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At the World Economic Forum in Davos that kicked off on Wednesday, Prashant Ruia of the Essar Group explains to the CNBC-TV18’s Menaka Doshi that government initiative in India and the return of growth in the US and China is set to create a global economic boom across all sectors.
At the World Economic Forum in Davos that kicked off on Wednesday, Prashant Ruia of the Essar Group explains to the CNBC-TV18's Menaka Doshi that government initiative in India, the return of growth in the US and China is set to create a global economic boom across all sectors.
Below is the edited transcript of the interview on CNBC-TV18
Q: You agree with Uday Kotak that the investment cycle will take 12-18 months or do you hold a more optimistic view based on the little bit of government initiatives in the last 6-8 months?
A: Let's look at it in two parts. In my opinion, one of the critical factors for the investment cycle to move forward was the existing pipeline projects which were stuck at various stages and forms. I believe that return of investment cycle in the last one or two quarters is due to all the initiatives by government to get a lot projects, stuck in the pipeline, moving. From an Essar perspective, most of the projects that were kicked-off three-to-4 years ago have all received the required regulatory approvals.
Q: And that’s been the case for a long time now?
A: The coal-supply linkages have come through for our power generation units.
Q: Does that continue to be a sticky issue broadly speaking for the industry?
A: I believe that significant steps have been taken by the government to make sure that sufficient coal will be available at least for the projects which are already underway.
Q: Will generation reach the 6500-6700 MW by 2014? Are you on course for that target?
A: Our total power portfolio is 7000 MW of which we are currently generating about 5,000 MW already. The balance will be achieved by March 2014. So, we are pretty much on schedule. We are also India’s second largest port company. A lot of the regulatory approvals which were holding up our port-projects have come through.
I would agree with Uday Kotak that the greenfield investments will still take probably 12-18 months. There are still a lot of projects in pipeline that need to be completed before we start talking of greenfield projects. So, I think we are moving in the right direction.
Q: Does that mean that the confidence which was so sorely lacking amongst Indian business-leaders over the course of the last year or two is slowly returning when it comes to putting new money into new ventures?
A: I would absolutely agree. There is a return of confidence. However, it is a slow process. We have witnessed two years of a slowdown, but certainly steps taken by the government are beginning to show positive impact on industry in various sectors.
Q: Is that reelecting in the mood or the attitude that foreign strategic investors have towards India?
A: We have seen huge inflows coming into the capital market.
Q: What is the reason for India’s fall from grace from being the toast of Davos in 2009 and 2010?
A: I agree, but the investors have seen negative media in the international press.
Q: Why don't you say they have seen little or no government initiative? Why blame the media?
A: The strategic have seen negative stories about India. So obviously they would want to see some more steps by the government before they start putting their money to work in India. Are they interested? I think they are very much interested. We will be the second or third largest domestic market in consumption in all sectors. Sooner or later, anybody who wants to be a global player has to be in India.
Q: The prevalent view of the global economy is that it is stabilizing, not recovering. Is that your outlook? How much of that view impacts your decision to continue investing in several businesses.
A: Globally consumption is looking a lot more stable. Europe is looking a lot betteand is over its worst.
Q: How about the UK? Don't you have refining operations in the UK?
A: Yes, you're absolutely right. And the US is looking a lot better with the return of growth.
Q: Do you really you think so despite the political impasse?
A: Absolutely. The US has the ability to surprise. We have quite a lot of investments in the US and the capital markets are a lot better. Liquidity in the markets is a lot better. Commodity prices are pretty strong across the board. So, for the current year, the overall global environment will certainly be stable and hopefully, better in the next few years.
Q: So what is your view on commodity prices? According to Chinese economists, China is expected grow 8-8.5 percent this year. So in that backdrop, will commodities only move up?
A: China's gross domestic product (GDP) growth was 7.9 percent just last week as compared to estimates of 7-7.5 percent. India is estimated to post a GDP growth of 6 - 7 percent. And the US is looking better. All of this means more consumption and big investment into commodities which has not happened in the last two three years. So the supply side will take some to catch up and we are already seeing the results of stronger commodity prices.
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