alternative is India, you know it’s a democracy, you have your money and you can get it out from investor point of view and you know that it’s going to be a system which is going to be fairly more transparent than what happens in China. Now is the time when manufacturing revolution will also happen in India. A lot of what is outsourced to China is going to come back to India. There is going to be a shift towards the tier 2 and tier 3 cities. It will not be focused in the tier 1 cities. I think the largest transformation that will come with this is new jobs in manufacturing sector will move to rural areas and tier 2 and tier3 cities.

Also I think push for Atmanirbhar Bharat will be beneficial in catering to domestic demand by domestic industries and sellers. I think this crisis was the way for us to be more internally focused, look within and then come up. Thirdly, there is going to be a change in the services sector. Earlier, we used to get product from outside. I think the world will now see the next unicorns coming from India. There will a paradigm shift in creation.