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Consumption Slowdown A ‘Blip’ That Can Be Corrected, Says ITC’s Sivakumar 

The liquidity crunch stemming from the NBFC crisis has affected several sectors—branded consumer goods and auto, in particular.

The slump in volume growth wasn’t due to lower demand or production, but because of a cash crunch in the supply chain of staples—especially among wholesalers, says ITC CEO S Sivakumar. (Photographer: Dhiraj Singh/Bloomberg)
The slump in volume growth wasn’t due to lower demand or production, but because of a cash crunch in the supply chain of staples—especially among wholesalers, says ITC CEO S Sivakumar. (Photographer: Dhiraj Singh/Bloomberg)

India’s consumption slowdown is just a “blip” that can be corrected with a couple of measures.

That’s according to S Sivakumar, chief executive offer of the tobacco-to-processed foods conglomerate ITC Ltd. He said the slump in volume growth to a seven-quarter low wasn't due to lower demand or production, but because of a cash crunch in the supply chain of staples—especially among wholesalers.

“While buying agricultural commodities on the other side, cash discounts which you would typically see at 1.5-2 percent between prompt payment and payment after a few weeks, has gone up to 3-4 percent for this rabi harvest (season),” Sivakumar said, adding that this highlights lack of liquidity in the chain.

The liquidity crunch stemming from India’s non-banking lenders has affected several sectors dependent on the secondary lending system—consumption-centric sectors such as branded consumer goods and automobiles, in particular.

While some measures have been taken, more money has to be put in the hands of these wholesalers to bring consumers back to branded products instead of local and unbranded goods, Sivakumar said. “This can be done through the repo rate (the bi-monthly monetary policy is due next week) or through quicker disbursal or loans.”

Banks, too, should be encouraged to lend more as “not too many defaults have happened” in the wholesale segment, he said.

Watch the full interaction here: