Cut subsidies and depoliticise every single economic decision–that’s what India Inc wants from the government.
A day after official data showed economic growth slumping to a nine-year low, corporate India and leading bankers say time is running out and the government is left with no option but to act to reverse the ongoing crisis of confidence.
“The most important reform is implementation of the Goods and Services Tax. That one legislation will be a game-changer for India Inc. We are not happy about the pace of reforms. So, the government has to make some announcements on foreign direct investment and take steps to change the perception,” Adi Godrej, chairman of the Godrej Group, said.
Chanda Kochhar, MD and CEO of ICICI Bank Ltd, says, “The government’s top priority should be decision-making on access to land and natural resources.” “The immediate need is to ease challenges in completing the execution of investment plans that are underway, such as access to fuel for the power sector. This will ensure that ongoing projects get completed and start generating cashflows, bring confidence back among businesses and the investor community,” Kochhar adds.
“The writing was on the wall,” says Harsh Mariwala, chairman and managing director (CMD), Marico Industries. Now, the to-do list is long and exhaustive, as there has been complete inaction by the government. So, the attention shifts to the Reserve Bank of India (RBI). “Tackling inflation using monetary policy tools is a short-term approach. Supply-side bottlenecks have to be tackled. There has to be a strategy in place on how to deal with supply-side constraints. Increasing rates and curtailing the investment appetite are a piecemeal approach. It only hinders growth,” Mariwala adds.
Adds Kiran Mazumdar-Shaw, CMD, Biocon: “I saw these figures coming, and have been urging policy makers to work on it. In the immediate future, our business will not be impacted, but we won’t be if this state of affairs continues. We need radical policy changes that are effective.”
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There are others who disagree with the criticism on RBI. “I do not believe interest rates are to blame. Supply constraints and high levels of macroeconomic and regulatory uncertainty are responsible for slowdown in investment. If anything, high urban inflation has contributed to choking urban consumption. So, RBI appropriately focused on inflation,” says Sajjid Chinoy, India economist at JPMorgan Chase and Co.
In this gloom-and-doom scenario, some still try and offer a big picture that looks a little brighter when compared to the rest of the world. “We don’t know what is going to happen in Europe. It can be very jarring. What gives me hope is that India always reacts to a crisis positively,” says Sunil Kaushal, CEO, India and South Asia, Standard Chartered Bank.
“The twin objectives that need to be tackled with urgency are reduction in the Centre’s fiscal deficit and increase in investments. Else, there is a danger of India getting into stagflation soon,” says Sriram Khattar, senior executive director, at real estate developer DLF Ltd.
“The key issue facing the Indian economy is a dramatic slowdown in investment, which is clearly a consequence of the ‘weaker’ investment climate and the evaporation of investor confidence. If the status quo persists, there is no reason to be optimistic about a change in sentiment or a return of investments to the country,” Jaideep Khanna, MD and head of corporate and investment banking at Barclays India, paraphrases the mood.
While the wish list is fine, not many think much can be done when political opportunism is in the air. ITC Chairman Yogi Deveshwar sums it up: “In the back of a falling rupee, every channel is encouraging a fuel price hike. But look at the political opposition to it without offering a suggestion on how to garner additional revenues.” The frustration is obvious.