Bengal finance and industries minister Amit Mitra on Saturday said he expects businesses to return to 90 per cent of their pre-Covid mode of operations, but expressed concern about structural challenges to the economy and inadequate central government initiative in spurring demand.
“My considered view is unless some new viruses appear and again we need to go back to social distancing and wearing masks, we will return to 90 per cent of how businesses were done before the pandemic struck. By and large I am hoping this is a blip and that blip will create its own dynamics but is not something that we can call completely a new normal,” Mitra said.
He was speaking at the valedictory session of Infocom 2020, the flagship event of ABP Group. The event this year is themed “The Next Normal” in the context of the pandemic.
“This is not a new normal. It may be an upgraded normal where people may be using virtual conferences rather than travelling across the world all the time. But it is certainly not something that will be abundant. We can have a virtual lounge today. But it is not the same as having a real lounge where you exchange ideas and challenge each other and watch each other’s body language,” he said.
Mitra said that certain activities and businesses such as manufacturing and tourism cannot shift to virtual.
Mitra feels critical board meetings cannot meaningfully take place without key board members meeting in person.
“Can the boardroom environment be reproduced for complex decisions, big ticket changes?” Mitra asked.
He said the minute a vaccine is available and things become normal, the unorganised sector will go back to their pre-covid mode of working.
However, structural issues in the economy are yet to be addressed, according to Mitra.
He said for seven quarters before Covid 19, GDP growth was on a decline, clocking a growth of only 3.1 per cent in the January-March quarter. He said that demonetisation and a hasty introduction of GST had its impact but more granular studies are needed.
“I am really disappointed that when Covid hit, what should have triggered in the mind of the government of India is a great depression is about to happen. In the first quarter, GDP shrank 23.9 percent and the second quarter was also negative, which means we are now in recession. That was known when the lockdown was imposed,” Mitra said.
He added that the Centre should have taken a cue from neoclassical Keynesian synthesis and stepped up spending to stimulate demand. Economies such as the US and Japan had significantly increased their spending and in the UK there was a furlough of 80 per cent of the salary being paid by the government if not called to work.
“In India, the Keynesian multiplier works out to be a figure of 4. This means if we spend Rs 100 from the government, particularly in capital expenditure and consumer activities, you will get a 4 time benefit from that,” Mitra said.
The minister also pointed to the low attrition rates in the IT sector in Bengal as a key differentiator compared with Bangalore and Hyderabad.
