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The new president of the Confederation of Indian Industry, Sanjiv Bajaj, who is also chairman and managing director of Bajaj Finserv, is sanguine about India’s growth story despite current blips due to geopolitical reasons. He told Rajeev Jayaswal that resilient India Inc is making efforts to convert the crisis into opportunities. Edited excerpts from an interview:
Listing of Life Insurance Corporation is a major corporate development. But it was listed with a discount. How do you see that?
At the broader level, it shows the clear intent of this government to go forward on its divestment and privatisation programme. In the short term, there are valuation losses for government also, but it is looking at a bigger picture, and we must commend them for that. Second, when you look at it from an investor’s point of view, investment activity is about gaining long-term returns at an acceptable level of risk. As Warren Buffet says, the stock market in the short term can be a gambling machine, but in the medium- to long-term, it is a weighing machine.
In LIC, we have a solid insurer. I believe the long-term prospects are good, but my main focus would be the intention of the government, and we must push it to be moving ahead in the same way. It has talked about privatising (some) state-owned banks, and one state-owned general insurance company. We must encourage it to move ahead with that agenda because it has a much larger impact. It has an impact on the government not being in business, it has an impact on creating more competition.
CII projected India’s GDP growth between 7.4% and 8.2%. What is the reason for optimism in this grim global scenario with the Ukraine war, supply chain disruption and rising inflation?
We are in the middle of a war, no doubt about that. We are also in middle of supply chain disruptions. But every set of challenges can create new opportunities. Human nature is to be consumed by the present, yet our endeavour is always to see how we will get out of the present to (brighten) the future.
If we look at the last two quarters, we’re seeing a number of sectors firing up. We’re seeing new private capex in sectors ranging from construction, real estate, housing, metals, and transportation. We expect more sectors to start getting into the investment cycle. We believe that overall domestic demand continues to be good. Rural is a little softer, and here we’re hoping that a strong MSP (minimum support price) and with a good monsoon, at least farm incomes will go up. Non-farm will continue to need some support from the government.
Inflation is at an eight-year high in India. How do you think the Reserve Bank of India and the government can strike a balance between inflation and growth?
From the government’s point of view, supporting some of the weaker sections of the society, mostly rural, should continue. Beyond that, drive levers for growth. At CII, we are very positive on the PLI (production- linked incentives) scheme of the government, and this year we’ll suggest few more sectors that can be taken up. Similarly, an employment-linked incentive scheme for sectors is needed that employ a lot of people like manufacturing of footwear or leather products, or tourism.
From the Reserve Bank’s perspective, we are in the cycle of higher interest rates, and we must keep in mind that we are nowhere near a normalised interest rates scenario. We’re just reversing some of the moves that were done when the pandemic hit us. We hope Reserve Bank will present a reasonably clear pathway to the triggers which it sees will impact its decision on interest rates.
We think that from a common man’s point of view, the (inflationary) pressure really hurts their pockets from fuel and food prices. Hopefully, with a good monsoon, food prices should start coming down. On fuel, when prices were low, the government raised taxation. We hope that in a collaborative manner between the Centre and states, they can cut some of these taxes at this point of time, so that you help the common man save a little bit more, that goes into consumption, that creates a new investment cycle, and overall, lifts us out of where we are into a higher growth trajectory.
While public investment is driving the economy, why private investments are not happening? Is it because of rising interest rates?
Interest rates are going up, but they are still within a controllable range. We are a strong domestic demand economy. In addition, we have strong opportunities for exports. The government has played a strong supportive role in funding infrastructure over the past few years to keep the economy running. It is a reality of life that when you are in a situation like what we’ve gone through, eventually the private sector has to deliver a certain risk-adjusted return on the capital it borrows. It’s not free money. That money comes with strings attached. Hence, it needs a level of certainty to be able to go and invest. We hope that the war gets resolved. As I said, more and more sectors have already started to invest. CII members, 50% have already started their new investment cycle and another 20-25% were about to in the next two quarters.
The rupee is depreciating. Does it worry you?
We believe the rupee must find its fair value. The only thing is that it must happen in a gradual manner because that allows industry to align with that, whether from an opportunity point of view, or from a cost point of view. If you have a lot of volatility, that is what creates distress because contracts are signed in advance.
So not much worried about rupee depreciation?
If it happens in a gradual manner. It must reflect the reality.
Do you think the Reserve Bank has been able to manage the volatility?
I believe so. the Reserve Bank has managed this quite well over the years, and we hope it will continue to do so.
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