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With a change of guard in political front, India industry too showed confidence of a Modi magic on Indian economy within twelve months.
According to a Ficci industry survey, 93% of industry heads foresee a rapid change in decision making machinery, while the remaining 7% still appeared sceptical about a Narendra Modi-led BJPgovernment. A majority 82% cited a substantial improvement in their business and investment prospects over the next twelve months.
The survey called for immediate reforms in land, labour, power, tax front, moves to stabilise inflation, addressing corruption issues, infrastructure creation and review of free trade agreements. Notifying the challenges for the new government, the participating CEOs opined that the growth has decelerated quite notably and the situation of the manufacturing sector continues to remain worrisome.
A significant majority of the participants felt that issues related to factors of production- land, labour, capital and power are amongst the most critical challenges that the new government will have to deal with. “Market for various factors of production has not seen much liberalisation. Be it land, labor or the capital market, we have a long way to go to ensure optimal utilization of these resources,” it added. It was also reflected by the CEOs that the forthcoming Union Budget should seriously look at subsidy rationalisation and bringing stability in fiscal regime.
It added that the new Land Acquisition Act makes it virtually impossible to acquire land and industry would like to see a comprehensive review of the same. “All natural resources are scarce and therefore access to these natural resources including land must be at equitable prices. The allocation must be rapid, enforceable and through transparent process,” the survey said.
In order to address inflation, the survey suggested that moderating prices is important as this will not only provide some relief to the last common denominator in society but will create space for an accommodative monetary policy.
“We have to deepen and broaden our capital market to reduce dependence on FIIs. Also, the corporate debt market has to be strengthened to reduce dependence on banks for long term funding requirements. Consolidation amongst public sector banks may be considered for creating large sized banks,” CEOs opined.
In addition, the CEOs also highlighted infrastructure development, increase in non-performing assets in the banking sector and law and order situation in the country as areas that need urgent attention of the new government. A suggestion was also made to review the impact of FTAs on India's economy and industry.
It was mentioned that transparency and stability in policies should be the key thrust area for the government to boost investor confidence. The participating CEOs were of the view that government should consider repealing retrospective tax provisions that have negative implications on the conduciveness of investment environment. The survey results are based on responses from about 76 CEOs, who are members of Ficci's National Executive Committee.
