 "Government must invest in infrastructure: Ravi Uppal")
Chief Executive Officer and Managing Director of Jindal Steel & Power Ravi Uppal says the government should do everything in its power to increase growth especially, looking at low the Index of Industrial Production (IIP) was. In an interview with Sanjay Jog, he emphasis the need for delivery on the ground for reforms to succeed. Edited excerpts:
What is your take on a number of measures taken by the government to stimulate growth?
All measures are to stimulate demand for goods and services in the economy. That means, the government must invest in infrastructure. Private sector is not making investment as of today, it is mainly coming from the public sector. So, I think the government should continue to spend through public sector until the time the private sector is in a position to financially put in more investment.
However, investors have been pointing to the high cost of finance. What is your take on this?
The government should make efforts to reduce the cost of financing for industry. People want their risks to be well contained and for that to happen policy framework must have continuity and consistency. Interest regime should be liberal and only low rates will get investments. If you look at US, for several years they continued to have rates close to zero which saw the US economy bouncing back to 3-4 per cent. The Reserve Bank of India (RBI) is right that banks should have performing assets. The RBI governor is right for lending in future. If he brings down the interest rate at lending level, then it is a good policy. Repo rate cut is not enough.
Do you support the government’s move to impose import duty on steel?
For the steel industry to revive, two things must happen — continued m (MIP) protection and demand creation. MIP is required as some of the neighbouring countries are not indulging in fair practices. The companies from these countries are dumping steel and they have government support. Therefore, it is not a level playing field. In order to neutralise the impact, MIP is justified. At the same time, we must create demand which will come when the industry spends. So both of them need to happen together.
How do you look at the Make in India initiative? Do you expect further measures to spur growth in the capital goods sector?
Make in India is a step in the right direction. It is creating awareness in the minds of local industries and also audience outside. We have to make in India because the manufacturing sector is the only one where you can add maximum local value. When you add local value it generates employment. There is a multiplier impact. If you manufacture automobiles, then obviously the component industry comes up. When more cars are sold, service sector comes up. Manufacturing is a unique industry which has a multiplier impact. Today, industrial gross domestic product (GDP) is 17 per cent which is too low compared to China, Malaysia, Japan which are 30 per cent plus. So, obviously something is missing, service sector is growing, but until the manufacturing grows the latter’s growth cannot sustain.
As far as capital goods was concerned, they used to produce other goods and services whether it is power generation equipment, cement machinery, paper, machinery, petrochemical unit so all of them are used for producing other goods. If the demand for other goods like cement, steel, power will increase, demand for capital goods will increase. Basic idea is to stimulate growth of commodities, demand in the market.
How do you view current developments in the coal sector?
Government and Coal India have done a good job when it comes to increasing production. But we must continue to produce more coal. To the point that coal should become a non-issue. Those who have linkages must not face any limits to supply. Let them buy up to 100 per cent producing that much. Auction more coal, auction more linkages that is the way forward.
India should never forget that coal is the mainstay for power production. Solar and wind are fine but coal cannot be completely replaced by renewables today. It will take at least 25 to 30 years. Even western countries have realised that to switch over to renewables and completely environment friendly technologies.
Has the reforms process slowed down despite loud talk?
The government had made policy amendments, lot of reforms have been done. The government tried to simplify policies but now the implementation is under focus. Rate of success is different in different sectors, if you look at roads, civil aviation, railway infrastructure, they have done very well. Telecom sector posted good growth but other sectors of the economy should also pick up. Even the power sector. Introduction of UDAY would bring fundamental changes and more efficiency to it. But we need to increase people’s earnings level so that they can spend more. The demand for commodities and services should increase.
Modi and his team are taking steps to attract foreign investors. The mood of investors outside has changed but we really have to make sure that the delivery has to be on the ground level. If that is not done, then the mood and optimism that has been created would be difficult to sustain. The government looks very serious and committed and we have to be little bit patient.
What is your take on a number of measures taken by the government to stimulate growth?
All measures are to stimulate demand for goods and services in the economy. That means, the government must invest in infrastructure. Private sector is not making investment as of today, it is mainly coming from the public sector. So, I think the government should continue to spend through public sector until the time the private sector is in a position to financially put in more investment.
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Secondly, the government is keen on growth. There is a debate whether to go for growth or to control inflation. I am one of those who strongly advocate going for growth because IIP recently dropped 1.5 per cent and earlier it had dropped 3.5 per cent. It means there is no steady trend in terms of an increase in industrial production, although the government is taking lot of steps to stimulate growth by spending on roads and rail infrastructure. But we need to do more. We should not be too bothered about whether fiscal deficit is 3.5 per cent or 4.5 per cent as long as the money is spent for development purposes, which means investing in infrastructure. I think inflation control will always be there. At this moment, the choice is clear that we have to go for growth.
However, investors have been pointing to the high cost of finance. What is your take on this?
The government should make efforts to reduce the cost of financing for industry. People want their risks to be well contained and for that to happen policy framework must have continuity and consistency. Interest regime should be liberal and only low rates will get investments. If you look at US, for several years they continued to have rates close to zero which saw the US economy bouncing back to 3-4 per cent. The Reserve Bank of India (RBI) is right that banks should have performing assets. The RBI governor is right for lending in future. If he brings down the interest rate at lending level, then it is a good policy. Repo rate cut is not enough.
Do you support the government’s move to impose import duty on steel?
For the steel industry to revive, two things must happen — continued m (MIP) protection and demand creation. MIP is required as some of the neighbouring countries are not indulging in fair practices. The companies from these countries are dumping steel and they have government support. Therefore, it is not a level playing field. In order to neutralise the impact, MIP is justified. At the same time, we must create demand which will come when the industry spends. So both of them need to happen together.
How do you look at the Make in India initiative? Do you expect further measures to spur growth in the capital goods sector?
Make in India is a step in the right direction. It is creating awareness in the minds of local industries and also audience outside. We have to make in India because the manufacturing sector is the only one where you can add maximum local value. When you add local value it generates employment. There is a multiplier impact. If you manufacture automobiles, then obviously the component industry comes up. When more cars are sold, service sector comes up. Manufacturing is a unique industry which has a multiplier impact. Today, industrial gross domestic product (GDP) is 17 per cent which is too low compared to China, Malaysia, Japan which are 30 per cent plus. So, obviously something is missing, service sector is growing, but until the manufacturing grows the latter’s growth cannot sustain.
As far as capital goods was concerned, they used to produce other goods and services whether it is power generation equipment, cement machinery, paper, machinery, petrochemical unit so all of them are used for producing other goods. If the demand for other goods like cement, steel, power will increase, demand for capital goods will increase. Basic idea is to stimulate growth of commodities, demand in the market.
How do you view current developments in the coal sector?
Government and Coal India have done a good job when it comes to increasing production. But we must continue to produce more coal. To the point that coal should become a non-issue. Those who have linkages must not face any limits to supply. Let them buy up to 100 per cent producing that much. Auction more coal, auction more linkages that is the way forward.
India should never forget that coal is the mainstay for power production. Solar and wind are fine but coal cannot be completely replaced by renewables today. It will take at least 25 to 30 years. Even western countries have realised that to switch over to renewables and completely environment friendly technologies.
Has the reforms process slowed down despite loud talk?
The government had made policy amendments, lot of reforms have been done. The government tried to simplify policies but now the implementation is under focus. Rate of success is different in different sectors, if you look at roads, civil aviation, railway infrastructure, they have done very well. Telecom sector posted good growth but other sectors of the economy should also pick up. Even the power sector. Introduction of UDAY would bring fundamental changes and more efficiency to it. But we need to increase people’s earnings level so that they can spend more. The demand for commodities and services should increase.
Modi and his team are taking steps to attract foreign investors. The mood of investors outside has changed but we really have to make sure that the delivery has to be on the ground level. If that is not done, then the mood and optimism that has been created would be difficult to sustain. The government looks very serious and committed and we have to be little bit patient.