Extended monsoon the reason for weakness in manufacturing and mining, says L&T

As India grapples with a weak economic environment, poor industrial output data, and weak power generation, we try to get a sense of how government spend on infrastructure is panning out and a status check on private capital expenditure. R Shankar Raman, whole time director and CFO of Larsen and Toubro (L&T), shared his views on Indian economy in an interview with CNBC-TV18.

On index of industrial production (IIP) numbers, he said: “If I look at the details, both the manufacturing sector and the mining sector has given away some of the growth momentum. What I understand is the extended monsoon and some of those flash floods have caused tremendous damage to the mining sector and it is going to take a little while for recovery.

"The manufacturing sector, it has been fairly, widely commented about because the last six months we have been seeing considerable demand contraction and unless the demand comes up, the production pace will not pick up. To some extent, the production adjustment to inventory levels and market demand scenario is also causing some blips in the production numbers but should things improve from here then you will find production moving up a bit and normalising. But my own sense is — till about March this year we will know clear trajectory of demand — you will find production numbers a little soft.”

On the uncertainty surrounding government projects in Andhra Pradesh started by Telugu Desam Party under the YSR Congress regime that came to power earlier this year, he said: "We are engaged with the state government. We don’t need these kind of start-stop-start kind of progress on projects. We are still a resource-stretched country, a lot of money has already been sunk on the ground and we are hoping against hope that good sense will prevail so the money invested already is not wasted. It is also an issue of credibility. My sense is the state government is beginning to see the logic behind these things. From three months before if we were less hopeful of these projects recovering at all, today we are little more hopeful.”

On revenue growth, he said: “We, as a system, want to make sure that we retain our goal and do not keep shifting goalposts every now and then because it will confuse the organisation as well. So we are manfully striving to reach the guidance. Till will tell but as far as the following year is concerned, we are fortunately blessed with over Rs 3 lakh crore worth of order book and to execute this it is very important to grow revenues at double digit. My approach to dealing with this large order book would be to push ourselves to stay on that double-digit trajectory for revenue growth and hopefully profits will ring in as well.”