Cost of funds and utility costs have to come down in India for better global competitiveness in the manufacturing sector, according to Sumit Sawhney, Managing Director and Country Head, Renault India.
“If you take the top 10 economies of the world, all of them are working on interest rate in the range of 0-5 per cent whereas India, which is described as the seventh largest economy, works at 8-13 per cent rate. So, cost of funds have to come down to drive competitiveness,” he said.
Demonetisation could help in this over the next 12 months “Since banks will be flush with funds, and there could be a reduction in interest rates, cost of funds may be reduced,” he said while addressing a CII conference on TCM (total cost management) here. Utility costs can go as high as 65 per cent which is twice as much as other global manufacturing hubs, he said.
He was of the view that demonetisation would help the country achieve higher economic growth in the long run amid some temporary pains.
Earlier, he explained how cost focus played a vital role while conceiving Renault’s global car Kwid for the Indian market. Kwid’s pricing, which was possible through TCM measures, was a key to the success of the hatchback, which is the only brand to feature along with Maruti and Hyundai in the top 10 selling models in India.
Kamal Bali, Chairman Cost Congress 2016 and Managing Director, Volvo India, felt that business success was about creating greater value. Product pricing and costs are linked. So it is very critical to have lower or optimised costs to create value.
He tried to dispel the popular misconception relating to cost and said cost was no more a finance function, but a strategic one.
“We have always thought of cost as a very boring subject. Cost is seen attached only to accountant. It is not true. Cost is actually in the hands of all other people, except the accountant. It is very important that the cost culture gets built in organisations,” he said.
Bali also explained that cost targets would lead to innovations and push people to do disruptive technologies.