“We foresee a V-shaped economic recovery with 9-11% GDP growth”

Decoding Budget 2021 with Vikram Kirloskar, Vice Chairman, Toyota Kirloskar Motor

Do you think that the National Budget 2021 in some way or the other did enough to shell out measures in the form of much-needed catalysts for boosting demand, curbing inflation, and thereby reviving the economy? What according to you are some of the policy measures that the government could undertake to ensure financial recovery and spur economic growth in your sector?

This budget was a challenging budget coming in the backdrop of severe impact on the economy due to the pandemic and the resulting economic slowdown. Faced with the challenge of allocating huge resources towards social, welfare measures and healthcare sector, the Government has done very well to continue its efforts to boost demand as well as spending on infrastructure in order to help the economy to recover fast.  In this context the Hon’ble Finance Minister has pulled off an excellent balance between growth and fiscal prudence largely realized through borrowing and asset monetization without resorting to increase in taxation. This budget has taken steps that will defiantly help consolidate the early signs of economic revival.

Besides the construction of road and highways infrastructure, the setting up of the Development Finance Institution with an outlay of INR 20,000 crore, will give boost to infrastructure projects. Privatization of Banks, Higher FDI ceiling in Insurance sector, Zero Coupon Bonds to invite sovereign debt funds to participate into Infrastructure projects, tackling the Bank NPA through Asset Reconstruction Company (ARC) and Asset Management Company (AMC) are all good ideas that will stimulate growth.

From an auto industry perspective, the long-awaited voluntary scrapping policy will take older vehicles off the roads helping lower fuel consumption, pollution and benefit the environment around us. This will augur well for the industry and enable access to cleaner new vehicles

Further from an overall direction point of view ensuring continuity, stability and better predictability of policies is crucial. Consistency in the policy provides the necessary fillip on the supply side of the manufacturing industry while helping make supply chains more competitive.

Going into the next decade, smaller cities and towns are expected to be main consumption drivers. How is your organization looking at growth keeping rural India at the centre of its growth story?

Rural consumption during the COVID-induced lockdown was one of the reasons for the quick economic revival we are witnessing today. In many sectors, the demand from smaller towns and cities is on an upward trajectory owing to a good harvest of crops and economic activity from non-metro markets.

Specifically, for the auto industry, the revival and continued rise of the rural economy has been very encouraging. At TKM, we are  expecting that the economy will maintain its buoyancy, driven by rising demand from non-metro markets. The recent launch of the nation-wide PRO Service by TKM will substantially increase our service footprint to smaller cities and towns thus bringing us closer to our customers. Additionally, we invested in building a regional stockyard in Guwahati last year to cater to the increasing demand for Toyota vehicles from tier II and III cities in the Northeast region.

We will continue to invest in initiatives to widen our reach in the emerging markets so the customers can experience our best-in-class product offerings and renowned after-sales service of global standards. Recently introduced products like the Glanza and Urban Crusier has received a positive response and catering to the needs and aspiration of a wider section of customers and first-time buyers.

The government has been advocating ‘Ease of Doing Business,’ making India ‘Atmanirbhar’ by promoting ‘Make in India’ initiatives aggressively. What reforms should industry sectors such as manufacturing and automobile rally behind to drive consumption and improve consumer demand?

Atmanirbhar initiative will help the manufacturing industry, especially automobiles, to achieve  quality and competitiveness in line with global standards.

To boost domestic demand and drive exports we believe that the Government’s resolve and actions to usher in reforms in the areas of land, labour, liquidity, and laws will be essential to enhance competitiveness and attract investments. Further, long-term policies and regulation road map along with consistency and predictability of policies is essential. With regard to electrified vehicles, a technology-neutral approach, wherein Government policy support is extended to all technologies proportionate to the social benefits that they provide, will effectively lead to more volumes and faster and smoother technology shift to such vehicles. This approach will also enable the Indian automotive industry to make the transition to electrified technologies and build a globally competitive ecosystem within the country.

SMBs are key to resurging growth for a developing nation such as India. How can corporates and the government work together to provide an opportunity for startups and SMBs to grow in the country?

SMBs and starts ups play a crucial role in the development of a strong and vibrant ecosystem. The corporates can support by enhancing the human development activities – through knowledge transfer, process development and skilling initiatives as these are the areas where the SMBs will face hurdles to grow and become globally competitive. From the Government standpoint, more initiatives to increase access to credit at lower interest rates for small and medium businesses will help them cross the financial hurdles to operate.

In the budget to incentivize the start-ups the Government has made announcement such as extending the eligibility of claiming tax holiday and capital gains exemption for investment besides measures to encourage one-man companies along with changes in definition of a small companies to ease compliance requirements. The budget was marked by doubling the allocation for the MSME sector at INR 15,700 crore, a welcome step for small businesses.

What kind of economic trends do you foresee for FY 21-22 spread over quarters buoyed by the policies announced in the budget?

The green shoots of economic recovery are already visible and most macro indices are showing positive trends. In addition, almost all major rating companies are forecasting a V-shaped recovery with a 9-11% GDP growth. Now that the vaccination drive has been rolled out and the new COVID cases are sharply declining across the country, this has given tremendous boost and confidence to people. The sharp focus of the government towards expenditure for infrastructure development and other capex is also going to be a major contributor towards healthy economic growth. Accordingly, we foresee the economic recovery will be in line and may even surpass the 9-11% growth that is forecasted for the fiscal.

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of ET Edge Insights, its management, or its members

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