The steel industry has been roiled by the global commodity market slump, lack of demand and high debt burden. Will the Budget deliver the much needed stimulus for the battered industry? Bloomberg TV India spoke to Jindal Steel & Power Ltd’s MD and Group CEO Ravi Uppal.

What’s your assessment of the economy and the macro situation ahead of the Budget?

The matter of concern is that the manufacturing and industrial sectors are still not doing well. And more so, for the core sectors — capital goods, mines, minerals, steel, cement and petrochemicals — growth is still not good. If you look at the results of most of the companies for the third quarter, it speaks volumes about the present status of the industry. And if you ask me what’s the main cause for the industry not doing well, I will point my finger to one factor — it is lack of demand.

Therefore, the Budget should take measures which will stimulate the economy by putting more investment into infrastructure so that demand for core sector goods like steel and cement comes up. Once the demand comes up and the industry sells more, you will have improvement in the prices and the off-take, volume and earnings will improve, which will start off a virtuous cycle. Also, the interest rates are still very high — the average interest rates or the commercial lending rate are around 10 per cent plus. For any economy that aspires for higher growth, these kinds of high rates won’t work. Therefore, the government has to see how commercial lending rates are brought down so that more and more industries in the manufacturing sectors and user industries borrow money and can convert it into investment. This will enable growth.

Will the government need to continue to do the heavy-lifting to revive the investment cycle, especially in infrastructure?

Absolutely. I think in a country like ours, where we have miles to go before we can have infrastructure anywhere close to international levels, we have to simply continue to spend heavily on infrastructure. And that will help us in terms of ease of business. The operational efficiency of local investors or foreign investors who want to put money into India, improves substantially once the infrastructure is in place. That’s the easiest thing to do and that’s where the government can participate on its own or by way of PPP — any of the two modules can be used. The private sector is still not in a position to invest huge money in infrastructure. They are still short on resources and many have a heavy debt burden and therefore will not be able to invest big bucks into the economy at this moment.

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