Interest rates are coming down, inflation is manageable, liquidity for NBFCs is improving, and the core levers to drive growth in the auto and FMCG are falling in place.
By Pritish Raj
While slowdown in demand has impacted growth in sectors such as automobiles and FMCG, Sunil Kant Munjal, chairman, Hero Enterprises, is hopeful that the consumption cycle will improve in coming months. In an interview with Pritish Raj, Munjal says private investment and consumer spending can only happen through lower taxes, flexible environment for hiring and a streamlined system of permissions. Edited excerpts:
The economy is going through a slowdown, with no green shoots being immediately visible. The latest available March quarter data indicate the slowest quarterly GDP growth in five years. Your thoughts?
India is no stranger to business cycles, nor is the world. Yes, there is a slowdown, but I don’t believe that there are no green shoots. Very few nations around the world have a manufacturing sector that is still expanding – PMI in excess of 52 – India is one of them.
For an economy, which is largely consumption driven, how worrying is the current slowdown in demand across sectors like FMCG, cars and two-wheelers, where volumes are dropping to new lows?
Without the credit cycle, you cannot have the growth cycle, and for both these to gain momentum, consumption needs to be revived. The consumption cycle will improve in the coming months and a revival of demand could well come from rural India with normal monsoons back on the table. Interest rates are coming down, inflation is manageable, liquidity for NBFCs is improving, and the core levers to drive growth in the auto and FMCG are falling in place.
But banks of late have trimmed exposure to the auto sector. NBFCs’ lending is already under stress post the IL&FS case.
The fault lines in the NBFC sector are quite visible, but it is important not to cast aspersions on the entire sector. NBFCs play a critical role in credit delivery, especially to the small borrower. However, there are many NBFCs that are still strong, have great credibility and enjoy solid balance sheets. They need to be supported so that they can raise long-term finance at lower rates.
CEOs of top auto and FMCG companies have sought policy intervention to revive consumer demand and private investments, either by way of lower taxes or a stimulus package. Do you think a short-term support will bring about some positivity?
I do believe policies and steps should be taken to support the private sector to help it play a bigger role in capital formation and job creation. Private investment and consumer spending are a function of the business environment, and it can only happen through lower taxes, easily available land at competitive prices, a flexible environment for hiring and a streamlined system of permissions.
How would you assess the government’s performance in the last five years? What were the big hits and misses?
In terms of hits, GST, IBC, measures to improve ease of doing business, DBT, efforts at digitisation, improvement in highway and road building, etc come to mind. In terms of disappointments, more could have been done to free up the agriculture sector in collaboration with state governments. Also, labour reforms and land reforms remain stumbling blocks. The approach to divestment is also a disappointment, we can’t have true and effective divestment in any country without privatisation.
The Mindmine Summit, an initiative of Hero Enterprise, has been instrumental in raising voices and sharing distinct views on India’s growth story. What is the objective of the 2019 summit?
This year’s theme – One Nation, Multiple Destinies – will seek to understand the diversity of India’s growth and development. It will look at the under-appreciated pockets of opportunity that exist around the country. It will seek to sensitise policy makers on the importance of designing distinct and unique policies relating to skill development, rural India, resource management, urbanisation and transportation so that all of India, and not just parts of it, can benefit.