The Corona virus pandemic hit India when the economy was already slowing down. With the lockdown now extended till 3 May and no clear idea whether life will be back to normal on 4 May, the prognosis for the economy is grim.
T S Sudhir of Filter Kaapi Live spoke to R Ganapathi, Chairman of Trigyn Technologies and the President of the South Indian Chamber of Commerce and Industry (SICCI) to understand how long will Indian industry feel the chill and what possibly could be the new sunrise sector.
T S Sudhir : How grim is the scenario as far as Indian economy is concerned?
R Ganapathi : More than describing how grim the scenario of the Indian economy is, it’s hard to predict how quickly the turnaround will come.
At this time it looks challenging, it is grim, but once the lockdown is lifted completely, green shoots will begin first in the space of agriculture on the back of a good monsoon that has been predicted.
The second would be some of the sectors linked to perhaps consumer goods. The final uptick will come in terms of auto manufacturing although initially you could have some pent-up demand surfacing.
Over all, I predict a tough two to three quarters before the turnaround begins because we just don’t know how the rest of the globe is going to behave. America, of course, it is fair to expect that theirs will be among the first to kickstart but India will have its strength emerging because it will be a high consumption economy.
Today, we have a unique situation, where both supply and demand is devastated. Supply should pick up in about 4 to 6 months from the time the economy reboots itself.
Sudhir : How effective do you think the twin announcements made by the RBI will be in terms of helping the industry get back on its feet?
Ganapathi : In my opinion, RBI has done what it needs to in two streams of announcement. The second one has been important because it has addressed several concerns of the NBFCs who are the last mile funders in this country.
Let me give you a basic example. If you want to buy a car or any other consumer product, the first thing you do is go to an NBFC and it is that revs up the economy and therefore NBFC’s concerns need to be addressed and I think this has been delivered.
In fact, a friend associated with one of the larger NBFCs in south India says that the RBI has delivered big time.
Also the last statement that the Governor made, saying that if needed we will come back and address your concerns again, that is an important takeaway.
Sudhir : You are part of the IT sector, an industry that could well be the torchbearer of the revival of the economy. What are your realistic expectations?
Ganapathi : The IT sector is in a happier position than most of the sectors because it is not dependent on the Indian economy. It is dependent on the global economy and global economy is not likely to fail and therefore we can believe that the IT sector would be among the first sectors to take off.
America is always considered as mother country for the IT industry and with the US $ 6 Trillion that is being pumped into the system by the US Administration, a lot of it will go to the larger companies and in particular, the push for discovering drugs and other formulations for health care will ensure that the health care and the life sciences sectors will take off quickly.
I think there will be heavy spend in these two sectors. Indian companies are already positioned well in these sectors and therefore I believe that the IT sector will pick up much faster than the rest of the sectors.
Sudhir : So if the IT sector has much to look forward to, as your projections indicate, could this Y2K 2.0 for Indian IT?
Ganapathi : I think every challenge brings its own opportunity for the IT sector and therefore I venture to believe that the IT sector is poised for growth. I think India’s strength is the IT staffing and IT solutions. Both will be leveraged to our advantage and therefore I believe that the IT sector will see a lot of opportunities for India and Indian companies.
In any case, IT companies are sitting on multi-year long-term contracts. They will continue to deliver what they are doing , the challenge will be only if they fail in the delivery which is unlikely otherwise maintaining the present revenues should not be overly difficult. I think growth will be part of the scenario in about 3 to 4 quarters.
It can come across multiple sectors, health care and life sciences and possibly a sector will emerge in the next 2 to 3 years as the go to sector, where retailing is done without any human interface.
You will have robots and artificial intelligence coming into play in the retail sector. I think there is a big opportunity that is emerging much faster than what we thought before the crisis.
Humanless interaction will be the way to go.
Sudhir : Given that you do a lot of work for American companies, how do you see the situation developing in the US and Europe impacting Indian companies.
Ganapathi : It’s difficult to predict about Europe.
One client in Europe told me either Corona will get Europe or Europe will get corona. Its pretty hazy at this time about Europe, the quality of Europe’s recovery is not clear at this time and therefore I wouldn’t want to comment on Europe. The problem coming for them soon after the Brexit and of course Europe was better prepared for the Brexit than perhaps UK but yet Europe’s economy was not in the best of shape when it went into this crisis and with all the issue that is associated with Europe in terms of economy and the physical health of the Europeans, I think it’s very hazardous to comment on Europe.
America is poised for a strong comeback. The Americans are so good at pushing the can down the road and that is perhaps the way capitalist economy behaves. It will come back to haunt them but in the short and medium term, the pickup will be significant in America, the recovery will be strong whenever it happens but the follow-up can be an advantage for IT companies.