‘Govt should focus on sectors that create jobs’3 min read . Updated: 30 Sep 2020, 05:57 AM IST
Unfortunately, in India, the covid-19 rate and its impact is still at a very high level. This will preclude full opening of the economy.
Manufacturing activity in India will make a sharp rebound once the covid crisis is under control and this is the time for the government to start large infrastructure projects to accelerate a recovery as commodity prices and interest rates are low, said Amit B. Kalyani, deputy managing director, Bharat Forge Ltd. As a de-risking measure, the auto parts maker is looking at new opportunities in aerospace, defence and mining, Kalyani said in an interview. Edited excerpts:
How do you see manufacturing activities picking up in Q2-Q3 FY21?
There are several factors that drive the recovery. If you see the recovery that is happening in the US, Europe, China and other markets, it is really driven by the monetary policy and by the rate of new covid-19 infections. Unfortunately, in India, the covid-19 rate and its impact is still at a very high level. This will preclude full opening of the economy. Once the situation comes under control, you will start seeing the economy open up and manufacturing activities will pick up significantly.
When it comes to monetary policy, I think the government needs to do more. This is not the time to worry about fiscal deficit because oil prices and interest rates are under control. Even as borrowing activities are less, banks have money but they don’t want to lend.
There has to be concerted efforts in getting large infrastructure projects kicked off with some quasi-sovereign backing so that they can be financed and economic activities could resume. Industries that really drive economic activities are housing, construction, infrastructure and so on. This is a good time to resume because commodity prices are low, and interest rates are low.
In India, we are under-invested whereas if you compare with China, they have built infrastructure for their grandchildren. This is the time to build infrastructure in semi-urban areas, move industries and create ecosystems in these areas to reduce pressure on the metro cities.
The central and state governments will have to collaborate along with the public-private partnership model to start off economic activities at such a large scale in the medium term.
Do you think the current demand cycle is sustainable in the domestic market?
I don’t know whether it is sustainable or not but from whatever I have understood is that a large part of this demand is coming from rural areas. The rural economy has specifically seen benefits of increased government spending over the past two years. This is good because it puts money in the hands of farmers but the sad part is that they only spend money and do not create direct jobs.
So, I think the next round of spending or attention should be on industries that create jobs. While robust agriculture backed rural demand is good, we need to understand that it creates demand for only certain areas and not for all industries.
Bharat Forge has done well in de-risking its exposure to one specific industry. However, the pandemic has impacted all sectors. What is the company’s strategy when it comes to its exposure to impacted sectors and new opportunity areas?
We will always de-risk, we will do so across products, geographies, segments and industries. We are now increasing our penetration within the auto industry in products where we were not present earlier. You will see that we will grow in automotive as well as non-automotive. These areas would be aerospace, mining, marine and defence.
How big is defence as an opportunity?
Defence makes minuscule contribution to our business today. But there are very few companies in the world that could have done the kind of work we have done lately. We are positioned in a way wherein the next decades could be well-spent harvesting opportunities via the products that we are developing and some of them that we have developed already.