Besides a social transformation, the way Indian consumers spend is going to see a lasting shift, according to Kenneth Andrade. This will benefit certain sectors that will emerge stronger after the crisis. The founder and CEO of Old Bridge Capital emphasises that credit is key to kickstarting economic growth. In an exclusive interview with Outlook Business, he discusses the importance of understanding both debt and equity in a balance sheet, why pricing is crucial and which sectors will see growth in the coming years
What’s your prognosis of the current situation?
Today, most of the smaller corporates have just about two months of cash flow to meet fixed expenses. After this, they will need to dip into their reserves and increase borrowing. This could end up being a systemic risk, if the financial sector does not support their requirements. If we go through a phase where corporates have no revenue or billing, the problem could spill over to their ability to retain employees. Thus, whatever needs to be done on the fiscal side must be done within a month. There’s no economy that is in a different shape today. If India is falling off the cliff, the world is falling one notch lower.
Do you believe the system, including consumers, will alter their ways once this scare blows over, given that COVID-19 is once-in-a-generation phenomenon?
I don’t think the fear will go away soon, so yes, I do expect lasting change. For instance, with the fear of loss of income and jobs, we just might see a structural shift away from a consumption culture towards a saving one. And once consumption patterns change, behaviour will change too. In such a scenario, we need to spot businesses and structures that are conducive to where the opportunity lies. A good example of such an opportunity is the insurance or the asset management business. I’m reasonably sure about the adoption of insurance. Whether it is general insurance or life insurance, the number of people buying them will start inching up, and it will become a staple way of investing for a large part of the Indian population.
I also believe there will be a significant social shift in trying to cater to the bottom of the pyramid, which will include a lot of social benefits in terms of healthcare and sanitation, besides mobility or communication, just in case the pandemic occurs