GST is pushing GDP growth, says Adi Godrej

Adi Godrej says there is an all-round growth and an increase in the income of people is driving demand in the rural areas. The chairman of Godrej Group, in an interview with Anurag Shah of Zee Business, said he feels that India is going to be the number one country in terms of purchasing power parity (PPP) by 2050.

This is the first time in several quarters when Godrej Industries has reported a dip in its margin as well as its Ebitda (earnings before interest, taxes, depreciation, and amortisation) margin. What is the reason for the fall?

Change in the accounting process at Godrej Properties, which is a subsidy of the Godrej Industries Ltd, is a reason. In fact, all the real estate companies have brought accounting changes from April 1, 2018. Our real estate business is doing well and is growing. There are new projects on the market and they are getting customers to buy the properties.

For Godrej Consumer, demand seems to be returning. Is it coming from urban pockets or rural areas?

There is all-round growth. GST (goods and services tax) has had a good impact on the growth as it is pushing the GDP (gross domestic product) growth. Secondly, GST rates on several consumer products were reduced and we have directly passed on the benefits to the consumers, which has helped in increasing the consumption. There is a growth in demand in the rural areas and this growth is backed by an increase in income of people. In fact, the government is also working hard for rural people. India is a land with maximum possibilities of growth in consumption, which can come through penetration. Consumption will increase with an increase in income.

The government has introduced several changes in GST since its implementation. Do you think there is a need for further rationalisation? Can GST slabs be decreased to one or two?

I don't think that it can be run through one or two rates and there is a need of at least three rate structures. GST has ended complications and is having a positive impact on the economy of the country.

You have always been vocal about GST and have said that its implementation will increase the country's GDP by 2%. It has been over a year since its implementation. By when do you see that 2% growth happening?

It is visible, but it is a difficult task to provide an estimate. For the purpose, you can have a look at the GDP growth of the January-March quarter, which stood at 7.5% and was higher than the previous quarters. I feel this growth is here to stay and will continue to grow in every quarter.

You want to say that the GST is the major contributor to this uptick in growth?

GST has contributed in a considerable manner.

Godrej Agrovet's performance has been moderate. Will a favourable monsoon and its impact on rural economy lead to an uptick in the company's growth?

Yes, I feel that you will be able to see an uptick and the growth will be supported by two things; they are the scope of growth in Agrovet's business and its R&D (research and development), which is helping us in developing products that can help the farmers in increasing their productivity.

The government has hiked the MSP (minimum support price) and says that it will double farmers' earnings by 2022. Do you think it will be able to achieve its targets?

Yes, it can be done. For the purpose, the farmers will also have to concentrate on animal husbandry such as milk and eggs, among others, as this is a sector that will provide an income year on year while agriculture is a business that can witness ups and downs.

Forecasts suggest that the GDP will remain above 7% in time to come and that the inflation will remain around 5%. Where do you see the growth trajectory?

Growth is going well and I am very happy when it comes to the future of India. Have a look at the purchasing power parity where we are in the third position in the world and just behind China and the US. I feel we are going to be the number one country in terms of PPP by 2050 as we are a young country and have less pressure of handing retired person.

Do you think that crude prices will be a matter of concern?

Crude prices were high in the recent past but have fallen. Secondly, the Opec (Organization of the Petroleum Exporting Countries) nations in their recent meeting have decided to increase the production so that prices are under control.

Can you let us know about the kind of inorganic growth that will be visible in time to come?

We always keep looking at the opportunities for inorganic growth, not only in India but also in other countries and act at places where we can see a strategic opportunity for growth.