The Chairman of Godrej & Boyce, Mr Jamshyd Godrej, is categorical that infrastructure spends will not only help tide over the present slowdown in the manufacturing sector, but also spur the economy as a whole.
Speaking to Business Line , Mr Godrej, who is also head of CII Manufacturing Summit, said it was time the government turned proactive in addressing the roadblocks that hampered the progress of large infrastructure projects to ensure that the growth momentum does not falter further.
Excerpts from the interview:
The current IIP numbers on manufacturing have been dismal; what has to be done to put it back on track?
This is the result of what has happened in the economy. It is not that the fundamentals of the economy have in any way changed. All the fundamentals are very much in place. If you see rural areas, people actually have good money in their hands. The monsoon has been good and so has agriculture. The employment guarantee scheme is putting money in the hands of the rural populace and the demand for goods and services in rural areas is very strong. The deficit that has come about is due to the slowing down of large infrastructure projects. Infrastructure projects create a lot of demand for material, services and manpower. It is a chain reaction; if the infrastructure growth slows down it will hit overall demand. The supply side has to keep increasing to sustain growth.
How do you see the new manufacturing policy?
The new manufacturing policy is good but how it is operationalized is crucial. The large zones envisaged will allow investments you need to attain the scale you desire. However, being a cluster approach, it should also house small and medium industries, which means it should be affordable for them to come to the cluster. Moreover, I don't think manufacturing should be looked at independently. It is part of the economy. So, when the economy does well and when there is investment, the sector does well.
What is the single most important issue you want the Government to address to get growth across sectors ticking?
To get growth back, we have to remove all roadblocks on infrastructure. We also have many industrial projects held up for a variety of reasons. In addition, the linkages in the economy that make things work, have to be taken care of. For example, for a tech sector to flourish, a university should be there as also skill development organisations, alongside all basic requirements such as power, roads and civic amenities.
We have the demography, growth, youth, education and all basic elements to propel growth, but it all depends on how it is made to work for enhancing growth.
Most companies have put their capex plans on hold. When do you see them reversing their stand?
When there is a situation where one does not see demand for a year or two, then capex is suspended. It will reverse only when the situation improves.
The Reserve Bank of India has been accused of stunting growth by hiking key rates to contain inflation. What else could have been done?
To be fair to the RBI, it does not have that many instruments to control inflation. All it can do is to tighten liquidity in the system and raise the policy rates. Suppose it had not raised the rates, would inflation have gone to 15 per cent instead of nine, is something RBI needs to answer.
It is often being said that the Government is in a state of inaction. How does the industry view this in the context of declining growth numbers?
When politics is in a state of flux, such issues do happen. A strong Government means, one that is functioning with an active opposition. Here, we have a situation where we have a Government and an opposition which will not allow it to function.
What are the opportunities that you see going forward?
Besides infrastructure, there is a huge opportunity in housing and urbanisation of cities — not only building new ones, but also renewing the infrastructure of old cities to make them more liveable. This provides tremendous scope for large investments to fuel growth.