How has the mood changed on ground for corporate India after the BJP government took over?

If you ask any industrialist or businessman, the answer is that the mood has changed for the better. The previous government was unable to do much, for various reasons. There were scams and there was no decision-making at least for the three years preceding May 2014. Not much was achieved compared to what other countries in the world were doing. Now, we have Narendra Modi as our Prime Minister. We all know how energetic and decisive he is; we have been impressed with his election campaigns. He gave people a lot of hopes and aspirations. The mood has changed not only among businessmen in India but also amongst foreign businessmen, and many foreign CEOs have met him in the last few months. He has made successful foreign trips and many leaders like the Chinese President and others have come to see him. All this is positive and, to that extent, the industry is positive too.

What do you think of the announcements made by this government? Has there been any tangible impact?

All the announcements are positive and good, whether it is Make in India or Swachh Bharat. Yes, one could question what is happening on the ground. But if a power station has to come up, it takes 4-5 years; if roads have to be built, you have to see at what rate — how many kilometres a day — the roads are being built. Whether the government is building them or a public-private partnership. Public-private partnership is the way to go, though there have been problems.

The GDP growth rate is going to be 5.5 per cent for FY 2015 and [Finance Minister] Arun Jaitley says it will be 6 per cent in FY 16. If someone wants it to be 7-8 per cent now, then he should become the Prime Minister and make it happen! It takes time.

This government has been lucky with reducing crude oil and commodity prices and, therefore, even consumer price inflation, which used to be high. GDP is rising and 7-8 per cent growth will happen at its own pace. Infrastructure will take time to build. My friends Jayanthi Natarajan and Jairam Ramesh, who were my colleagues in the Rajya Sabha when I was a member, to justify clean environment, gave growth a complete go by. Indian industry was angry and disturbed, and industrial development had received a big setback in the last three years of the UPA-II rule. The new [environment] minister, Prakash Javadekar, has cleared a number of projects in the last six months. This is very comforting.

But the kind of investments needed from domestic and foreign companies are not happening, and banks are not lending due to NPAs [non-performing assets] and because some business groups have too much debt. Banks don’t want further wilful defaulters.

Land acquisition and labour laws are still a problem. I can’t blame this government as Rajya Sabha won’t clear those Bills. Just as it did not clear the Insurance Bill. I am neither a politician nor a BJP member or from the Opposition. However, to be fair to the government, I would ask the critics what they want from them. Everything is stuck in the Rajya Sabha and we cannot blame the government. If the Rajya Sabha doesn’t function, it is rather unfortunate.

Is the decline in the Index of Industrial Production (IIP) a cause for worry?

I agree with the forecast of the government that GDP growth rate will be 5.5 per cent this fiscal and 6 per cent in the next. We cannot expect magic. I would go with the government figure. It shows improvement, and I think IIP and the manufacturing index would improve correspondingly. I don’t see them going down. I see them going up, except to the extent that while the US will do well and grow by 3 per cent, Japan and Europe will grow only by 1.2 per cent each in 2015. For those who are dependent largely on exports to these countries, there could be some suffering. They have to make up by either exploring other markets or selling more in India. This, however, is easier said than done.

I think Modi would not want to spend too much political capital so soon in his tenure

Bajaj Auto exports a lot. We export about 60 per cent of our three-wheelers and 35 per cent of our motorcycles. Till today we are doing well, as we don’t export by and large to Japan, Europe and the US but to Asia, Africa and Latin America, basically emerging markets.

What is your outlook for the auto sector?

My elder son Rajiv knows much more about it. But for two-wheelers, no matter what the growth rate will be in FY 15, the next year is likely to be better. First of all, this year, we have had a bad monsoon. Next year I am hoping and presuming that it will be better. Many motorcycles are sold in rural and semi-urban areas. Secondly, unlike three years ago, when the two-wheeler industry was growing by 20 per cent per annum, the growth will be much smaller this year. The industry as a whole will grow in single digit, because two-wheelers are not exported much except by Bajaj Auto.

The Insurance Bill okays 49 per cent foreign direct investment in the sector. How does the Bajaj group plan to take advantage of it?

There is no question of taking any advantage of that Bill. What one has to understand is the justification for the Bill. I am supportive of the limit going up from 26 per cent to 49 per cent. For 10 years, it was stuck at 26 per cent. The sector was opened to private players in 2000. In both our companies, Bajaj Allianz Life and Bajaj Allianz General Insurance, Bajaj Finserv has 74 per cent equity. People say their companies need funds and penetration rates need to improve. There are 20-odd private sector players each in the life and general insurance sectors, with a few present in both. The top few companies don’t need additional capital. We don’t need capital for the next couple of years. The older and larger insurance companies are doing well and making profits. But newer and smaller companies are making losses and need money. The Indian partner may not be able to put in that money.

The ordinance has just been approved by the Union Cabinet. Lok Sabha and even the Rajya Sabha will pass it in the Budget Session as the Congress Party supports the Insurance Bill. The bill enables the foreign company to increase its equity to 49 per cent. It is for Allianz to decide whether it wants to raise its stake or not. They have a call option to do so. We will have to see the final Act and talk to Allianz. Our relations with them are excellent. Once both sides see the fine print of the ordinance, we will decide how to proceed.

The government has been talking of scaling up public investments to spur growth. Do you think this will increase the fiscal deficit?

I am not worried about increase in fiscal deficit within limits. The government has said it will maintain 4.1 per cent fiscal deficit, though this is difficult. I will compliment Arun Jaitley if he succeeds in maintaining it. Capital expenditure, by definition, should not be towards non-merit subsidies and projects like NREGA; it should be spent on capital account whether for roads or where the private sector is not coming in for whatever reasons. The government needs to spend money for creating assets. Let it not spend on salary increase or subsidies. Under BPL (below poverty line) schemes, only genuinely poor people should be helped.

The one criticism I have of this government is why it doesn’t go for more and faster disinvestment and raise money. I am not in favour of higher tax rates. Revenue expenditure should be reduced. They should raise money through more disinvestment. Make a target ₹1 lakh crore for disinvestment. The stock market is good.

I support privatisation. But I think Modi would not want to spend too much political capital so soon in his tenure. Moreover, all the unions will be up in arms and the Opposition will start shouting. Much as I would like at least some of the non-strategic public sector enterprises to be privatised, the government may not be able to do it right now. Maybe after a few years, this government will do that. For disinvestment, however, they should prepare an environment and build a consensus for it. Labour unions have to be handled. If this government also gives this excuse to go slow on disinvestment, then I will be disappointed.

comment COMMENT NOW