Don't expect economic revival for 2 years: L&T's A M Naik

L&T chief says elections will keep government busy, while India Inc grapples with debt problem

The economy is unlikely to revive for the next two years, as the government will be in “election mode” and private-sector companies grapple with a Rs 6.5-lakh crore debt problem, said Anil Manibhai Naik, outgoing Group Executive Chairman of India’s biggest infrastructure company, Larsen & Toubro (L&T), on Tuesday.

“India is in election mode. There are polls either in one state or the other, apart from general elections for the next two years. This will keep the top leadership of the government busy with campaigning and crucial governance will get neglected,” said Naik in an interview with this paper. 

“Besides, the private sector is not in a position to invest, as many companies are dealing with their debt problem, while other large corporates that wanted to invest have completed their capital expenditure programme,” he added. 

Government spending will now be more on the social sector, instead of creating new infrastructure projects. “The focus will be more on winning elections rather than on governance. Hence, I do not see the economy reviving in the next two years,” Naik said. 

Beside elections in Gujarat, Karnataka and Himachal Pradesh, three Northeastern states, too, will go for polls before the general elections. “Post-2019, hopefully, the private sector would sort its debt mess, oil prices would improve, and the government will be free from elections. I expect the economy to revive from then,” he said.

Naik, who is credited for making what L&T is today, said the few large new infrastructure projects such as the Mumbai-Ahmedabad high-speed train project, Mumbai Trans Harbour Link and the Ganga bridge in Bihar are being financed by soft loans by Japan or multilateral agencies, without which these projects would not have seen the light of the day. "The government does not have money for such large infrastructure projects," he said. “Foreign investors are not necessarily rushing to India particularly in the infrastructure sector. Today, there are 40-50 road projects and power projects with a capacity of 20,000 Mw on sale, including our power project. But there are no buyers,” said the 75-year old, who will spend more time mentoring new leaders for L&T and corporate social responsibility from next month, said.

Naik said both the goods and services tax (GST) and demonetisation have resulted in the slowdown. “The GST and demonetisation resulted in our economy slowing down but they were necessary in national interest for the long run,” Naik said.  On L&T, Naik said the conglomerate has identified few non-core businesses which would be divested so that the company structure can be made simpler. “There are few businesses which are generating revenue of below Rs 1,000 crore and are not adding value to the group. We plan to exit these businesses and make up the lost revenue by generating higher revenue from core businesses,” Naik said.

The cash-rich company will also participate in the government’s divestment plan and pick up companies which are core to its own businesses like defence. “We are ready to invest Rs 5,000 crore to Rs 10,000 crore if we get a good opportunity,” Naik said.  While he is passing on the baton to his successor S N Subrahmanyan, Naik said he would be available for advice and is also mentoring the next set of leaders of the company in two groups, one in the 45-55 years age bracket and another in the 35-45 years age bracket.