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May 29, 1998


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The Rediff Budget '98 Interview/R Seshasayee

'I hope economics will be back on BJP's agenda soon'

R Seshasayee Just 49. But R Seshasayee is the most powerful man in one of the Indian automobile giants, Ashok Leyland Limited.

The fact that he had been eyeing the post he now holds -- managing director -- even before he joined the company is borne out by his reply to then managing director R J Hancock's question, ''Where do you expect to reach in your career?'' ''Eventually in your chair,'' said Seshasayee, who was being interviewed for a job 20 years ago.

And he did just that. He took over as the company's managing director from R J Shahaney earlier this year.

In an exclusive interview with Shobha Warrier, Seshasayee outlines his expectations from the Budget, the impact of the sanctions and the automobile industry.

The last 18 months have been very bad for the Indian economy. Do you expect the economy to grow, now that we have a comparatively stable government at the Centre? Or, is the scenario going to be bad with the US imposing sanctions on India?

R Seshasayee Firstly, I think there is a certain level of growth in the economy -- whether you have an active government or an inactive government.

Because, in all these decades, you had something like 5 to 5.5 per cent growth which came about mainly because of agricultural production, the only area which has been well managed under the Indian context.

It came about because of a certain level of industrial initiative and entrepreneurship which we have in this country.

I have no reasons to believe that the level will go down now. But the issue is how that level can be nudged into 6.5 or 7 per cent.

That depends on an non-interventionist government with the right kind of policies. That depends also on whether or not the people perceive that the economy is going to grow. I mean not only the people here but people from outside also. But that is a question mark.

But I am optimistic as I have not found any big lack of consensus on economic reforms.

Do you feel the Bharatiya Janata Party-led government is going to follow what its predecessors have done?

In a way, the quick succession of governments is a blessing in disguise. Because the incubation period of any reform process is two-three years. The successive governments have defended it. So, it becomes easy for those who come later to continue.

Are you worried about the current crises like the stoppage of funds and the imposition of sanctions? Will it in anyway affect the Indian economy?

In a very short term, yes. If nothing else, the projects that are in the pipeline will suffer because of the uncertain situation. But I don't think that the effect is going to last for more than six months. After that, I would imagine that the equations will go back to normalcy. And by then, hopefully, India will sign the Comprehensive Test Ban Treaty and gets it out of the way. Let's hope that by then economics will be back on the BJP's agenda again. Unfortunately we have put international politics ahead of the economic agenda now. But that will change after six months.

Do you expect the BJP government to further open up the economy to make it more attractive to the outside market?

The opening up of the Indian economy is not in the agenda of the Indian government or the Indian people anymore. That is the agenda of the Western nations because they need to find markets for their things.

The worry that we need to have is whilst you are opening the Indian economy, how do we deepen this economy in a manner that the Indian industry, the Indian initiative and the Indian entrepreneur do not get a raw deal. That is a matter of concern.

Do you want protection for Indian industry?

I have always said that the Indian industry needs support, not protection. I do not use the word protection. Support could mean implementing reforms.

By support, what exactly do you mean?

Ashok Leyland For example, take the engineering industry. If it has to come up, it has to improve its quality. Surface treatment, painting, etc are very important elements today.

The Indian engineering industry needs support in terms of giving an impetus to develop those capabilities in India itself as the outside world has advanced a lot. Take the software industry. It needs massive fiscal support to make it a competitive industry, particularly in the development of long-term products.

Because product development in software requires a long-term policy, it requires a fairly high-voltage marketing effort too. The support can be in terms of funds to market the software products which are globally launched.

Another form of support could be improving the infrastructure. See, no industry can produce quality products at competitive rates if the power situation is very bad.

If the government cannot improve the situation, it has to say, ''I cannot do it. You have to do it on your own.''

Moreover, the process of opening up has to be correspondingly lower. It is not an argument against opening up, it is an argument against opening up without understanding where Indian industry is in competitive terms.

Former industries minister Murasoli Maran had said that no government can protect its industries all the time. There has to be a time-limit and after that it has to face the competitive world market.

Exactly. I agree. Okay, if they say, we are giving you five years, and in five years, we are going to bring down the tariff from 40 per cent to 20 per cent... That's fine. So, what is required is dialogue, at least in key industries where overseas competition may wipe out the Indian industry.

Ashok Leyland is one of the largest automobile companies. Now that Volvo, which specialises in transport buses and heavy commercial vehicles, has set up its plant in Bangalore -- that is, in south India where you dominate -- how do you plan to tackle them?

Ashok Leyland We are not worried about Volvo because the good thing about Volvo coming here is that it will create a kind of consciousness or awareness in the minds of Indian customers about what an international product is and what is available in the Indian market.

The bad news for them is that we do not have an economic atmosphere supporting a high-priced product like that. Several features of it, like the high horse power engine, cannot be fully used because of our road conditions.

Another thing is, a truck is used only 20 per cent of the time in India. Trucks stand idle during the remaining time.

A very heavily priced equipment has to be used very heavily. Unless you remove all the obstacles like the checkposts and things like that from the road, you cannot use such trucks.

For instance, Volvo trucks have a very sophisticated cabin for the driver. But our drivers do not normally live in such plush places. Due to this, I foresee a lot of difficulties for that product... But we are not unduly worried.

Talking about infrastructure, the conditions of our roads are pretty bad. As you are in the automobile industry, have you any plans to enter the field to improve the roads?

Well, as a company, no. The Hinduja group, which owns the majority control in Ashok Leyland, have looked at infrastructure projects.

Personally, I was the chairman of the Confederation of Indian Industry's surface transport committee. I feel the government has made the road sector an attractive investment proposition. But we must remember that no country has built roads purely from private investment.

Won't toll management help in recovering the cost?

Very few countries have succeeded with this in recent years. The US toll system was successful in the past. But, in the recent years, Malaysia is a good example. Otherwise, the system has failed.

Is it the size of our country that is dissuading private investors from entering the infrastructure field?

The returns on investment are not sufficiently attractive compared to some other industries. Returns from a consumer industry or some such industry rank much higher than the road industry, which takes hell of a long time to get any return.

Do you have any plans to enter the small car section, now that the Tatas also has come out with a small car?

No, we have no plans to enter the sector.

Do you feel there is room for more players in the small car sector?

There was a gap in the small car segment but, with the announcement of plans by both the Koreans and the Tatas, you have enough competition. So, the consumer will get a good choice.

Quiet a few luxury car manufacturers entered the Indian scene but sales were terribly down last year. Do you feel they misunderstood the Indian market?

Partially, yes. There is an exaggerated view of the size of the Indian market that can afford big cars. We are still a recycling economy. The number of years we hold on to a car is much longer than abroad. That has a direct impact on the size of the market.

It was reported that Ashok Leyland could sell only 43,000 of the 84,000 trucks produced. Has the market reached a saturation point or was it because of the general recession in the market?

Last year, there was a tremendous slowdown. Market size came down to more than 40 per cent in our segment. So, there was a steep fall in the sales.

No, we have not reached a saturation point at all. This is something which was almost expected because we had two years of boom. But the correction was too steep. This year also it is not going to be much better. I expect that it will move up again. We are far from saturation.

How big is the Indian market for you? How much more can you grow?

If you take the trend over the last 10 years, we should at least have an 8 per cent growth. The equation is something like this, if the GDP growth is 1 per cent, you must have commercial vehicles growing at about 1.5 to 2 per cent.

It was reported that you are going to cut down production by 30 per cent. How will that affect the company?

That was last year. This year also, we have to cut down. Yes, it affects the company quite badly because we are investing very heavily. And suddenly, when the market collapses, we have to cut down by 30 to 35 per cent in order to remain there. But we are battling the market situation pretty well. At the end of this, we will come out stronger and tougher.

It was reported that you are going to launch an eco-friendly, new light commercial vehicle. What is it?

We have today the 7 tonne GVW. What I have announced was the 4 and 5 tonne GVW. All the engines will be eco-friendly.

As I was waiting, I glanced through your house journal which said that the two persons who influenced you the most are Adi Sankara and Bill Gates...

Ashok Leyland (laughs) Two extremes! I had a lot of interest in spirituality even when I was young. Adi Sankara influenced me in three ways. One is, his philosophy has struck me as the most comprehensive explanation of life. He has left nothing in doubt.

What is more, he was not an armchair, spiritual, religious head. There was a lot of action in his life. The fact that he initiated and institutionalised so much of action even as an advaitist interested me.

His life is a clear testimony to the fact that you don't have to remain inactive to be a practitioner of spiritualism. I would say Vivekananda is another example of that. There was a lot of physical action in his life too and he had undertaken so many missions.

Another aspect is that Adi Sankara was an outstanding poet. If you have read Sivanada Lahari or Soundarya Lahari, you will understand the kind of poetic ecstasy that he had reached.

Bill Gates is the person who has changed the world single-handedly. In the last century, no one has changed or influenced the world as much as this man has done.

What inspires me is the power of his mind. His book gives ample clues about his ability to predict the future. His level of confidence and ability to change is so complete. That is a great inspiration.

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