What’s your view on the Indian economy? Is it on the mend?
The festive season has been better than what was expected. Optimism is returning, there have been a lot of conversations around incremental capex which will take place soon. Some of them have announced investment plans but the real capex will start coming in only in the next 9-12 months when the credit offtake will start. On the government side, earlier only a couple of areas were spending like defence and infrastructure but I am now told other departments are also being pushed to spend. The GST and tax collections are looking good, so the government has some spare money to spend.
What are the signs of concern for you?
Yes, there are signs of worry. While the third Covid wave has not come as expected after the festive season, some concerns remain on that front. On the upside, 57% of the population has got at least the first dose of vaccination. But we do see the fourth wave in Europe, so you cannot ignore that fact. We are hearing of shutdowns for unvaccinated people.
Plus there are supply chain issues, this is impacting India also especially the car industry. My impression is it could go on for another 12 months. Commodity prices remain high. Geo-political issues are worrisome, especially what is happening between the Western world and China.
What kind of capacity utilisation are you seeing and which sectors would see capex pick up?
The capex conversations are coming from infrastructure sectors and those supporting them. India’s exports are up 55%, so some of the industries which are reliant on exports also have a lot of capex coming through. Generally, as capacity utilisation starts touching 70-75%, they do need to start planning for capex as it doesn’t come overnight. My view is that once the supply chain issues in the auto industry go away that will also see demand pick up. On the service side, the bigger players have raised a lot of capital; so when things open up they could acquire assets at cheaper rates.
