View: Moving the needle to navigate COVID-19 turbulence

View: Moving the needle to navigate COVID-19 turbulence

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Buoyed by extraordinary efforts and timely measures introduced by the Government and various regulators, both the automotive and financial sectors saw a strong finish to the last financial year.

The atmosphere was tingling with optimism and the industry was poised to return to a high growth trajectory. But all this changed with the arrival of the largely unanticipated second wave of the pandemic.

While many have expressed a sense of déjà vu, the second wave is, in fact, different from its predecessor, what with its impact being felt in both urban and rural India, and its severity surmounting on younger people; including working professionals.

The continued surge of the virus has resulted in an unprecedented humanitarian crisis, which tragically continues to claim the lives of employees, their family members, and customers today.

While the second wave and various restrictions introduced in its wake obviously have a knock-on effect on the economy, it is important for industry and business leaders to adopt an empathetic approach in these times.

It is heartening to see that corporate India has risen to the occasion by providing unstinted support to affected employees, organizing sponsored vaccination drives; and generally putting the interests of their employees first during these testing times.

While the core focus is and should remain on preserving human life and individual health, it is also important to address the health of the economy; particularly that of small businesses and MSMEs that form the nuts and bolts of our economy.

Significantly aided by various government and regulatory measures in 2020, MSMEs emerging from the shadow of the first wave were jolted yet again by the abrupt and unanticipated nature of the second wave.

Tremors of the second wave are being felt by all key players in the automotive ecosystem including OEMs, suppliers, dealers, financiers, and most importantly, customers and borrowers.

Partial to complete lockdowns across the country, strained driver availability and mounting transport costs have collectively caused a steep decline in the free cashflow of transporters; particularly the smaller ones.

Across the financial sector, common on-ground feedback is that small borrowers—especially those who operate in the unorganized sector—are expressing the need for a temporary breather on their payment obligations; either as a result of themselves being infected by the virus or due to their cashflows having been suddenly reduced to a trickle.

The overall impact on the business and cashflow of borrowers, combined with the decision of most financiers to not deploy their feet-on-the-street employees amid today’s health and safety concerns, is likely to impact collections in the short term and lead to a consequent uptick in EMI slippages.

It is, however, not all gloom and doom. And as an optimist, I believe that the second wave is only temporary turbulence that cannot stop the India growth juggernaut. We, as a country, have already demonstrated the resilience of our economy by tiding over the first wave through close coordination between government, regulators, and industry. There is no reason to believe this time will be any different. In fact, we have already seen some evidence of the authorities responding with familiar alacrity and intelligence.

The continuing key pain points, though acute, are short-term and can be addressed by moving the needle by a few months. This will serve as a panacea to the financial sector, enabling improved credit flow and increased demand offtake come Q2.

With continued government and regulatory support, I am confident that corporate India will be able to navigate the presently troubled waters and grow from strength to strength.

—Samrat Gupta is the MD and CEO of Tata Motors Finance Group. Views are personal.



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