This is an informative and impressive interview given by A M Naik,Chairman of Larsen & Toubro in today’s edition of Economic Times expressing his anguish on the mistakes made and how to address challenges to bring India’s Economy back to a sustainable 9% to 10% GDP Growth Rate with financial inclusion
Some thought provoking bytes…..
On reviving GDP Growth Rate….“has to retrace itself to 9-10% and be sustainable for many years without stoking inflationWhen we grow at 10% the rich get wealthier,and therefore,it is important that it should be inclusive growth “
On Freebies….“I am not in favour of Freebies as it takes away the Dignity of Labour”
On Narendra Modi as PM…..” He is going to make a difference,that too a big difference”
On Driving Growth….” Look at our Trade Imbalance with other countries.It has grown in the last 15 years.If you import raw materials,it adds value to the nation.But if you bring ready-made TV,ready-made cars,then what jobs are you creating here?”
On Free Trade Agreements….“….thing that has damaged India is the indiscreet signing of free-trade agreements (FTAs)…the very word is free trade but where the trade traffic is one way you are exporting jobs and not creating jobs within the country.The Prime Minister in the BRIC Summit ais India has to create 10-15 million jobs.Yes we did.But we created them in foreign lands….We export iron ore to China which means we take it out from Mother Earth and the Chinese add value by making steel and export.That’s why manufacturing which was 22% of the Indian GDP went down to 17% and from a growth of 12% at one time it is registering negative growth.It was directly created by government policies…take a relook at all FTAs….We (Indians) are not bonded labour for life.”
On what should be the three Priorities of the Government…“First,and foremost create jobs…restore the manufacturing’s contribution to GDP from 17% to 22%.China has 46%,Malaysia 40%,Indonesia 46%….Do you expect India’s population to daily wake up every morning and worry from where they get their lunch?”…Second,a country can be said to be powerful not just by it’s economic wealth but if it has it’s own independent and powerful defence sector …The government is willing to import and become the largest importer.But you are not willing to give the indian private sector it’s rightful opportunity…India’s defence is in a real bad shape…..We should agree to 49%,subject to genuine transfer of technology.But nowhere in the world,even in the most advanced nations like the US,which has a high-tech defence sector,do they allow foreign companies to hold a majority stake….Forget about sharing technology,it’s not going to happen…..create a strong defence equipment manufacturing base….third is to attract large FDI in Infrastructure….We are talking about a trillion-dollar investment in India and we haven’t even spend one-third of it in infrastructure…The Indian private sector no longer has the appetite for public-private partnership(PPP).The previous government used to talk that half the amount would come from PPP-$100 billion a year.Today,through PPP even $ 5 billion cannot be raised….The private sector has no money…The route to invest in PPP does not exist anymore…Even the Centre’s own ability to spend so much money is limited because of the fiscal deficit,freebies and waiver of loans.The government has a plan to set up 100 cities and high-speed express rail…the quadrilateral is 6000 kms…Rs 100 crore/km…That is about Rs 6 lakh Crores…when you put your hand in the tijori,the money doesn’t exist….The only answer is large foreign direct investment”
On PSUs….”All PSU companies have to rise to the occasion to become efficient.Then we will have economic growth “
On Avenues to raise Funds….”…dilute the public sector…We can generate Rs 5 Lakh Crore.The government stake in ONGC,IOC,GAIL,SBI can be scaled down very slowly to 51% to start with….if you privatise LIC,it’s valuation will be more than Rs 5 lakh crore.You let go of 20-25%…what you get straightaway is Rs 1-1.5 lakh crore “
On Sick PSUS….” Don’t take sick companies for privatisation for the purpose of generating money.They need to be privatised to generate efficiency.Allow them to be board-managed.Give them freedom so that they can compete with private sector.You can’t shackle them and make them compete with private sector.And because you can’t compete,you don’t let private sector enter.It means continuing with your inefficiency at a great cost to the exchequer and to the people of India”
On Air India….”Air India could have been one of the largest airlines in the world…..Today 85% of the traffic internationally is taken away by foreign carriers…Now all the money is going elsewhere…..You have to privatise Air India.Air India is our flagship carrier,a brand builder of our nation…Put it on the market…The government should wash it’s hands of and tell the airline that you ae on your own.Either perish or grow.In five years you will see a different Air India”
On how to attract FDI Investment in Infrastucture….”….consider giving a permanent guaranteed return on equity.Take away all the risks associated with infrastructure investment…That’s when FDI,pension funds ,long-term investors will come.And they will invest in PPP.For so long we are sitting on 26% FDI cap in insurance.They can easily make it 49%.All these are low hanging fruits that the government can do in the first 100 days….give tax breaks along with assured returns.Either you make investments tax-free for 10 years and offer 12% guaranteed return.Or you give 16% returns and people will pay tax and reduce tax to 25% so that they effectively get 12%;14% is even better”
On Infrastructure Companies….”…a lot of them are in pain…they are debt-ridden.They have no money,they are actually selling assets.They are in no position to create assets”