In a conversation with Nisha Poddar, TV Narendran, managing director, Tata Steel, and president of the Confederation of Indian Industry (CII), said the boost to infrastructure spending, support to MSMEs and continued backing of rural employment are key positives in this year’s budget. Edited excerpts.
Q: Tell us about highlights of infrastructure boost?
I think on infrastructure we have more than met expectations. At CII, we’ve been asking for the focus to continue on infrastructure. We are very happy that it’s been increased. I think the challenge now is to make sure that that money flows to the ground and is executed well. Infrastructure has a huge multiplier impact—it creates jobs across the country, it creates demand for many industries, leads to investments in the private sector, so on and so forth. On the consumption side I think support has been given to the MSMEs (micro, small and medium enterprises), particularly in the high-contact sectors, because that’s where business has been impacted, jobs have been impacted. There is continued support for (right to work legislation) MNREGA. There is a focus on medical infrastructure, because that’s where a lot of households spend more money than they plan. And ultimately, I think consumption needs to be supported, and they can be fully supported only when jobs are created. And that’s right to boost the sentiment having public sector infrastructure, and hopefully, followed by private sector infrastructure, will have jobs back and that should help consumption.
Q: Another important aspect that our government will have to deal with is growth versus fiscal discipline. How do you see that being balanced in the present?
I think the finance minister and her team have done a good job of balancing. They’ve been helped by tax revenues which have been greater than they thought. I think even in the budget she said the GST (goods and services tax) collection was Rs 1.4 lakh crore in January, which is very positive. If you see most of the last 12 months, I think six or seven months have been over Rs 1 lakh crore, so I think it’s been great from that point of view... And I think from the CII point of view also, our request was that we should continue to deal with a fiscal deficit with a glide path which is not going to derail growth. The finance minister says that she will chase 4.5 percent fiscal deficit by FY26. We would have preferred a FY27. But I think we’re okay with FY26, if we can deliver on 8-8.5 percent growth for the next few years. I think we are certainly back on track. And the tax collection should be robust. So, I think we’re okay with what has been planned.
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Q: There are a few things developing right now. First of all, cost inflation is something that industry is talking about already that would hit your bottom line immediately. Then, crude prices have been going up because of geopolitical reasons. And third, we are entering into an interest rate tightening cycle. All this is going to hurt the manufacturing and capital intensive sectors in particular. How do you see the budget addressing some of that, if at all?
We’ve been going through some fairly big structural changes in the global geopolitical environment. And we have also seen a decade where China was exporting a lot. In some sense, somebody said China was exporting deflation. And now China is exporting inflation. So there’s been a big shift. Again, we see a situation where China, Japan, Korea, a lot of countries are reducing exports of carbon-intensive products. So that is disrupting supply chains to some extent structurally. And second thing is as the cost of labour goes up in China, manufacturing is shifting out of China. So a lot of these things are happening which is having an impact on commodity prices, etc. And on top of that supply chains were underprepared for the sudden recovery in global demand. Some of it will take a little bit more time to settle but I think organisations need to readjust for this new normal and see how they can manage it. All of us did China sourcing; you need to do sourcing beyond China. We are asking people to source from India instead of just sourcing from China. So these things organisations need to plan for and not assume the last 10 years is going to be the same way for the next 10 years.
Q: The MSME sector and COVID-hit sectors need much relief. Has the budget met the expectations?
A positive thing has been the credit guarantee scheme being extended and enhanced with a focus on MSMEs in the high-contact sector. They needed that as they have been hit by all three waves of the pandemic and also impacted by a lot of local lockdowns. So I think they need that support. And the hospitality sector employs about 10 million people. It has a big impact on jobs and consumer sentiment. Obviously, we need to continue to support MNREGA. We didn’t see anything about urban support for the urban poor. I don’t know if there’s something in the fine print of the budget, but certainly the rural poor are getting some support. I hope that the spending on infrastructure will create jobs both in urban India and rural India, because a lot of talk in the budget was also with urban planning, creating rapid transit systems, so on and so forth, which will create jobs in urban India.
Q: The budget spoke of sustainability and reducing the carbon footprint. How do you see that impacting the sustainability journey for the Indian corporates?
This journey is going to be complex, it’s going to be expensive. We’ve seen this happening in Europe, for instance, where the government and industry need to work very closely together, because if you’re going to transition from traditional sources of energy to new sources of energy, you need to also build the infrastructure. You need to have the right policies, you need to create the right incentives. You also need to have mechanisms to ensure that somebody else somewhere who is not so carbon efficient is not shipping into your geography because you have a higher cost becoming more carbon efficient. All this needs to be planned well. I think Europe is doing a good job of that. And I think as we plan for 20-30 goals we need to work together and I think as CII we’ve also told the government we are happy to work with them to develop the right policies which will help industry transition and also incentivise industry. You know, for instance, when you look at government procurement, the government is already moving away from L1 in some cases. How can you encourage buying green products even if it’s slightly more expensive? The announcement in the budget on steel scrap is again positive for green because that’s recycling. India can recycle more scrap to cater towards the requirements. These are steps we need to see a lot more of in every subsequent budget.
Q: Lastly, I want to ask you about the disinvestment plans. They have this time given a more rational figure. Hopefully they will be able to meet it in the next financial year. But the Tata group has taken a lead in supporting disinvestment so far with Air India, now also Neelachal Ispat Nigam Ltd (NINL) to be taken over by Tata Steel Long Products. How do you see this developing and tell us something about how Neelachal is going to be funded?
These are assets which probably have not been put to the best productive use in the hands of the government for whatever reasons. And I think the private sector can do a better job of unlocking more value from these assets, you know, so that’s where we see it. And if the government gets money out of this divestment which it can use to enhance health, infrastructure, education infrastructure, and regular roads and rail, I think that’ll do more service to the public. As far as Neelachal is concerned, we see it as a good asset. It’s next to our Kalinganagar plant. We want to create a state-of-the-art long products plant there over the next few years. So we are happy with that acquisition.
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