TALKING BUSINESS I believe that the RBI is acting prudently — A. Vellayan
He is a no-nonsense person. And, he doesn’t hesitate to speak his mind. Chairman of the well-diversified Murugappa Group, A. Vellayan shares his thoughts on the current status of the Indian economy in this interview with K. T. Jagannathan. Excerpts:
What is your take on the status of the Indian economy?
I think the Indian economy is growing on the past momentum, and the current political impasse is creating lack of confidence both within India and outside for investors.
Do you think that the Reserve Bank of India has gone on a prolonged ‘monetary tightening mode', hurting the growth in the process?
I believe that the RBI is acting prudently, and without being influenced by the political process. However, the balance of payments and fiscal deficit have forced the RBI to play its role which, I think, they are doing well.
Do you agree that fiscal discipline has gone a little too awry?
Yes. I feel that the overall fiscal discipline at the Centre and the States has gone out of hand.
How much the mood is driven by negative perception?
Most of the mood is driven by bad and delayed decision-making.
Is the sentiment negative or the scene bad?
I think the scene itself is weak. No one wants to ‘hold investments’.
What do you think that the authorities, monetary and fiscal, should do just now to do course-correction?
I think in order to restore the confidence in Indian and international investors, there should be a time-bound plan for major policy initiatives to be announced.
Various GOMs (Group of Ministers) should be convened and decisions rolled out.
How do you see the global development pan out on the Indian economy?
If the global situation gets any worse, then the scope for foreign investment either as FDI (foreign direct investment) or as FII (foreign institutional investment) will reduce. This will hurt the Indian economy.
What should the corporates do at this point in time?
At this time, the corporates should be cautious, be cash positive, and, if the downturn gets worse, look for opportunities.
Should one overlook rising inflation to boost growth?
What is the solution?
The solution, I think, clearly, lies in fast-tracking infrastructure investments. China did this at a point in time. We should also do it. This could help attract FDI. Further, this could facilitate job creation.
Also, we should look at agriculture productivity very seriously.
The mismatch between the DAP and urea prices, I think, would result in a 20 per cent drop in farm production this year.
Improvements in farm productivity will go a long way in easing the supply constraints.
What is your outlook on the Indian economy?
The long-term future is bright but till September 2014 we will muddle along.