Downward revision of India's GDP forecast won't affect investments: TV Narendran
Premium- Narendran said while the downward revision is a bit of a dampener, overall sentiment about growth is positive
New Delhi: The downward revision in India’s FY23 growth forecast by various agencies, including the RBI, does not come in the way of any investment planned by the private sector, according to TV Narendran, chief executive officer and managing director of Tata Steel Ltd, and president of industry chamber Confederation of Indian Industry (CII).
Narendran said in an interview that several sectors like mining, chemicals, infrastructure and supply chain facilities including warehouses are scripting investment growth stories.
Earlier this month, the RBI revised India’s FY23 growth outlook from 7.8% to 7.2% and IMF from 9% to 8.2% due to a host of factors including war in Europe and high commodity prices. Narendran said that while the downward revision is a bit of a dampener, overall sentiment about growth is positive.
Narendran said that global geopolitical events have a local impact, but it is a reality that businesses have to learn to live with. He said that CII is going by an estimate of 7.5-8% growth in FY23 which reflects the current reality, revised down from its earlier 8-9% growth trajectory.
“Even at this rate, India will be the fastest growing large economy. India has the capability to weather the storm. Exports are strong, foreign exchange reserves are good, inflation on an average is still within 6% though it has recently gone up. In many ways, we are still reasonably well poised," said Narendran.
However, oil price is a concern, he said. “We expect it to be around $100 per barrel. If it goes well above that, of course, it may have a more significant impact. Overall, when we spoke to our members in March, the general feedback was that they expect it to be a good year and capacity utilization is high and private sector investment seem to be coming back," Narendran said, adding that despite the growth forecast revision, overall sentiments are positive.
He said that in the last few months, government spending on infrastructure has been growing and that the industry body expected the government to stick to this trend as it is supporting demand and economic activity.
He said that metal companies are investing in capacity addition after having repaired their balance sheets in the wake of strong demand and good margins. “So people are investing to grow… Consumption will also start picking up. Investment led growth is already there. And I do not see any private sector company who had plans to invest postponing or delaying the plans. I think people are quite positive about the growth in the Indian economy," said Narendran.
MINT PREMIUM See All
Narendran said that sectors like metals and mining, chemicals and infrastructure are witnessing an investment growth story. “In mining, more and more auctions and private sector coming into coal, mining investments will go up. Chemicals is also seeing a strong story. There also we will see investments coming up…Also, I am seeing lot of infrastructure related investments in supply chains and warehousing. With the growth of e-commerce companies, a lot of companies are investing in supply chains," he said.
According to him, the steel sector got impacted by the commodity price surge in multiple ways. Russia has been a big exporter of not only coking coal, but also what is called pulverized coal (PCI) which is injected into blast furnaces. The country used to account for around 30% of pulverized coal and 15% of coking coal in world markets. “Because Russia is out of the market, coking coal and PCI prices shot up and the input costs went up in the steel sector across the world, barring China which has been continuing to use their sources of coal. There has been an input cost pressure on steel," he said.
Also, Russia and Ukraine together used to export around 40-45 million tonne of steel mainly to markets like Europe and North Africa, he said. With these exports fizzling out, steel prices also shot up particularly in EU, Middle East and Africa, not so much in Asia, Narendran said. He also said that factors like rebuilding of Ukraine and China’s steps to bring back its economy on track are positive factors for the sector. “Overall, the sector outlook is quite positive."
Narendran said that constant improvement in the cost of doing business and ease of doing business was the industry body’s appeal to the government as other countries too make constant improvements on these fronts.
“Schemes like PLI scheme are acting as incentives. We should continue to do that. Also, cost of infrastructure impacts cost of doing business, which is getting addressed... Labour intensive sectors like textiles, furniture and electronics manufacturing need probably a bit more support to supplement capital intensive manufacturing. We are slowly improving. The advantage India is offers is that India is not just a source, but is also a market. When companies are looking at diversifying and de-risking their supply chain, India is a better option than many others because India can both be a source and a market for them while many others can only be a source," said Narendran.