Focus on reviving rural demand, job creation: L&T Finance to govt

New Delhi(PTI): While the government tries to boost the economy and kickstart employment generation, it must focus on reviving demand, especially in rural markets, by “focussing on low-hanging fruits”, L&T Finance Holdings chairman and managing director Y M Deosthalee has said.

“The biggest problem facing the economy is lack of demand. And only the government can help revive this as corporates have built up overcapacity in the past and are stretched financially now.

“To achieve this, it must focus more on the low-hanging fruits by picking those projects which can easily be restarted and generate jobs,” Deosthalee told PTI in an interaction here.

It can be noted that most of the mass marketers like small car and bike makers, FMCG companies, whitegoods makers and tractor makers, among others, have all been reporting steady declines in rural sales for many months now.

Deosthalee, who heads one of the largest NBFCs, said sensing rural distress, his company has already cut down on its lending in rural markets.

Bike makers have reporting lower sales or even contraction for many months now, while car makers have been reporting low growth rates that too due to new model sales in urban markets.

In August, bike sales contracted 9.6%, while those of cars inched up just 6%.

As per the Society of Indian Automobile Manufacturers (SIAM), the major concern is the declining sales of bikes, which saw a drop of 9.6% in

August due to demand slump in rural markets.

“Demand for motorcycle has suffered due to a slowdown in rural economy. It is a real area of concern as decline in motorcycle sales has brought down the overall vehicles sales,” SIAM said, adding that market leader Hero MotoCorp saw its sales decline by 15.46%.

In July also, bike and LCVs sale fell by 6.36%

and 4.11%, respectively, while whitegoods sales are down close to 12% in the first quarter.

The problem is that most of the rich regions in western and southern parts of the country are staring at drought and water bodies have already started drying up, Deosthalee said.

Identifying irrigation as one of the biggest areas where the government has to spend its maximum energy and attention, Deosthalee rued that nobody has really identified a lasting solution to the rain dependence of the country even after so many years of drought and agrarian crises.

He also said that the government should increase investments into infrastructure like roads, railways, port and housing so that these sectors can generate lakhs of jobs.

The CMD said another key area that the government can focus successfully is to create jobs as 1.3 crore youth enter the job market annually but remorsed that the Modi government has so far been not ‘very successful’ on the employment front.

He also flagged the troubles in the discoms and steel sector as problem areas that need immediate attention of the government.

Lack of reforms in the distribution side is the biggest problem and not lack of demand for power, he said.

The power sector, especially the distribution side, has been reeling under heavy debts and merchant power producers are holding onto excess stock as fund-starved SEBs are unable to buy power, even as they declare load shedding.

The state-owned SEBs owe around Rs 3 trillion to banks.

The government has to revive demand in the power sector by rationalising pricing and ending irrational cross subsidy, he said.

The state-run SEBs need to be reformed so that they can buy power and distribute. The problem is not lack of demand for power but the inability of SEBs to buy and distribute power at commercial prices, he pointed out.

Deosthalee, who spends his past time singing for charity, has already produced a musical album with eight CEOs — Shika Sharma of Axis Bank, Kalpana Morparia of JP Morgan, and Sunil Munjal of the Hero Group, among others — and is now making a Marathi movie for charity.

Posted by on September 14, 2015. Filed under Nation. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.