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Thursday, April 02, 2020

Wealth creation will lead to growth … That’s what the govt needs to focus on: Pawan Goenka

"Clearly if you look at the Budget, it was all about how can we make the economy (strong). Whatever structural reform had to happen probably has been talked about in the Budget. So, I don’t think in the next few months, you will hear of any structural reforms," says Pawan Goenka.

Written by George Mathew | Published: February 23, 2020 2:15:13 am
‘Wealth creation will lead to growth … That’s what the govt needs to focus on’ Pawan Goenka, managing director of Mahindra & Mahindra

Pawan Goenka, managing director of Mahindra & Mahindra, says technology and innovation will drive the automobile industry in the coming years. In an interview with The Sunday Express on the sidelines of IIT Kanpur Alumni conference, Goenka spoke about the economy and the industry. Edited excerpts:

What’s your assessment on the economy? Do you see any recovery in the near future?

Well, a lot of initiatives have been put in place in the Budget. And, a lot of things happened between July 5 and February 1. We need to wait to see how those give a positive rub off to economic growth. Currently, of course, GDP has been very low, lowest in many, many quarters. The expectation is that next year it will touch 6 per cent again. So it’s going to be a slow climb. I don’t expect that overnight or very quickly. We’ll get back to 8 per cent but it is a slow climb, but I think everybody realises and understands what needs to be done. And there’s clearly renewed thrust on economic growth that we have seen.

Do you expect any structural reforms or economic stimulus to boost growth in the economy?

Clearly if you look at the Budget, it was all about how can we make the economy (strong). Whatever structural reform had to happen probably has been talked about in the Budget. So, I don’t think in the next few months, you will hear of any structural reforms. But things to add to the Budget announcement, like for example, automotive industry is debating the scrapping policy, which has been talked about for a long time and the Finance Minister has said they’re working on it and could be released soon. So, those kind of things will keep happening.

What should be the focus of the government if you’re not expecting more stimulus?

We have to realise that the fiscal room available to the government is not very high. It really becomes very difficult to give economic stimulus. Though experts would say stimulus will bring the economy back in gear, but at the same time, if they’re not willing to spend … you know, what is the effect that might come in?

Wealth creation will lead to economic growth. And, that’s what the government perhaps needs to focus on. How do we ensure that wealth … the companies which are creating wealth are encouraged to create wealth. And the feeling that that we generally have about wealth creation … that mindset needs to change.

The automobile industry was facing a slowdown in the last so many months. Has the situation returned to normalcy?

I think we have bottomed out and everybody in the industry believes that we will start seeing an upturn. It probably would be a slower upturn for the next, I would say, six to seven months, and, after that, we should see faster growth.

How is the demand from the rural sector now?

There’s not much of a difference in rural and urban right now. However, the rabbi crop is likely to be very good and revenue from the crop, because of MSP (minimum support price), should also be very good. In kharif, all indications, right now, are that it will not be deficient. Therefore, the rural economy should do well in the next four to six months. My belief is that even this year tractor industry is also down by about right now about 9 per cent, but it will reduce to 7 per cent by the end of the year, and so they start seeing a positive growth from next year.

How do you visualise the automobile industry or in other words where is it heading towards in the next five years?

In a nutshell, accessibility of mobility, clean, electric, safety and shared — these are the words that will define the automatic industry. Without technology and innovation, the industry cannot get to where it needs to get. Whichever one of these words should pick up … let’s say you’ve got clean. The technology is very high end advanced technology that has emerged only in the last four or five years. If you look at electric, it’s all about technology. So everything to take the industry forward to the future is all about technology. In fact, the auto industry people don’t realise how technology intensive the industry is. We see what is on the surface. What is not seen is what’s behind it to get that vehicle to you. And everything that we do, has a lot of technology embedded.

There is a perception that demand/ sales of electric vehicles have not not picked up or the growth is not up to the expectations. Do you agree?

I agree with that, for the kind of effort the government is putting into electric vehicles. I think the results have not been proportionate to that effort. I think we are at the inflection point. And the take-off should happen. However, we need to be clear on which is the area of focus and put all our resources on that area of focus. For example, if you think that the three-wheeler and the buses is where we need to focus on electric vehicle, that’s mass mobility. That’s where you will get the maximum benefit of electric vehicles. So, India needs to decide whether personal mobility and shared mobility — both need to move forward. Or, for India, shared mobility is more important. Let’s focus on that first. And then we’ll get to personal mobility.

What about the infrastructure for electric vehicles like electric charging points?

Power supply is not an issue at all. The problem is getting the power to the car and that is coming very slowly. The government cannot put up charging infrastructure and it has done enough to facilitate and private entrepreneurship to come forward and see a business opportunity in this. Now, many startups are setting up localised charging infrastructure. And again, we should not underestimate the power of startups. And this time, when I went to the Auto Expo so at least half a dozen startups are working only on charging infrastructure. So maybe charging infrastructure will not come by some big bang businesses, but come by multiple startups in different parts of the country.

Do you see a potential for driverless cars in India now?

For India, probably it is not the priority right now because we have to sort out many more things first. And for India, pollution, safety and accessibility — these three things which perhaps are not as important for developed economy as it is for India. We need to focus on those things. Electric vehicles should become a solution for for clean and accessibility.

Has the coronavirus outbreak impacted the auto industry in India?

The initial impact appeared to be large. Now, it seems that the supplies are starting slowly. Okay. So I think by the time we have to wrap up the quarter … at the worst, we will probably lose few hundred vehicles, but that’s okay.

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