Chennai: FICCI President, Mr. R V Kanoria, while addressing a press conference in the city today said that “India has some of the finest entrepreneurs in the world and given the right environment they can collectively help get the economy back on track and once again move it in the direction of high growth.”
“Over the years, the entrepreneurs in the country have played a catalytic role in nation building. Whichever sector or activity they have been involved in, their ultimate objective has been to generate employment and improve the standard of living of our people”, he added. Given the state of the economy today, which has raised concerns in many quarters, it is important for the government to take some proactive measures and re-kindle the entrepreneurial spirit.
Alluding to Prime Minister Manmohan Singh’s remarks made earlier on the state of economy and the next steps in reforms, Mr. R V Kanoria mentioned that “this is just the right time when the nation wanted to see such a bold and decisive move by the Prime Minister. The PM’s statements are a morale booster as they signal the government’s serious intent to take key economic measures that would bring confidence back in the Indian economy and put the growth agenda back on track, which are ultimately for the benefit of the country as a whole” Commenting on the challenges identified by the Prime Minister, which could be the focus of the government in the near term, FICCI said that “these issues are critical and the right policy moves on each of these has a potential multiplier effect on both investments and employment generation”.
“Many of these issues were flagged by FICCI as part of its recent 12-point action agenda for stimulating Indian economy’s growth. We strongly welcome the attention drawn by the Prime Minister to some of these areas. The Prime Minister’s emphasis that we need to create more investment avenues, so that savings are increasingly channelled into productive investments that create jobs and growth, has been the essence of our action agenda and we feel very encouraged by the PM’s statement”, he added.
For stimulating investments, FICCI feels that we need both fiscal and physical measures. The monetary policy moves by the RBI have been particularly aggressive and focus largely on controlling inflation. This monetary tightening needs to be compensated by certain fiscal measures by the government for driving up investments. FICCI urges the government to look at providing accelerated depreciation, re-introducing investment allowance and scrapping MAT. All these measures would give a significant fillip to investment activity without significantly affecting government finances.
On the particular issue of Minimum Alternate Tax (MAT), Mr. Kanoria emphasised that “this concept was introduced at a time when revenues from customs duty were coming down. However this is not the case today and in any case if MAT is withdrawn, the government would see more revenue coming by way of excise following an improvement in manufacturing sector growth”.
Commenting on the physical constraints to growth, it was mentioned that overall industrial production in the country can also go up if bottlenecks such as shortage of power and nonavailability of coal are addressed by the government. FICCI’s 12 point economic agenda gives specific suggestions to energise the coal sector. These along with reforms in the environmental clearance processes as well as in land acquisition mechanisms need to be pursued in right earnest. Further, any deviation in the regular pattern of advance of the monsoon should be viewed not only from the point of view of agriculture growth and purchasing power in rural areas but also from the perspective of energy generation.
On promoting infrastructure development particularly through the PPP mode, FICCI suggests looking at developing a robust inventory of bankable projects and evaluating all possible avenues to raise long term funds for supporting such projects. In this context, the government must lay greater emphasis on developing the corporate bond market, leveraging insurance and pension funds for investments in infrastructure and on developing the municipal bond market for financing urban infrastructure.
On the issue of fiscal deficit, which has been off limits for some time now, FICCI has suggested that the government should consider improving the efficiency in use of sums allocated to various welfare programs. Pilot projects across the country have shown that it is possible to exercise restraint on the expenditure which does not have a development impact. We feel that the focus should be on direct transfer of subsidies program linked to the ‘AADHAR’ platform.
“Industry is fully committed to contributing and financing the development activities of the government, but we urge for a judicious use of such resources by the government. Revenue expenditure needs to be economised and substituted with capital expenditure and investment that adds to the productive capacity of the economy and creates avenues for generating more resources in the long run”, said Mr. Kanoria. As an example, one can consider the MGNREGA program under which greater emphasis should be laid on focussed need based asset creation such as infrastructure and wages should not exceed productivity of labour in agriculture and other rural activities.