RC Bhargava, Chairman, Maruti Suzuki clearly believes that slowdown in GDP in the frist quarter is a temporary issue and that one should have a long-term view of the economy because the government is trying to restructure the way the entire economy functions and that is not going to be easy.
For decades now the economy has been on a route which was totally inconsistent with sustainable rapid growth, so these timely changes were necessary. Therefore, one will have to go through short-term strain and the pay the price for doing wrong things for a long time and to benefit over longer term, he said in an interview to CNBC-TV18 from the sidelines of JPMorgan India Investor Summit 2017.
The reforms taken by the government will be positive for the long-term, he said.
Talking about the issues regarding GST implementation, he said many people were non-compliant with the tax laws or accounting laws and so, to comply with the tax laws behavioural changes need to take place and that is not going to be easy.
On the business front, he said total demand for passenger cars is close to 10 percent, while the industry would growth between 8 and 12 percent till the economy grows faster.
When asked how according to him the onset of electric vehicles would impact auto ancillary industry, he said only those companies that manufacture engine parts and engine related systems will get affected. However, some of the original equipment manufacturers (OEMs) do it themselves, he said.
Moreover, the introduction of EVs is a must because otherwise, it would not be possible for India to grow its transportation only on the basis of fossil fuels.
Below is the verbatim transcript of the interview.
Q: What is Maruti’s passenger vehicle growth outlook?
A: Total demand for car at this point of time will be something close to 10 percent, not 20 percent. We should over time expect industry to grow between 8 percent and 12 percent on a long-term basis till the economy becomes faster.
Q: I am asking you this because the gross domestic product (GDP) numbers have shown a slowdown compared to last year. You are an outlier but generally are you getting a sense that growth has been stymied for your sector, going by what the GDP is telling us?
A: I think GDP number going down and all is very temporary. I don’t think that we should take a short-term view of the economy because what Prime Minister Narendra Modi and his government are trying to do is restructuring the entire way the economy functions because over the last many decades we have gone on a route, which is totally inconsistent with sustainable rapid growth and it could not have continued.
So it is a very timely what changes are happening. It will have a short-term pain because if you do wrong things for decades, you cannot just get over it and say nothing has happened. You have to pay a price for it.
I think we will be paying a price for it, maybe more than one quarter certainly but I don’t take a short-term view of what is happening. I take a long-term view because I think what is happening is going to be extremely good for us in the long-term.
Q: Coming to a more micro issue of goods and services tax (GST) because at the moment all the companies are – there are problems of not being able to upload invoices, exporters getting stuck because the capital flow is impeded, this is going to take long, are you worrying?
A: No, this part gets sorted out. Part of the problem of GST is that there were so many people who were non-compliant with any of the tax laws or their counting laws, they just did not keep proper accounts. To comply with GST and to fulfil all its requirements, you need to become compliant with the way you maintain accounts according to account standards and the way you pay taxes.
This is huge psychological and behavioural change for a whole lot of industries, not easy.
Q: The government’s push towards electric vehicles (EVs), how is this going to impact the industry, are you going to see a lot of ancillaries go out, should we worry as investors and customers?
A: The introduction of EVs is something which we have to do. I don’t think India can continue to grow its transportation only on the basis of fossil fuels. It is not sustainable, should not be done.
We do need EVs. Bringing in EVs has a lot of challenges, many of which are known to everybody. The component industry is only going to get affected to the extent of those who make engine parts and engine related systems. Some of these are done by the original equipment manufacturers (OEMs) themselves, the rest is done – those particular people will get affected, they will have to look to diversify.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
