Status quo would not help revive demand, say CEOs

With a majority of Indian private sector companies not planning to raise any big-ticket loans in the near future, chief executive officers called the Reserve Bank of India's status quo on rates a "non-event" and said lack of transmission of rates by banks was not reviving investments.

"Everyone is disappointed. The RBI can continue to take this stand citing inflation but how will the country move ahead? The RBI needs fresh thinking if this country needs to progress," said Rajeev Talwar, CEO of India's largest real estate firm by market value, DLF.

Statistics collated by research firm CMIE reveals that though the private sector had shown initial enthusiasm in announcing new investments since the Narendra Modi-led government came to power in 2014, most of these projects have failed to take off. The private players announced 2,856 projects worth Rs 11.33 lakh crore during 2014-16. But of these, only a third of these have gone under implementation so far while the rest remained on paper - thus showing the intent of the corporate sector not to invest.
 

CEOs say high interest rates and low demand are the main reasons why they have not revived investments. "No new projects by the private sector are coming up. Hence the demand for industrial products and raw materials remain static. Once and if the demand picks up, the companies would first like to make use of the idle capacity in the steel, commercial vehicles and cement sector," said a CEO asking not to be named.

The only good news for the corporate sector is that the demand from consumers for cars and two-wheelers is growing by double digits. Consumer durables companies are also expecting sales growth of 15-20 per cent - starting the festival season that begins next month.

But large corporates say they would wait till the next policy when a new governor may reduce rates - taking into account lower food prices due to a good monsoon. "As of now, there is nothing to encourage investments. May be by next year when the goods and service tax (GST) would be rolled out, we would take a call on new investments. Till then, the investments are only for maintaining the facilities," said the head of a large manufacturing company.