'Economy's up partly due to pent up demand' | Economic Times

NITI Aayog Vice-Chairman Rajiv Kumar has placed a huge glass pane on his table as a precautionary barrier since he is meeting officers, staff members and guests daily. In this age of the novel coronavirus, one has to tread carefully. Kumar is cautious on another front as well: revival of the Indian economy. In an interview with Shantanu Nandan Sharma, he says he is only cautiously optimistic about the recent data that shows a surge in highway and railway traffic. Excerpts:Is the recent traffic surge in highways and railways’ freight segment a good indicator of economic revival, or should we wait for more evidence?The rise in traffic in the highways and the railways freight clearly indicates that economic activities have been picking up. Between the two modes of transportation, the surge in freight traffic in the railways in particular is a very good sign because during the monsoon season, usually, the transport of bulk commodities gets restricted. It is likely that this surge is also due to companies and plants building up the inventory of inputs, which could have run down during the lockdown period on account of logistics bottlenecks. I am told that the capacity utilisation of trucks too has picked up from April levels, but it’s still not as good as the railways. So, the rise in traffic needs to be analysed from two angles, first, yes, the economy is picking up and these are good indicators; and, second, we need to acknowledge that it is partly due to the release of pent-up demand from the lockdown period.How do you compare the rise in traffic — in railways and highways?Between the two, the railways has been doing better and that’s a good sign. I hope this trend continues. And I am optimistic that the railways will have an upper hand as the average speed of freight trains has considerably increased. The introduction of time-table for freight/goods trains will make a significant difference too. Most part of the Dedicated Freight Corridors will also be ready by the end of next year which again will release a lot of capacity and accelerate railway freight movement.Both the highways and the railways have their own roles to play. But the modernisation of Indian Railways and the adequate capacity expansion will play a bigger role in driving the economic growth in the years to come. It will also have a huge positive impact on the ecology.What is your assessment on economic recovery for a year or so?I don’t want to dodge this question, but it will be foolhardy to make a forecast at this juncture. It will largely depend on how the pandemic behaves. If the virus resurfaces, for example in Europe, it will have an impact on our trade as well.The recovery has so far been V-shaped, but to be honest, that is unlikely to continue that way. Once the pent-up demands are met, things may start normalising again.The economy will likely see a contraction during FY 2020-21. So, we have to try very hard to ensure that in 2021-22 we pass the level of output we had reached in fiscal 2019-20. And to make that possible the government has announced a very large infrastructure pipeline and is pushing big-ticket infrastructure projects. These will create a momentum in the economy. If a project is well-designed and viable, finding the necessary financing is not an issue. The prime minister has a vision about making our infrastructure world class and so I am optimistic.Do you think mini lockdowns as well as weekend curfews imposed by various state governments are a major disrupter in reviving the economy?Yes, statewide lockdowns are a disrupter because the supply chains go across states. You can’t expect one industry expanding its output without having inputs from other states. My personal view is that we have to go for focussed, hyper local interventions to contain Covid-19. In every state, the authorities have to identify areas of high infection and contain those. The 3T process (tracking, testing and treatment) should be consistently followed. The blanket lockdowns in states are counter-productive. All the states need to understand that. After all, a pick up in economic activity, while keeping the virus in check, is in their interest as well.