Indian economy normalising after Q1 slump; growth potential intact: Kumar Mangalam Birla
BusinessToday.In September 14, 2020
Kumar Mangalam Birla, Chairman of Aditya Birla Group, exuded confidence that India is on the path to economic recovery after a severe shock in the first quarter of this fiscal. Addressing shareholders of Grasim on Monday, he stated that Indian and global economy are likely to bounce back as a result of fiscal and monetary measures employed across the world.
"From a growth rate of 2.9 per cent in 2019, the global economy is expected to contract by 4.9 per cent in 2020, as per the IMF. However, global growth in 2021 is estimated to rebound to 5.4 per cent YoY, as economic activity revives backed by fiscal and monetary measures across the globe," Birla said.
"The Indian economy delivered a subdued performance in the last fiscal year with FY20 GDP growth falling to 4.2 per cent primarily led by manufacturing and construction sector weakness. As expected, we witnessed a contraction in economic growth in the first quarter on account of widespread shutdowns. Despite this slump in Q1, the activity levels are gradually normalising," he further added.
Referring to policy measures implemented by the government and Reserve Bank of India, Birla stated that India's growth potential remains intact even after taking a hit due to the coronavirus outbreak.
"I remain confident that India's long-term growth potential remains intact despite the COVID setback. The IMF also has estimated that the Indian economy will rebound to 6 per cent in FY22," he said.
Championing the Atmanirbhar Bharat initiative, Birla said that Grasim has been a stellar example of this cause for the past 80 years. "Grasim traces its very origin to the spirit of nation building. Its success over 8 decades is an emphatic endorsement of Atmanirbhar Bharat. Today, your company, is home to world-beating fibre and cement companies. The unmatched global scale built across diverse sectors like fibre, chemicals, and cement, is on the back of decades of relentless innovation, soaring and fearless ambition, incessant cost consciousness, and nimbleness," he told the shareholders.
Talking about the future outlook for Grasim, Birla said that given the uncertain business environment, the company's current strategic focus is on demand creation through innovative products, cost rationalisation, agility, and cash flow. This was exemplified in tapping export markets in June quarter when domestic market was down, Birla said.
"Across the businesses, our fixed costs have reduced by 35 per cent, which amounts to savings of Rs 256 crore compared to the FY20 quarterly average. The company's Capex plan for FY21 has been calibrated to Rs 1,615 crore as of now. Your company has decided to continue the Vilayat VSF brownfield expansion with revised timelines," Birla said to the shareholders.
Birla assured Grasim shareholders that measures have been put in place to optimise operations across plants, reduce fixed costs and conserve cash, and that the company has enough liquidity to navigate the current uncertain business environment.