Bigger stimulus needed for revival: Sanjiv Puri, Chairman, ITC

Kolkata: ITC Ltd chairman Sanjiv Puri said the longer the country is in lockdown, the greater the stress on the economy, which will result in an increase in the government support needed for getting micro, small and medium enterprises (MSMEs) and even large companies back on track.

All industries are facing a liquidity squeeze given weak revenues and need assistance so that jobs can be protected, he said, calling for more measures and pointing to stimulus plans elsewhere in the world.

“Various countries have announced fiscal packages, which are 1-20% of GDP,” Puri said in a video press conference on Thursday. “A large support will be required to revive the economy, which will be done as per assessment from the quantum of stress, depending upon how long economic activity is constrained… Industry needs support to protect jobs and to support all these costs while revenues are weak.”

ITC is adapting to a post-Covid world by minimising expenditure, recalibrating investment, delaying FMCG launches unless they are products in demand. The hotel business is coping with new norms of physical distancing and no-contact services, he said, adding that ITC won’t cut salaries.

‘Liquidity Issues’

“The longer economy is shut down, there will be more stress in the economy and more support from the government might be required,” Puri said. “MSMEs and even larger industries will face liquidity issues. Some steps have already been taken, but more needs to be done. Office work can happen digitally, and restrictions can be reduced following all government safety norms other than in the containment zones.”

Puri said most manufacturing locations are on the periphery of urban centres and need to be allowed to start functioning. It may, however, take a long time for capacity to build up to a reasonable level, since vendors or employees could be in containment zones. “The government has been proactive in dealing with Covid-19 which is a welcome move,” ITC chairman said.

“However, the manufacturing value chain should be allowed to operate end-to-end and the agri-value chain (has) to be fully functional outside containment zones, following the strict protocols laid down by the government. These sectors create majority direct and indirect employment. We have to look at both lives and livelihood as stressed by the Prime Minister.”

Puri said it’s difficult to say when FMCG demand will revive to previous levels. Considering these factors, there could be a realignment of ITC’s long-term goal to achieve ₹1 lakh crore in sales from the FMCG businesses by 2030, although that remains the aspiration, he said.

“Staples are on a decent trajectory, but discretionary product demand will take a little longer to revive,” Puri said. “In the short term, there will be greater focus on staples, health and hygiene products. And, going forward as the situation normalises, we will get back to our plan and start to promote the products launched in recent past.”

Before the Covid-19 pandemic, ITC and other major FMCG companies had predicted consumer sales will revive in the second half of the year with the harvesting of the rabi crop. Puri said ITC is readying itself for the future, considering the fight against Covid-19 could be long and there are chances of the disease resurfacing after this initial outbreak is quelled.

“Anything indexed to travel like airlines and hospitality may take a couple of years to revive. Some are capital intensive and very high economic multipliers with a lot of employment. Tourism is 10% of GDP,” he said.

ITC is running its factories at 20-60% capacity, restricting production lines to essential items. Of its 120 plants, including those of contract manufacturers, about 80 are currently operational. Some of them are in hotspots and a few are in states that have not allowed any relaxation until the lockdown ends. All its cigarette factories are shut.

The country’s second-largest hospitality chain, five of ITC’s hotels are accommodating stranded guests or being used as quarantine centres, he said.

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