With slowdown fears looming large over Indian economy, impatience is growing among businesses and investors; India Inc is becoming more critical of Centre’s economic policies.
“The slowdown was there since long, but we were expecting the Centre to take strong steps to boost demand. But it seems that the government is losing its hold on economy. In any business meet, slowdown is a topic now and businesses are worried about reckless tax sleuths. How long can you keep these concerns under wraps?” asked a leading automaker, requesting not to be named.
Some others have been more vocal about the slowdown. “There is no demand and no private investment. So where will growth come from? It doesn’t fall from heavens. The auto industry is going through a very difficult period. Makers of cars, commercial vehicles and two-wheelers are going through a rough patch,” Bajaj Auto chairman Rahul Bajaj said at the company’s 12th annual general meeting.
During the April-June quarter of this fiscal, the automobile industry saw 12.3 per cent drop in sales including significant drop in passenger cars, SUVs, commercial vehicles and two-wheelers. Signs of job losses are already becoming visible. And the slowdown is not restricted to just car or home sales. Economists say the problem is deeper.
Major Fast-Moving Consumer Goods companies are already reporting decline in sales of even basic products like atta, hair oil and toothpaste.
“Our India business delivered a steady volume growth of 5 per cent amidst a general slowdown in consumption of staples. We expect a gradual recovery in the coming quarters for the industry and also for our business,” said Godrej Consumer Products. Similar concerns were flagged by ITC, Nestle and Hindustan Unilever.
This is further casting doubt on the Centre’s claim of more than 7 per cent growth this fiscal. Last month, the International Monetary Fund and Asian Development Bank had cut India’s growth forecast, citing global and domestic headwinds.
Former Infosys director Mohandas Pai and Biocon head Kiran Shaw Majumdar had already taken to social media to speak out against “tax terrorism” by the government.
However, what is making the industry wary is the lack of strong policy measures.
Last week, former Reserve Bank (RBI) governor D Subbarao had warned that the Central government’s attempts to squeeze out RBI reserves is a sign that it is desperate. The government’s move could well be killing the animal spirit of financial markets, he said.
“When you have continuity of policy, everyone knows about the policy framework within which the firm is expected to operate. But any sudden change in policies tends to disrupt their planning process. I don’t see too many changes in policy. I have seen too many additions and refinements to existing policies, some of which may have been necessary, but some of which to me seem knee-jerk reactions that could have been avoided. Policy continuity at the government-level is very important for growth of India Inc,” said M Damodaran, former chairman, Securities and Exchange Board of India.
Clear signs
The signs of an economic slowdown is already becoming clear with declining sales in automobile, home and FMCG sectors. All these are further casting doubt on the Centre’s claim of more than 7 per cent growth this fiscal.
Last month, the International Monetary Fund and Asian Development Bank had cut India’s growth forecast, citing global and domestic headwinds.