Govt must raise expenditure on infra, focus on rural income: Experts

Resolve NBFC crisis, ask banks to transmit MPC's decisions, they say

Industry players and experts want the government to raise its expenditure on infrastructure projects, elevate rural disposable incomes, address the crisis of non-banking financial companies, and prod banks to cut interest rates to put the economy back on track.

Mohit Malhotra, chief executive officer, Dabur India, said there was a liquidity crunch in rural areas, leaving little money in the hands of the rural consumer, affecting consumer staples. 

“If government spending and a stimulus package can be provided to rural areas, they will go a long way in reviving consumer demand and growth in the sector,” he said.

Sumit Malhotra, managing director, Bajaj Consumer Care, said there were a few areas the government could focus its attention on to beat the slowdown. “One is it (government) needs to loosen its purse strings and undertake strong measures to spur demand in rural areas,” he said. 

The second step, he said would be to reduce stress when it comes to tax compliance. “That is a big concern area for companies and the Centre can go a long way to do something here,” he added. 

The third would be to nudge banks to provide credit easily to the sector, Malhotra said. Recent challenges in banking have made banks too cautious in providing loans to the corporate sector. Plus, there is need for a better transmission of interest rates by banks. This will spur investment,” he said.

Prabal Banerjee, president, finance, at Bajaj Group, said private sector investment could happen only when private investors can shed their fear of non-performing assets and for that the bank debt-servicing structure has to be overhauled.

“It has to be recalibrated with business cash flow rather than interest payment every month and quarterly debt servicing,” he said. 

Besides, if any government company or the Centre itself is not paying dues to a private company, that company should be getting relaxation of their dues to banks and other statutory dues should be exempted from payment till the time the government pays the affected company, Banerjee said. 

According to V G Kannan, CEO of Indian Banks’ Association, the government can move to spend big on infrastructure projects to kick start the economy. “Business confidence has taken a hit. We need to boost it,” said Kannan, adding, “the government will have to implement schemes in infrastructure and road sectors, and should start spending, for example, to expand railways projects.”

However, bankers need some assurance that they won’t be hauled up if business decisions go wrong, he said.

“There is a general fear among bankers in conducting normal business. That should not be the case,” Kannan said. Bankers also said the government should not take sudden decisions, such as telling the auto industry to implement BSVI emission norms all of a sudden. 

Auto players want a cut in the goods and services tax (GST) rate from the peak of 28 per cent to spur the growth in the sector that is down with a continuous slump. Rajan Wadhera, president of the Society of Indian Automobile Manufacturers, requested the GST Council to cut the rate to 18 per cent. The date for the next Council meeting has not yet been set. 

TVS Motor Company Chairman Venu Srinivasan said the GST rates for two-wheelers should be reconsidered, especially at a time when the new safety norms and fuel norms are expected to increase the prices.

“Given the importance of the two – wheeler segment as an item for mass mobility, the GST rates for two-wheelers undoubtedly needs to be reconsidered. It certainly cannot be bench-marked against the prevalent GST rates for luxury goods at 28 per cent, especially given the current state of inconsistencies with the integrated multi-modal public transport systems across India,” he said. A banker said the Centre can start clearing its dues to contractors. “That in itself will boost the private sector quite substantially and can kickstart the economy,” he said.

To lift sentiment in telecom, Cellular Operators Association of India Director General Rajan S Mathews said the issue of financial stress needed to be addressed. “The government should reduce the license fee and spectrum usage charges,” he said. He also called for abolishing the GST on spectrum payments which draws 18 per cent both on principal and interests.