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Here's why Rahul Bajaj thinks GDP growth will disappoint him

Updated : June 25, 2018 11:50 AM IST

In a letter to Bajaj Auto's shareholders, Rahul Bajaj, chairman of the company, reasoned that India's weak GDP can lead to the company 'performing worse' this year than the last.

Although India posted a robust GDP growth of 7.7 percent for the fourth quarter of the financial year of 2017-2018, the Central Statistical Organisation pegged India's real GDP growth at 6.6 percent which is a matter of concern.

Bajaj's letter, attached with the company's annual report, gave two reasons as to why the GDP will bring down the company's performance this fiscal.

Here's why Rahul Bajaj thinks GDP growth will disappoint him

In a letter to Bajaj Auto's shareholders, Rahul Bajaj, chairman of the company, said that India's weak GDP can lead to the company "performing worse" this year than the last.

Bajaj's letter, attached with the company's annual report, gave two reasons as to why the GDP will bring down the company's performance this fiscal. The first being insufficient investments and the second- the state of banks in the country.

For insufficient investments, Bajaj wrote, "Our share of the gross fixed capital formation to GDP has been declining over the last six years and now stands at 31 percent. This is insufficient to bring about a steady-state growth of 7.5 to 8 percent."

India's banking sector has been in trouble ever since the Reserve Bank of India came out with the first NPA list which listed 12 large accounts of well-known companies and banks.

"Saddled by a huge overhang of bad loans or non-performing assets that have eroded their balance sheets and destroyed profits, most banks have neither the requisite financial strength nor the confidence to fund industrial growth," Bajaj wrote.

Bajaj, however, does not see a 'quick recovery' from the ongoing resolution proceedings.

The state of banks, according to Bajaj, is not only going to affect the bigger players but will also affect the medium and smaller scale corporate entities across India.

The company despite the weak macro cues, according to the chief, had a positive annual report. It recorded its highest ever net sales as it increased by 15.6 percent this fiscal, the report said.

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