Adi Godrej, the man who is at the helm of Godrej Industries, believes that RBI policies in the past two years have neither brought inflation under control nor improved growth. In a freewheeling chat with Mihir Bhatt of Zee Business, Godrej said that Indian economy suffered due to slow decision-making; however he remains upbeat on the country’s growth prospects. Godrej said that growth in the economy will increase in the second half of the current financial year.
Below is the verbatim transcript of his interview to Zee Business.
On IMF Forecast for current FY
Godrej said that IMF estimates on country's GDP growth is incorrect since the data was based on wrong figures. IMF projections were based on previous quarters decline in GDP, he added.
On Monsoon Impact
Godrej believes that good monsoons may reflect in agricultural growth of the country. He said growth in the economy will increase in the second half of the current financial year and may remain between 5-6 percent.
On trade data
Though Godrej is optimistic about the balance of payment, he said that current account deficit may touch USD 70 billion. On the volatility of rupee, he said that the correct range of rupee is around 57-60 versus the dollar. If we can contain the level then we will be able to contain inflation and fiscal pressure can also be handled, he reiterated.
On consumer sentiment
Godrej is of the opinion that consumers have negative perception and the reflection of this can be seen on automobile and real estate sectors. However a lower interest can work as a trigger in boosting demand for auto and housing sector, he said.
Expectations from RBI
Godrej is of the view that RBI must think about reducing repo rate. He said that high rate is not good for economy and growth. Hike in repo rate will lead to difficulties, hence RBI should now shift focus to growth, he added. Emphasising upon implementation of goods and services tax (GST), he said that growth of economy will kick off once the government introduces GST. He believes that it is not likely to be done before the general elections. WPI-CPI is expected to be reduced by 2% until March 2014, he added.
On UPA performance in last 2 years
Godrej said that the government took quick steps for improvement of economy during 2008 crisis, but decision making has slowed down in the last 2 years owing to which the economy suffered a lot. He said the reason behind the apathy in decision making was mainly due to fear of court cases, CAG, anti-corruption movements. Instead of solving the problem, government stopped its decision making perhaps because it didn’t want to take risk, he said. However he also believes that improvement in growth can be seen in the third quarter of this fiscal year.
On populist schemes
Godrej believes that in a big democracy there are always problems. Negative economic decisions are taken to fulfil short term needs, but the problems that have been persistent for a couple of months can be mitigated. He said that though India is a poor country, there are opportunities galore. If the government concentrates on growth then India will face no problem. Good decisions can accelerate growth and whichever government comes to power can do that. He believes that FY 14-15 will be a good year for Indian growth.
On Growth Model of Gujarat
Godrej believes Gujarat is not the only model of growth. Along with Gujarat, Madhya Pradesh, Haryana, Chhattisgarh, Bihar have also clocked good growth. He believes that focus on good governance, law and order and entrepreneurship are the key to development. On being asked about the prospects of Narendra Modi winning the elections, Godrej said that he is not very sanguine about the validity of exit polls. Moreover it is too early to predict now, last time too the exit polls showed that NDA was winning but UPA came to power. Hence only time will tell (as to who forms the government), he said.
On RBI policy in last 2 years
Godrej is of the opinion that RBI has not made good policies in the last two years. RBI policies in the past two years have neither brought inflation under control nor improved growth, he said. Nevertheless he is confident that the new RBI governor Raghuram Rajan will concentrate more on the latter.
On growth strategy for Godrej Consumer Products
Godrej said that GCPL has expanded mostly in emerging markets. We have built 3X3 models for emerging markets. There are also plans of expansion in Asia, Africa and South America. The main focus is on consumer products like hair colour and personal care. The company is working on inorganic growth for emerging markets, he said.
On strategy for other group businesses
Godrej said that his company has a very healthy balance sheet and debt is significantly lower. Domestic markets are quite big for expansion in Godrej properties, Godrej Agrovet, consumer durables business. In Godrej property the debts were considerably higher and hence the company announced a right issue though there are no plans to sell stake in Godrej Properties. We will not make acquisitions of companies to expand the real estate business but we have plans to acquire large projects for expansion of real estate business, he said.
On pricing across verticals
He said that he expects improvement in the property market during October-November. Prices have to be hiked when production cost or raw material cost increases. Possibility of GCPL’s margins will remain. Between Dussehra and Diwali, people will take advantage of special offers by banks, he believes. He said that very few people know that Godrej Group makes equipments for space and nuclear sectors but the group's business of space and nuclear sector not too big. Consumer product is their major focus, he said.