Economics before politics good for the industry, says Ficci president

Anish Shah, group chief executive officer of Mahindra Group and managing director of M&M, on Saturday took over as the president of the Federation of Indian Chambers of Commerce and Industry (Ficci) at the 96th annual convention of the industry chamber. In an interview with Asit Ranjan Mishra & Nitin Kumar, Shah explains his key focus areas and views on the economy as well as the industry. Edited excerpts:

What is your view on the state of the Indian economy and where are we headed?  

It is very positive given what is happening around the world. For us to have seen 7.8 per cent and 7.6 per cent growth over the last two quarters is positive. It is a good momentum and we expect the momentum to continue. I would expect that to go up North to 8 per cent next year. As a result, we will see a lot of investments from the private sector. There is a lot more demand that is coming in. As long as we are not impacted by some of the global events, I think we will be in a strong place. 

Private investment has not picked up as expected. What are the main factors holding it back? 

For some sectors it has picked up already. In auto, for example, Mahindra Group has already doubled its SUV capacity and it is looking to add more capacity going forward. There are other industries and companies that have put in greater capacity also. It has not been across the board right now. One aspect has been the global concerns and the uncertainties. We are living in a time of uncertainties far greater than they have been before. 

Secondly, capacity utilisation was lower in some sectors and that has started to pick up now. Sometimes there is a lag factor. Overall, we are on a good track. 

There is a concern that current growth is driven by urban demand and there is talk of rural distress. What has been your experience? 

If I were to look at over the last three years, there has been a reasonably strong rural focus, more for agriculture and a little bit less for non-agriculture. If we were to look at the last two or three quarters, yes, there is a little more stress on the rural side but sometimes it is fairer to take a slightly medium-term view. From a medium-term perspective, we don’t see too much concern. Things are on track. Even as we think from a tractor business standpoint, this year may be flat or slightly below flat but if we look at it from the last three years, the growth rates are quite reasonable. 

Inflation has been coming down. When do you see the Reserve bank of India (RBI) reversing the interest rate cycle?  

I would give a lot of credit to the RBI for managing the economy well, for being proactive and for ensuring that inflation doesn’t become a problem for the economy. That is more important in the long term than what we see in the short term. Rates today are similar to what they were before the Covid-19 pandemic. Yes, it would be nice to have lower rates but it cannot be at the cost of the economy. We would leave it to the RBI to manage the economy and when they feel that inflation is completely under control and we don’t have further risks, that is the time we would welcome lower rates. 

India will have its general election in the next few months’ time. What are the big-ticket reform items it should pursue? 

We would want (the next government) as an industry body to continue on the path of growth. That’s one thing we have seen the current government do very well and set ambitious growth targets as a result of that. For us, as long as economics comes before politics, as an industry body we would be happy to see that. Yes, there are realities in politics that we have to live with in a democracy, but we would always advocate economics coming before politics.

What will be the priorities under your presidency?

This year, there will be four key priorities. The primary theme will be inclusive growth. The four priorities under inclusive growth are Make on India, women-led development, farm prosperity, and sustainability.  

What is your perspective on the state of electric mobility in India? Do you believe that the current government policies are supportive enough for industry to transition towards cleaner alternatives?  

The current policies are definitely effective. From a policy standpoint, I don’t think we need anything more. Where we stand today is phase one, which is to transition to born electric models, that will happen over a period of a year or two. The next phase aims to achieve a 20-30 per cent adoption rate, primarily fueled by charging at home and office spaces due to the lack of fully developed public charging infrastructure during that period. The third phase would be building public charging infrastructure and reducing charging time from 60 minutes to 40 minutes. But this (charging) time has to come down much further to create strong charging infrastructure. With that the third phase would further increase the penetration by around 2030. 

What is your view on Tesla demanding a duty cut to set up a factory in India? 

I would not comment on a specific company, but for any industry to build a strong economy, we need investments in India. We want to encourage companies from around the world to invest in India rather than investing in other countries. Essentially, our message is that if you have faith in India, then invest in India.

How prepared do you think the Indian industry is for the green transition?  

One of the myths in sustainability is it comes with a cost. At Mahindra, we started our journey in 2008. Soon after that the government talked about moving toward LED lights, which actually was a net positive for everyone because the payback period was very short. If you look at today, renewables is one area where there is a strong push and the target is to get 500 gigawatt (Gw) of renewable energy by 2030. That is actually beneficial for the industry because we are putting up a captive solar plant in one part of India to support multiple locations and the grid can transfer that energy. That energy is 30-40 per cent cheaper than traditional energy. So, a lot more companies can start benefiting from that. We will see a lot more demand for solar plants and wind plants, which we are starting to see already.

The Sensex has touched 70,000 intraday. What does it mean for India Inc? 

I am not an expert on markets. For us it is about delivering what we have committed. Creating world-class products and companies. The market will do what it wants to do. That does not change what we do. That one I would leave to the market experts to answer? 

India has announced auctions for its initial phase of critical mineral reserves. It is anticipated that auto companies are likely to bid for them. Do you anticipate challenges if these firms enter a sector that demands huge investments and distinct expertise? 

I don’t think it is a matter of cost. I believe it is a matter of securing the supply chain from a geopolitical standpoint. Whether auto companies engage in mining depends on their objectives and the development of indigenous supply chain. If domestic supply exists, it's preferable for auto companies to let those firms handle it, although different companies may have differing opinions. Each company must assess its interest in this sector by comparing advantages. If it aligns with their goals, they can enter. If not and other companies enter, outsourcing becomes an option. If there's a short-term need and no other players are involved, they might engage temporarily and then transfer operations to a future interested party.