Govt should focus on demand revival, job creation: Deosthalee

Says L&T Finance has already cut down on its lending in rural markets

While the government tries to boost the economy and kickstart employment generation, it must focus on reviving demand, especially in rural markets, by 'focussing on low-hanging fruits', L&T Finance Holdings chairman and managing director Y M Deosthalee has said.

"The biggest problem facing the economy is lack of demand. And only the government can help revive this as corporates have built up overcapacity in the past and are stretched financially now.

"To achieve this, it must focus more on the low-hanging fruits by picking those projects which can easily be restarted and generate jobs," Deosthalee told PTI in an interaction here.

It can be noted that most of the mass marketers like small car and bike makers, FMCG companies, whitegoods makers and tractor makers, among others, have all been reporting steady declines in rural sales for many months now.

Deosthalee, who heads one of the largest NBFCs, said sensing rural distress, his company has already cut down on its lending in rural markets.

Bike makers have reporting lower sales or even contraction for many months now, while car makers have been reporting low growth rates that too due to new model sales in urban markets.

In August, bike sales contracted 9.6 per cent, while those of cars inched up just 6 per cent.

As per the Society of Indian Automobile Manufacturers, the major concern is the declining sales of bikes, which saw a drop of 9.6 per cent in August due to demand slump in rural markets.

"Demand for motorcycle has suffered due to a slowdown in rural economy. It is a real area of concern as decline in motorcycle sales has brought down the overall vehicles sales," SIAM said, adding that market leader Hero MotoCorp saw its sales decline by 15.46 per cent.

In July also, bike and LCVs sale fell by 6.36 per cent and 4.11 per cent, respectively, while whitegoods sales are down close to 12 per cent in the first quarter.