Inflation keeps Tata worried

Mumbai, July 18: Bankers may not be too worried about inflation — and have started to question the need for another round of rate hikes to tamp down on the RBI’s biggest bugbear — but India Inc clearly is.

The $70-billion Tata group chairman Ratan Tata has warned that high inflation in India and China will dampen consumer demand for a range of products, including automobiles in these high growth markets.

In a letter to Tata Motors’ shareholders in the company’s annual report for 2010-11, Tata said, “While 2010-11 has been a year of high economic growth in Asia, the quarterly growth figures in China and India have been declining. Inflation rates have risen and the central banks in both countries have initiated measures to slow down their economies to curb inflation. The resulting high interest rates, tighter credit regimes and higher fuel costs will dampen consumer demand.”

While he refers to inflation as a “lurking enemy”, the real concern is the possibility of another global slowdown, “this time not based on overvalued assets but on self-imposed fiscal prudence”.

Tata reiterated the importance of China and India as markets for the automobile industry where even after the economic meltdown in 2009, the two countries saw a 45 per cent and 26 per cent growth, respectively, in domestic sales while Europe, the UK and the US markets declined 6, 11 and 21 per cent, respectively.

The Tata Motors chairman finds the sales of Jaguar cars and Land Rover and Range Rover vehicles during the year very encouraging. While Jaguar wholesale sales grew 11.8 per cent to 53,000 cars, Land Rover and Range Rover rose 30.1 per cent to 1,90,628.

Tata Motors that has recently started assembly of the Land Rover Freelander in India is looking at assembling other Land Rover products here. “An examination is also underway on a joint engine development programme, which will have facilities in the UK and India,” Tata said.

The annual report said the company would continue to keenly focus on international markets and expected to launch its product range in many of its markets. As a part of this strategy, an assembly plant in South Africa is being set up and is expected to start production next year.