Use "huge amount of reserves" to prevent rupee from depreciating, says HUL CMD Sanjiv Mehta

New Delhi: Inflation and market condition are still concerns and it is imperative for India to ensure that not only inflation is contained but the economy also grows, Hindustan Unilever MD and CEO Sanjiv Mehta said on Tuesday.

Steps taken by the government such as extending the scheme of giving free food grains, increasing outlay on subsidy for fertilizer and decreasing duties on fuels would help overcome the current challenges, he said in a virtual earnings press conference.

Mehta also suggested that the government could use the "huge amount of reserves" to prevent the rupee from depreciating rapidly.

"Inflation is still very much a concern, the market still remains a concern. Those factors haven't gone away. The (FMCG) market volume growth still remains minus 5 per cent in the last three months. It hasn't gone away. It hasn't turned positive at all and the value growth is of course 7 per cent. Primarily the growth has come out of the price growth," he said.

India’s retail inflation was 7.01 per cent in June.

From a macro perspective, Mehta said, ”For us, it is very important that we manage inflation.” While an interest rate hike is inevitable to tame inflation, he said “you have to do it in a manner that it does not constrain the economy”.

He further said, "The imperative for the country is not only to ensure that inflation is contained but very importantly, the economy keeps growing." If the economy keeps growing at a 7 per cent kind of level which the IMF has forecast then that should augur very well for the country, Mehta said adding, "We should then be able to navigate this huge crisis pretty well better than most of the large economies".

When asked if the government has taken those steps to ensure growth while containing inflation, he replied in the affirmative pointing out measures such as extending the scheme of giving free food grains and increasing outlay on subsidies for fertilisers which would help in bringing back rural demand.

Also, he said the reduction in excise duties on fuel by the Centre and many states would "clearly have a dampening effect on inflation”.

On the falling rupee, he said, ”You don't want the currency to depreciate at a very high rate and you would want a very moderated approach…it has to be done in a contained manner and today, we have a huge amount of reserves that can help us do that.” Mehta also said a “ray of hope and optimism” is a good monsoon, which augurs well for the economy.

"There are still pockets of India, especially the central belt, where the monsoons have not yet been good, though the forecast is that the monsoon may cover up. So if the monsoon does cover up, then it should be good certainly, certainly would be one good factor," he said.