Freebie culture hurting economic growth, must end: L&T chairman A M Naik

Developing infrastructure should be the govt's top priority, says L&T chairman

Competition among political parties to offer freebies was depriving India’s infrastructure sector of government funding and hampering economic growth, L&T Group Chairman A M Naik said on Sunday in Anand, where his alma mater Birla Vishvakarma Mahavidyalaya honoured him as BVM Ratna.  

"If we look at large infrastructure projects under construction, most of them are either funded by Japan (Japan International Cooperation Agency or Jica) or World Bank. These projects should be ideally funded by governments. But state governments are diverting their funds to offer freebies like electricity and food. Developing infrastructure should be the governments’ top priority if we have to take a long-term approach to develop the country and bring people out of poverty," Naik said. 

L&T competed for projects funded by foreign sources as there was transparency in the award of contracts and financing was secure, he said. "There are states which are offering freebies but are falling out of the investment radar of Indian companies, as infrastructure is neglected in these states," Naik, 80, told Business Standard. States with good infrastructure are powering ahead but others are unable to attract corporate investment. 

The fact that 80 per cent of the Indian population was still using free ration showed the stress in the economy, Naik said. "We have to divert funds from freebies to infrastructure finance as the demand and potential of infrastructure is huge and the economic benefits of good infrastructure will ultimately benefit the poor." 

In October last year, Prime Minister Narendra Modi accused Opposition parties of encouraging a freebie culture. Freebies lead to wastage of taxpayer money and impact the country's economic growth. A large part of the Indian government's budget was spent on welfare projects for the poor and infrastructure development was getting hampered, Modi had said.

India was on its way to become a $5-trillion economy, though Covid 19 pandemic had shaved off two years of growth, Naik said. "Despite the slowdown due to the pandemic, we would reach the $5-trillion economy target as a lot of work is going on in the country."

The fast-track infrastructure development of Uttar Pradesh (UP) under Chief Minister Yogi Adityanath showed why a stable law-and-order regime and infrastructure development was necessary to lift the population out of poverty, he said. "Within a few years, the situation on the ground has changed in UP and it would lead to faster economic growth in the coming years," said Naik.

Naik had complained in December 2021 that L&T was getting a large part of orders abroad as companies with zero experience were winning projects in India by quoting low figures and then abandoning projects. "Since then we have won several orders in India along, besides overseas orders," he said. L&T won the prestigious order from Saudi Aramco last year, he said.

Naik said he was confident that L&T of the future would be technology-driven, as seen in its acquisition of Mindtree, which placed it among the top five software development companies in India.

Naik, who is among India’s top philanthropists, said he was spending a large part of his wealth in opening hospitals and schools in Mumbai and South Gujarat. He donated Rs 142 crore in 2022 and became the first professional manager to enter the top 10 on the Hurun India philanthropy list.

(Disclaimer: The interaction took place on board an L&T aircraft.)