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Tuesday, July 07, 2020

Boycotting China items not feasible: L&T MD-CEO SN Subrahmanyan

In the last few years, there is an over-dependence on the government for infrastructure and engineering orders for a fair amount of contracts.

Written by Shubhra Tandon | New Delhi | Updated: June 22, 2020 5:11:11 am
SN Subrahmanyan. (File Photo)

With the skirmish at the border with China, the ‘Boycott China Products’ sentiment is running high. The dangers of any rash move in this direction are well-known. SN Subrahmanyan, CEO and MD of Larsen & Toubro, in an interview with Shubhra Tandon, cautioned that to take a total view on boycotting Chinese goods is not feasible currently. Edited excerpts:

How do you think the call of ‘Boycott China’ will impact the capital goods sector?

One has to be realistic and practical whether it is possible. There are Chinese companies that have set up shops in India, Chinese goods are from many points of view efficient and cost-effective. So, to take a total view that we can boycott the Chinese goods is not feasible because we also have balance of trade, and trade is obviously inclined towards China. But if the country thinks from a long-term measure and looks at China as an enemy country, we got to put in place policies and processes so that over a period of time we could make this effective.

In case some import tariffs are levied on components and goods coming from China, what will be the impact in terms of supplies and prices?

It will affect because many of us have placed orders on some Chinese companies. If there is a sudden imposition of import tariff and then there is a sudden change in law, one will have to depend on the government for compensation on some of these issues. Secondly, we will have to find alternative sources of supplies and those can be costlier which will lead to some costs.

Given that government finances are so stretched and there’s uncertainty in policies, how sustainable is it to depend on government orders?

In the last few years, there is an over-dependence on the government for infrastructure and engineering orders for a fair amount of contracts. This is because the private sector in India which is very vibrant has over-stretched itself in terms of leveraging its debt, balance sheet and some of them have overestimated the kind of revenues that will come in. Therefore, there is a lot of turmoil. Having said that, we have to depend on the government side for orders, which has been the case. I think the situation is going to continue like this for some more time.

Uday Kotak, while taking over as the CII president, said the government has done enough and it’s for the private sector to start investing even if it means to export. Do you agree?

One has to agree to that. In a country like ours, the government alone cannot do much of the investments and it has to be backed by private-sector investment. I also agree that the government has done what it can in terms of empowering the private sector from a liquidity, moratorium, NCLT deferment, from sustaining the MSME point of view. However, the entrepreneurial spirit has to come back. The investment spurt has to come back and that can only happen with demand coming back. —FE

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