Vineet Aggarwal, Managing Director of Transport Corporation of India (TCI) is optimistic about the logistics business growing faster than pre-COVID-19 level in coming quarters.
But as President of ASSOCHAM, he suggests the government should look at five important points this budget to revive growth of the overall economy, even as businesses see improvement. During an interview with Jescilia Karayamparambil and RN Bhaskar, he talks about the industry expectation and logistics business.
Tell us about the logistics and transport business in the country
The changes in the economy have led to change in the logistics sector as well. Notwithstanding, the industry is very fragmented as well. Clearly, the ownership is scattered as well.
People who own less than 20 trucks account for more than 80 per cent of the truck ownership in the country— it is one aspect of the road transport industry.
The logistics industry — air transport, road transport, sea transport, rail transport, warehousing services, inventory management services, packaging — as a whole has expanded quite a lot in line with GDP. Along with logistics, the share of road transport has grown. The share of road transport in the overall freight market is in excess of 60 per cent.
The level of professionalisation is getting there. GST has led to forced formalisation in this business.
What are ASSOCHAM's budget expectations?
Considering that we are coming out of a pandemic, the expectations from the government are fiscal relaxation, increasing infrastructure spending, increasing expenditure on health and education; revival of demand and job creation.
This fiscal relaxation will be more like an investment for the future, not an expenditure for today. It will help India move out of a pandemic in a V-shaped manner or a faster rate of recovery.
The National Infrastructure pipeline needs to accelerate. The trickle down effect of this is huge. It provides for employment at all levels. It also creates demand for a lot of products to build that infrastructure. One specific initiative that I would like to highlight is Pradhan Mantri Gram Sadak Yojana (village roads). This will help improve rural employment, income, and connect the agri supply chain. Village roads will have a multiplier effect.
There is a need to increase expenditure on health and education as a percentage of GDP. The public expenditure on healthcare is a percent and half. Private investment is also a percent and half. In the future, the public spend should at least be two to three percent. It is not because we have to be prepared for pandemics, but a robust healthcare system is needed. There is a capacity issue in the country and it is evident at every level. Thus, building that healthcare infrastructure will be very critical.
The shift in education to digital will be important to pull people out of poverty. Education linked with technology will be essential going forward.
We have been consuming more products than services during the last few months. It is critical that consumption led demand continues. That means rationalisation of GST will be critical which should be based on data.
There should be a focus one job creation as well. We should start focusing on hospitality and tourism more closely. In 2008, after the financial crisis, travel for leisure came back faster than business travel. This was because there was a pent up demand. So, it will be a good time for the government to start looking at tourism and hospitality. Then look at MICE (meetings, incentives, conferencing & exhibitions) related travel. That can be both a job and demand creator.
Tell us about the agri-tech upgradation fund.
We are suggesting to the government to set-up an agri-tech upgradation fund. This will allow a lot of innovation in the agriculture space using drones, better-quality seeds, water efficiency, soil-quality testing etc. There is a lot of innovation that can take place.
This support should be available for the start-ups that go to the ground level and do those changes. To move up in the agriculture supply chain, these are the kinds of investments that are needed.
When do you expect the economy to revive?
The growth rate is an indicator of where the economy is heading. I believe Q4 (2020-2021) onwards, we should start seeing positive growth. Next year onwards, we will get positive GDP numbers.
India is at the lower base but the growth element is high. There is a certain amount of pent up demand that exists as well as a certain level of capacity utilisation has started to increase in all industries. This means they will get into a capex cycle.
Private investments have not come in as much as government expenditure. We believe that private investments will rise in the coming few quarters.
How will the China plus opportunity help industry and the company?
From ASSOCHAM’s perspective, it is a great opportunity for India. Many companies and countries have shown interest in the China plus strategy. It is not merely to use India as a base for exports but also cater to the Indian market which is massive. This is critical for a lot of companies when they look at entering the Indian market. There are definitely huge opportunities.
In the case of TCI, our 99 per cent business comes from India. We have offices from Leh to Andaman. We offer all kinds of services. Our idea will be to provide services within India as much as possible and to our neighbouring countries where we have our offices. The ability to create a network within a country is something that we can do very easily (for anyone in a supply chain).
What is ASSOCHAM’s view in coastal shipping?
More than 60 per cent of transport is moved by road. It is not economical for a nation like us. We have to bring down the cargo to the rail and sea.
At ASSOCHAM, we strongly believe that the shift towards multi-modal is critical for competitiveness of Indian export and domestic market.
Has TCI reached pre-COVID-19 levels?
Everyone was affected due to COVID-19 and subsequent lockdown. We are suppliers of supply chain services and we were affected as others were affected. The first quarter was very weak for us. We saw more than 40-50 per cent loss in revenue. We are now back to pre-COVID-19 level or say better than that. We expect our growth trajectory to be faster than pre-COVID-19 level.
There has been a lot of focus in the waterway lately. What is scope and progress there?
Waterways is one aspect. The broad focus should be on coastal shipping — it is very important. Waterways is a very small portion of business in India. There are certain routes made by the government to move cargo but it is not moving to the extent it should. There were challenges pre-COVID-19.
On the coast, the movement of containers and bulk is easier. It is the cheapest mode of transport.
Coastal shipping and inland waterways should be looked at together and not separately.
What is the percentage of trucks owned by you?
10-15 per cent trucks are owned by us, rest are vendors or are hired from the spot market. It has not changed much. This move is more strategic in nature.
What was TCI’s turnover? At what rate is the company growing?
In FY 2019-2020, TCI’s turnover was Rs 4,500 crore. But for this year, it will be slightly different. We were growing at 10-12 per cent CAGR. But some years have been more challenging than others.