Low growth and high inflation is my main worry. With this kind of increase, growth of cars have flattened off, sales of trucks have declined.
The hike in the policy rates is certainly not good news for customers. This will affect manufacturing growth and price of metals will remain higher. Don't think inflation will come down.
The auto industry certainly does not feel they have any power over pricing. There is nobody who would agree with that. This will most certainly have a negative impact on retail demand but it is difficult to quantify it right now. A 25-basis point rise was what was expected but with a 50 basis points, the industry will certainly be concerned.
The Society of Indian Automobile Manufacturers had earlier brought down the expected growth target for the year to 12-13 per cent for the industry. This increase in rates will certainly be a worrying point this year. However, I cannot say now if the growth target will be downgraded further.
It is not completely just to say the government has failed to bring inflation under control. The international scenario is such that raw materials and oil prices are high. So, much of the inflation is related to global pricing.
Furthermore, with schemes such as NREGA, more people have higher disposable incomes. These schemes have fuelled rural buying. Oil is still high globally and so is metals. Just trying to control it by increasing lending rates is not at all proper. The side effects of this could be that growth may come down but inflation will remain high.
VENU SRINIVASAN
Chairman and Managing Director, TVS Motors
