Interview With Ms. Ayushi Chand

Ms. Ayushi Chand is an Indian Economic Service officer, currently posted at Ministry of Finance, India as the Deputy Director. She has interned with the Planning Commission of India and worked with the Andhra Pradesh Government as well. She is also interested in behavioral economics and its application in public policy, education ecosystem in India.


1. The latest report by NSO shows that GDP contracted by about 7.3% in FY21, which has been a record low. How do you perceive the coming times for the economy of India, and what kind of measures are necessary to bring a positive change on the economic front?


Ms. Ayushi: For the full financial year 2020-21, India’s economy contracted by about 7.3%. However, India has now reported two consecutive quarters of GDP expansion, after having witnessed two consecutive quarters of contraction earlier in the financial year. India’s economy continued to accelerate in the January-March quarter, growing by 1.6%. The continued GDP growth indicates that India’s economy was treading on the road to recovery before the second wave of the CoVID-19 hit and forced restrictions across multiple states impacting economic activity.


The forecast of the future GDP shows that it may be better than the previous quarters. Investments, calculated as gross fixed capital formation, rose 10.9% in the fourth quarter. Government expenditure grew by almost 28.3% in the final quarter of the fiscal. The growth rate swinging back in the positive territory is in line with most estimates, supported by high government spending, reform measures, and progressive unlocking.


Going forward, the steps taken to accelerate the vaccination drive will have a major impact on the easing of lockdown and in turn the economy. The improvement in the last two quarters shows some bright picture with the government's focus on improving infrastructure. Production-linked incentive schemes can bring relief to the manufacturing sector. Further, a big opportunity for India lies in digital transformation, which holds great promise for a new type of globalization.


2. These days cryptocurrency is all the hype across the world. What do you think should be India's policy for these technologies as they show a positive trend and might be very lucrative?


Ms. Ayushi: While cryptocurrencies have become a hype across the world, there are major concerns associated with them which need to be addressed. The extreme volatility and the decentralized nature of these pose regulatory and security challenges, along with inadequate literacy around the subject. All the issues need to be addressed thoroughly before a clear policy is chalked out.


This question regarding India’s policy for this technology needs to be solved by a multi-stakeholder approach. The government, regulators, blockchain experts, crypto exchanges and the users have to be brought on board to decide the future of cryptocurrency. Discussions are on about how it will look like and what kind of policy levers and technology standards encourage the adoption of cryptocurrency and blockchain technology.


3. With the second wave slowing down, it's time to get back in full force to revive the economy and the finance sector, which also calls for bearing in mind a sustainable financial recovery. How do you think can India sustainably restructure the sector, and what kind of measures are needed to do the same?


Ms. Ayushi: The Indian financial and banking sector is likely to be slow to recover compared to other sectors post the pandemic, and this is because the sector is acting as a pillar of support for the recovery of all the other sectors.

At the same time, an improvement in India's macroeconomic conditions is likely to alleviate stress for the country's banking sector.

Despite the economic hit, the banking sector's funding profile remains its strength. Indian banks' good franchise, extensive branch network and large domestic savings support a granular and stable deposit base. Strong growth in deposits due to the country's high savings rate should offer efficient banks room to grow.

Steps by the government and Reserve Bank of India, including an emergency credit guarantee scheme for SMEs, are likely to lessen stress. Plans to establish a 'bad bank' and strengthen the National Company Law Tribunal framework would also bolster the sector. As per the Budget Speech of 2021-22, an Asset Reconstruction Company Limited and Asset Management Company would be set up to consolidate and take over the existing stressed debt. This should again provide relief to the sector.


4. With the devastating second wave of the COVID-19 pandemic, the migrant labourers who had slowly started returning to the industrial states have again had to go back to their hometowns. How do you think the state governments can reform their labor laws and implement new schemes to provide a livelihood to these migrant labourers who are struggling the most right now?


Ms. Ayushi: In order to improve the working and living conditions of migrant labourers and their families, there is a need to implement a comprehensive national strategy for migrant labour welfare.


In the short-term, their re-employment is of utmost importance. States must identify the sectors where the returning migrant labourers can be employed so that they can meet their daily sustenance. Schemes like MGNREGA can provide the immediate relief required.


In the long-term, emphasis must be on skill mapping and skill development. The skill development initiative must be matched to industry requirements both in their home state and the destination state


Migrant labourers also need to be supported in two specific areas: legal rights and financial awareness. The migrant labourers must be made aware of their legal rights under the various central and state laws. This would create an enabling environment for the contractors who hire them, to comply with the extant laws. Financial inclusion of migrant labourers plays a big role in the economic upward mobility of their families.


5. The pandemic induced lockdown has affected several small businesses (worse for women entrepreneurs). According to a research conducted by Krea University, around 11% women-led MSMEs had to shut down with only 1% getting back on their feet due to government aid. What measures can be taken to improve the financial status of these MSMEs?


Ms. Ayushi: The revival of MSMEs is clearly understood to be key in wider employment generation and for distribution of the benefits to the economy. The lack of working capital so far has constrained many of the shuttered, marginally functioning, and surviving MSMEs from returning to their full economic potential.

To support MSMEs and help them survive and turnaround from the pandemic, the Indian Government introduced a host of measures under the 'Atma Nirbhar Bharat Scheme' (Scheme). This included changes in the definitions of MSMEs

The Government has announced several financial measures to help bring additional liquidity and stimulus to MSMEs. Key measures include Emergency Credit Line Guarantee Scheme, Rs. 20,000 crores as subordinate debt to provide equity support to stressed MSMEs, and Equity infusion of Rs. 50,000 crores for MSMEs through a Fund of Funds. The Reserve Bank of India has announced periodic loan moratorium, relaxed working capital financing and deferred interest payment on working capital without asset classification downgrade.

Measures have also been introduced to amend the Government Procurement Policies as well as increase the threshold for default under the Insolvency and Bankruptcy Code.

While these measures should relieve MSMEs of the financial stress in the short-term, in the long-term, focus should be on capacity building and digital transformation. E-commerce enabled several MSMEs to shift to online marketplaces owing to a lack of demand in retail markets. Thus, the adoption of enhanced technology coupled with the right input and maintaining quality would play a significant role in defining the long-term success of the sector. With this, MSMEs would be able to expand their outreach not only nationally but also globally.

Emphasis needs to be given to providing adequate support to women entrepreneurs in terms of risk diversification and re-skilling. For this, awareness needs to be spread regarding personal finance, investing and skill building schemes.


6. With the second wave leading to new lockdowns, consumer demand has gone down again. What steps do you think the government should take to boost this demand? How do you think the consumer behaviour has changed due to this?


Ms. Ayushi: The second wave of COVID-19 and the break out of mutant strains that render the virus highly transmissible across both urban and rural areas led to fresh restrictions on activity being imposed across a large area of the country. Yet unlike in the first wave, the impact on economic activity is expected to be relatively contained in the second wave, with restrictions on mobility being regionalised and nuanced. Moreover, people and businesses are adapting to pandemic working conditions.

Urban demand, as reflected in some high frequency indicators – electricity consumption; railway freight traffic; port cargo; and toll collections – recorded sequential moderation as manufacturing and services activity weakened due to restrictions/lockdowns imposed by most states. Mobility indicators declined during April-May, but they remain above the levels seen during the first wave last year. Moreover, the vaccination process is expected to gather steam in the coming months and that should help to normalise economic activity.

With external demand strengthening, a rebound in global trade is taking hold, which should support India’s export sector. Global demand conditions are expected to improve further buoyed by fiscal stimulus packages and the fast progress of vaccination in advanced economies.

While the rural demand may have also been impacted somewhat, it is expected to remain strong given the forecast of a normal monsoon. Going forward, a close watch needs to be kept on how the rural demand shifts.


7. What advice would you give to youngsters on becoming financially independent?


Ms. Ayushi: Personal finance is one area that should be considered an essential life skill. The youngsters should learn the basics of savings, investment, expenditure, interest rate while in school/ college. In fact, the earlier you start investing, the earlier you can become financially independent.

I would advise the youngsters to learn about basic economics, finance. Learn and weigh the pros and cons about different investment options such as Fixed Deposits, Mutual Funds, Stocks, Metals and Real Estate. Read about the Rule of 72, risk-reward equation, risk diversification.

While these terms may seem complicated, when you learn the basics and start implementing those, things will become much simpler.


(The views and opinions expressed here are personal and do not reflect the viewpoint/ opinion of the government).


Interviewer- Sanaa Munjal

Image Source- LinkedIn