India Inc seeks policy clarity, action to get economy moving
May 27 2014 , Mumbai
Industry is still haunted by policy paralysis that bled the economy with GDP growth slipping to less than 5 per cent. Should the new government falter in initiating immediate steps, the economy may run down further, most industry captains told Financial Chronicle.
Sectors such as steel, auto, cement, infrastructure and real estate are still witnessing significant demand slowdown, as consumer sentiment remains low. Corporate mandarins expect the new government to boost spending on infrastructure to revive demand in cement and steel.
The auto sector too hopes that consumer sentiment will turn around and car sales pick up in the second half of the year.
Dilip Oommen, CEO and managing director at Essar Steel, said, “We expect the new government to push infrastructure development, which in turn would lift demand for steel. Also, paperwork and project approvals should be speeded up.”
His colleague and CFO at Essar Ports Sailesh Sawa said, “We expect the new ministers to improve the long-pending approval process. Although we have seen some movement in the past two-three months, many more steps are needed to improve the sentiment.” He said it would be possible to increase port capacity three times by 2020 only if new capacities are approved and the capex cycle is revived.
Pravin Shah, chief executive of automotive division at Mahindra & Mahindra, said, “The last two years have been the worst for the country, with very few project approvals. Even where approvals were granted, funds were not allocated. The auto sector witnessed its worst phase in the past two years. We are sure the government would provide the much-required boost, as the sector contributes around 7 per cent to 8 per cent of the GDP and provides significant employment.”
Corporate captains are relying on the cabinet’s youthful leadership to get things moving. “The preference for young leaders in the cabinet in comparison with the previous cabinets is a right step and denotes focus on dynamic ministers who would be ready to show extra-enthusiasm in implementing projects,” said K Venkatesh, managing director of L&T-IDPL.
“We expect the ministers to take realistic stock of where the sectors are and address the issues accordingly. Priority measures must be initiated to facilitate capital raising, with equal focus given to equity and debt. Taxation must be made transparent to drive foreign investments; projects executed on priority basis; disputes resolved fast and relief provided to the aggrieved partners both in the public and private sectors,” Venkatesh said.
D Muthukumaran, head of corporate finance at Aditya Birla Group, said, “We desire that held-up projects get a leg-up and the capex cycle is revived immediately. Both public and private investments have suffered in the past few years. The economic cycle would improve only if sentiments revive through stable government policies and people start taking the government seriously.”
NK Bharali, director of business development and HR at Oil India, said the sector expected more emphasis on exploitation of natural resources within India. “Hence, we desire that the government would provide incentives to exploration and production activities in offshore and onshore fields.”
The cement sector, which has been struggling and witnessed slow growth in 2013-14, also expects the scenario to improve, going forward.
“We have placed a lot of hope in the new government and I am sure that the country will get back on track in the days to come. We will have to give the new government at least one quarter to settle down. At least work should resume on all big projects that were stalled. Once these projects get going, cement demand will revive,” said Vinita Singhania, managing director of JK Lakshmi Cement.
Ranganath N K, managing director of Grundfos Pumps, said, “I am personally looking forward to a slew of quick reform initiatives that will allow businesses to get established and grow. The government has to make changes to substantially increase the ease of doing business in India. It has to change from being a policeman to being a facilitator. A level-playing field needs to be created for all businesses with stable policies that can attract investors. The initial focus has to be on infrastructure and power.”
Mathew Titus, executive director at Sadhan, the MFI industry body, said: “The microfinance industry expects two things from the government; one, it continues funding through the WSG programme for group formation of women in weaker areas, and second the passage of the microfinance bill. Regulatory clarity can help channel bank funding to MFIs and take the industry to the next level of growth.”
(With inputs from B Krishna Mohan and Trushna Udgirkar in Hyderabad)