Sounding an optimistic note on the economy, Sunil Kant Munjal, Chairman, Hero Enterprise, said he expects the situation to start improving in the next two quarters.

In an interview with BusinessLine , he said there has been some “pain in transition” and there is need to focus on investments, increasing exports and “earn and spend” the way out of the current economic slowdown. Excerpts:

What do you make of the current slowdown in auto and two-wheeler sales?

I am not directly involved in the two-wheeler business any longer but I can say that the automotive industry in India is undergoing a serious challenge in terms of the changes taking place. First is the change in terms of the BS-IV to BS-VI emission norms. Second is the big push for cleaner emissions worldwide.

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There are two different approaches being taken — some countries have just laid out the outcome and some like India have also defined the path of electric vehicles. The industry has pushed back to some extent and told the government that it can’t decide the path as the government is not an expert. It can define the air quality standard but what technology will get us there is an industry expertise.

Overall, in India, the consumer end of business has gone through a difficult time due to lack of financing from banks and shadow banks. I expect that in the next two quarters we will start to see an improvement in the overall situation regarding consumption, production and then investments. This is true not only for the auto industry but all consumer-facing industries.

Do you think the NBFC slowdown impacted sales?

The last-mile funding in India over the past many years has actually not happened from banks but from NBFCs. The sector has been in a bit of a crisis situation for some time but the situation is gradually inching towards normalcy. I think we are still some distance away, though, directionally we are in the right way. I think we need to accelerate the process.

You had been investing in start-ups for some time. Are you looking at a dedicated fund for this?

We had been investing in start-ups for a while and also did venture funding after that but have, in fact, stopped doing it. Now our investment office only makes investments in larger opportunities.

Are you satisfied with the measures taken by the government to revive the economy?

The government has taken many measures, such as the Insolvency and Bankruptcy Code (IBC) and the Goods and Services Tax (GST) that will greatly benefit the economy in the medium to long term.

But many things piled up in a short period of time and we are going through the pain of transition. Many small companies suffered during demonetisation. With GST, everybody came into one tax system but the need for process-driven organisation was painful as many were new to this. Gradually, each of these is settling down but, unfortunately, it has happened at a time when the world economy is going through a rough time. We have to lean inwards for improvements and at the same time we have to figure out how to increase exports and inward investments into India.

The need we have for investment in infrastructure is significant and the resources available are limited. So we either breach the norms we have set for ourselves for fiscal consolidation or we don’t do as much as we need. Neither is a perfect answer. So I would imagine that it would be better to earn and spend our way out — more by way of disinvestment to get more liquidity for the government, use off balance-sheet items and, at the same time, allow some slippage in the fiscal deficit but use it on productive infrastructure that will have quick returns and a multiplier effect on the economy.

Is this what you hope from Budget 2020-21?

I think there will be a big focus on steps to make investments easier, both by Indian and global entities, and also the ease of doing business will move forward. I also think the government will move forward on its focus on ease of living and urbanisation.

What are the other investment opportunities you are interested in? Would sectors like BFSI interest you?

As both a philosophy and policy, we never make any announcement of what we are going to do. Some of the investments we did have got announced, like those in OYO Rooms and Aavishkaar. We have already made some investments in the financial services sector and will continue to look for opportunities across sectors.

Are you happy with the final form of GST? What about rates?

I was one of the members in the committee that designed the GST regime. The original recommendation was for a much simpler form of GST. What came after many rounds of negotiations was a bit of a compromise formula and we complicated it a lot more than we needed to. We are gradually moving towards simplifying GST and I hope, in three years, if they resolve all these issues, we can have a smooth, highly functional GST, which ties India into one common market, with zero cascading of taxes.

The original calculation for a revenue-neutral rate was a single rate. Some States would like to increase the tariff but I don’t think it’s a good idea as it will dampen consumption. Revenue will increase with better compliance and recovery in economic growth.