GST impact will be felt from the next day: Godrej

MUMBAI: A good monsoon and the proposed passing of the GST bill will change the Indian business landscape dramatically, driving growth beyond double digits, taking the markets to an all-time high and bringing back industrialists to open up their purse strings for investment, Adi Godrej said.

The chairman of the $4-billion Godrej group told TOI in an interview that while double-digit growth would become a reality after 2017-18, when GST is introduced, the response in the stock markets and the kick-starting of the investment cycle would be immediate. While the markets have already started to take note of the potential of a good monsoon and higher corporate earnings over the last few trading sessions, lack of demand, high debt and unused capacities have so far kept companies away from making any large investments.

He termed the potential adoption of GST, which seeks to bring in a national value-added tax structure in India, as the second biggest piece of reform after the liberalization of the Indian economy during 1991. “It will add 1.5 to 2% to the GDP and the economy will start picking up much earlier than the scheduled adoption date,” he said, adding that companies would immediately go on their drawing boards to start investments as it will also fuel consumer demand.

“The benefit would be felt from the very next day. Prices will go down and, as a result, demand would go up, which will lift industrial production and tax collection for the government,” he said stressing on the need for its quick adoption. The government has indicated that it would be in a position to pass the GST bill during the monsoon session of Parliament.

Enthused by the renewed prospects of GST adoption, Godrej is planning to add 8 to 10 new factories which could take investments of anywhere between Rs 10 crore and Rs 100 crore each. He plans to make fresh investments in setting up two new projects under the group FMCG company, Godrej Consumer Products (GCPL) and a couple of agri-product projects under Godrej Agrovet. Besides, he also plans to grow through acquisitions as has been the norm over the last few years.

Though sales have been pulled down by weak demand, particularly in rural areas because of two consecutive bad monsoons, he feels things would start improving by the second half of this year. While growth rate of its consumer-focused company GCPL was 15 to 25% in the last three to four years, it came down to 9% last year and even further to 7% in the last quarter.

“For the first time in a decade, the volume growth (at 12%) is higher than value growth (at 9%),” he said, stressing on the drag.

Despite a sluggish demand, Gordej, however, has tasted success in real estate sales. ‘It’s been a record year for Godrej Properties and one reason could be the elimination of black money from the system,” he said, indicating that the group keeps away from it. Godrej is happy with the reforms taken by the Modi government in the first two years of its tenure, but said it should improve its record on privatization and disinvestment, adding that it has no business to be in airlines and hotels.