Corporate tax cut will reignite private investments: Baba Kalyani
Low tax rates for the industry will encourage entrepreneurs and businessmen to invest in different sectors.
Will the government’s announcements to reduce corporate tax and expand the scope of corporate spend under Corporate Social Responsibility (CSR) norms spur investment?
This is the single biggest boost to the ‘Make in India’ campaign. India now is on par with the United States, the UK, Vietnam, Indonesia, Singapore and Thailand in terms of manufacturing cost competitiveness. In January 2018, the US economy got a big spurt after President Trump reduced the taxes. I think we should also start seeing similar effects in a couple of months. It should also re-ignite a virtuous cycle of private investment in the country.
Most importantly, this will allow many Indian companies to get into the global supply chains of several sectors other than automotive and pharma. There are a lot of new business models coming up because of technology advancements. Low tax rates for the industry will encourage entrepreneurs and businessmen to invest in these sectors. But we now need to take some steps like converting SEZs (special economic zones) into economic employment enclaves. Leverage vacant lands that are available. Create demand measures like it was done during the 2008 downturn. For example, buses were bought under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM). The private sector needs more defence orders. Something like that will build on this tax regulation.
Many companies are saying that investments may not be immediate because there is excess capacity in the system. What do you think?
This is where the real problem lies. If you look at the traditional business model, everybody has too much capacity. On traditional products, we are all working way below our full capacity, whether it is cars, trucks or anything. Now, EV is a technology. It is not a traditional business model. We, therefore, have to create new markets with these new technologies rather than depending only on the traditional business models. I think companies that are able to do this speedily and at a reasonable cost are the companies of the future.
What are the new business segments that Bharat Forge is exploring?
Bharat Forge is India’s first manufacturing multi-national company, with facilities all over the world. Whatever we have developed has been with our own research. We do a lot of work in material science and new material processes, which is our bread-and-butter business. We are also working in the areas of defence and related products, electric vehicles, nanotechnology, and composites, including carbon composites. A lot of our electric vehicle aggregates and sub-systems will be coming into the market in the next few months.
Our industry used to be centred around metals at one time. Now the industry is moving into everything other than metals. There are a lot of electronics in vehicles already and there will be a lot more when EVs come in. There are a lot of light metals in vehicles. There are a lot of composites coming in. We are also doing a lot of manufacturing through 3D printing. There is a lot of convergence of technologies in many fields and we have more than 12 research labs. We even make small jet engines, which we have developed in one of our research labs. Customers for these largely are from the defence sector.
Could you shed some light on the investment that you recently made in Europe for aluminium casting?
We foresee that a lot of aluminium will be used in the automotive industry and other industries for light-weighting. These are very special aluminium castings with very thin walls and built-in cooling channels and stuff like that. If you take an electric vehicle, the battery casing is made from aluminium casting with cooling channels. That’s the kind of thing we are going to make in our plant (in Germany).
Could you share more information on the carbon composites segment of your business?
If I was to peek into the future, I believe that wheels for cars in another five to seven years will be all made from carbon composites.
There is an increase in the usage of composite materials in light-weighting vehicles so that they consume less fuel and therefore generate less emission. We are working on making carbon composite wheels. I can’t say when it will be ready, but we are working on it. And generally, what we work on becomes reality.
What was the thought behind investing in electric vehicles companies like Tevva Motors?
Unless you invest in a startup like that, you don’t know what is involved in an EV. And if you don’t know what is involved in it, you really cannot do development work in terms of the sub-systems that go into it, whether it’s the battery charging system, inverter, AC-DC converter, controls, et cetera. Having a stake in Tevva (an UK-based company that makes electric drive trains) taught us a lot of these things. And hopefully, that will allow us to become a supplier to many OEMs (original equipment manufacturers) who move into the EV business.