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At 76th AGM of Mahindra Group, Anand Mahindra discusses recession, oil prices and more

Elaborating on how China’s loss can be India’s gain, Anand Mahindra said: “US Foreign Secretary Antony Blinken made a speech recently where he called China ‘the most serious long-term challenge to international order’ and proposed, among other things, ‘to align with partners with shared interests who are opposed to China's overseas development policies.’ That is India's cue. We can be the balance against China. We can be the new player in the supply chain."

August 05, 2022 / 06:34 PM IST
Anand Mahindra

Anand Mahindra

Mahindra Group Chairman Anand Mahindra announced at the company’s 76th AGM on August 5 that the Q1 F23 results, “which have shown the growth pathway of the company and the Mahindra Group”, has been approved. He also pointed out that Mahindra’s Scorpio-N launch saw unprecedented response, with 25,000 bookings made in 60 seconds.

The Mahindra Group Chairman went on to deliberate on various global issues to highlight the importance of perspective, starting with increase in oil prices. He said: “Let us take the oil prices over the last 15 years and adjust them for inflation. In 2008, the oil price was the highest ever -- about $130 a barrel. If you take that figure and adjust it for inflation, it would cost about $300 in today's money. The highest price of oil in recent times is $120. It is actually lower than 2008 on an inflation-adjusted basis. Today's price is not great. But looked at through the lens of inflation, it's not devastating.”

He then went on to say that the war in Ukraine is teaching us a timely lesson about the dangers of overreliance on oil and the need for alternate energy sources.

Anand Mahindra added: “It also coincides with a climate change crisis which needs to be tackled on a war footing. It seems logical that this experience of oil supplies being negatively affected by war will shake us out of our complacency and give a much-needed fillip to the quest for renewable energy. Some good may yet come out of this deplorable situation.”

He further pointed out how the war in Ukraine has brought high-tech defence into focus, as Ukraine, though vastly outnumbered, has been able to hold its own due to the high-tech defence technology being poured in by NATO countries. “There is a lesson in that countries like ours need to be perpetually ready to defend our borders. High Tech defence will become a sunrise industry,” he said.

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The business tycoon then went on to discuss “whether the United States will go into recession” and said while it is difficult to predict how a possible recession will play out in the US, there is a silver lining to it.

He explained: “India has always been resilient. If there is only a mild recession in the US, that is likely to be good for India. Our resilience will help bring capital inflows. Further, the recession will help reverse the commodity price rises and also perhaps induce the US Fed to put a cap on rising interest rates.”

Speaking about supply chain disruption, Anand Mahindra said: “In M&M, one of the main reasons for the long waiting periods for delivery of vehicles is that the availability of semiconductors had slowed down to a trickle. Those lamenting the demise of a global supply network are ignoring the fact that the disruption is in the China-dominated global supply network rather than the true global supply chain.”

He said that unshackling ourselves from China is a good development and the process of unshackling has already begun and explained that China may be losing its edge already. Sixty percent companies and 82 percent manufacturers now report their production slowed during the present outbreak due to lack of employees, inability to obtain supplies, or explicit factory halts resulting from the lockdowns.

“So, where is the opportunity in this scenario? There is likely to be significant supply chain restructuring. Companies and countries will look for alternate supply sources. This will create pockets of opportunity around the world. There is likely to be a significant supply chain restructuring, and India may well be one of the beneficiaries of this 'sourcing' diversification,” he added.

Elaborating on how China’s loss can be India’s gain, Anand Mahindra said: “US Foreign Secretary Antony Blinken made a speech recently where he called China ‘the most serious long-term challenge to international order’ and proposed, among other things, ‘to align with partners with shared interests who are opposed to China's overseas development policies.’ That is India's cue. We can be the balance against China. We can be the new player in the supply chain. The situation is rife with opportunities. We have but to seize the day.”

Explaining how overall, the current situation is full of opportunities for India, he said that though the rupee depreciation has caused inflation, it has remained in control due to sound fiscal and monetary management. Our inflation target deviation is well below those of most developed economies.

He added: “The rupee was overvalued, and it was inevitable that it would head towards finding its own level. This level helps boost export competitiveness and helps India's exports, which have grown 25 percent YoY. There are, however, some gaps we need to fill in to take full advantage of these opportunities. The most important of these is jobless growth.”

“The Indian unemployment rate is hovering around seven to eight percent, according to CMIE. This is because job growth has not kept pace with GDP growth. Only 40 percent of the labour force that is capable of working is actually working or looking for work. In the US, this labour participation rate is 60 percent. The biggest sufferers are youth and women. Though the government is trying to do its bit by announcing plans to hire 1 million people in govt jobs by 2023, given we have a 900-million-strong workforce, there's a lot more to do.”

In conclusion, the Mahindra Group Chair said: “Let's set aside our fears and step up to bat…. I believe industry should have faith in the future and invest. The world is changing, and there are opportunities waiting to be seized. We seize these opportunities and turn our fortunes around. A little bit of calculated risk, a little bit of courage will pay rich dividends. To quote FDR, we have nothing to fear but fear itself …”
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first published: Aug 5, 2022 06:34 pm
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