Worst is not behind us, December onwards will be very difficult: Vineet Rai

All is not well and worst is not behind us just because the traffic on roads have come back to normal as the supply chains are still disrupted and the economy has been decimated due to state-wise lockdowns, Vineet Rai, Chairman and Founder of Aavishkaar Group told ETV Bharat.

New Delhi: The real impact of Covid-19 on Indian economy will only be felt during the peak winters when the impact of lifting of loan moratorium will be visible on the ground, said a top investor. All is not well and worst is not behind us just because the traffic on roads have come back to normal as the supply chains are still disrupted and the economy has been decimated due to state-wise lockdowns, Vineet Rai, Chairman and Founder of Aavishkaar Group told ETV Bharat.

“The challenges are significant, if you look out and see that the traffic is back to normal then one might think that the world has come back. But the reality is different,” said Vineet Rai, whose group has assets worth $1 billion under management.

Vineet Rai says there is an alarming rise in the number of Covid-19 cases in the country and this is the biggest threat to the economy despite the fact that the recovery rate in the country is also very high.

“I don't think that either from the investor's point of view or from outside that we are out of the woods. My guesstimate is that things are going to turn worse before they will become better,” Rai told ETV Bharat in response to a question in the Business and Banking Dialogue organised by Mumbai based electronic payments firm EPS India.

“We have not yet seen the testing time from the COVID-19.The real testing time will be in December, January and February when the impact of lifting of the moratorium will become very clear to the public,” said the social impact investor.

In March this year, the Reserve Bank of India allowed banks and lending institutions to offer borrowers a 3-month moratorium on loan repayments to lessen the financial burden on businesses and salaried class as the country was under a complete lockdown. The moratorium was extended by another 3 months and ended on August 31.

The loan moratorium did allow the salaried class and business not to pay their EMIs during the lockdown if they faced financial difficulties. However, experts are of the view that during the same period the economy was severely hit due to nationwide lockdowns which was followed by state specific lockdowns.

“The reality is that supply chains are being massively disrupted. In my view, the government made some basic errors in not understanding the economy and supply chains during the lockdown. During the lockdown, the supply chains were disrupted and it decimated the economy,” Vineet Raid said in response to a question by ETV Bharat.

“It was done with good intentions but in the hindsight these good intentions have been copied by States and States without being concerned about the supply chains continue to impose lockdowns despite the Union home ministry's advisory to the contrary,” Rai said while explaining the adverse impact of state wide lockdowns on the country’s economy.

As per the latest data released by the NSO, India’s GDP suffered the biggest ever contraction since independence during the first quarter (April-June) of this financial year when the country was under a complete nationwide lockdown. NSO data showed the GDP contracted by 23.9% in the first quarter against the growth of 5.2% during the same period last year.

“There are challenges and those challenges will reflect in the business and there is also a change in the behaviour of consumers. You can go to a mall and try to see what is happening,” Vineet Rai said while highlighting the consumer behaviour who have become risk averse due to the uncertainty caused by the global pandemic.

The highly infectious Sars-CoV-2 virus, which was first detected in China’s Wuhan region late last year, has killed over 71,600 people in the country and over 8,87,000 people worldwide.

The COVID-19 virus has caused unprecedented disruption in the global supply chain and industrial activity and expected to result in a loss of $9 trillion to the global economy.

(Article by Krishnanand Tripathi)