 "Siddharth Birla with Manmohan Singh")
Sidharth Birla, chairman of Xpro India Ltd and the new president of the Federation of Indian Chambers of Commerce and Industry (Ficci), believes the Indian economy is on a comeback trail. Even so, he estimates economic growth only up to 5.5 per cent next year. In an interview to Shine Jacob, he talks on contemporary developments and policy issues. Edited excerpts:
The Aam Aadmi Party in Delhi has been voted to power after promises such as supply of 700 litres of free water daily and halving of electricity prices. Can such economics be sustained?
It has been voted in and created a huge democratic upheaval for the positive. That party comprises amazingly bright people, with commitment from a larger number of amazingly bright people. I am sure they will be coming with something that is sustainable. We can only comment once we see that. Their intentions are very good because they help people on the ground. It’s a new party; they are also aware that they should not open their cards prematurely. Having so many bright people, I am sure they would do well.
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As if paying heed to the suggestions from business chambers, the Reserve Bank of India has not raised rates this time. With concerns on the inflationary front, what is your take in this regard?
Certainly, RBI has been very balanced in the latest policy. We welcome that and one of the things we are articulating in our own way is that in the larger picture, we are still unsure how a tight monetary policy can cool food prices. The larger effect of a tight and high-cost monetary policy is detrimental to investments; those of individuals, too, as their monthly installments go up.
The real answer to food inflation is to raise productivity. Supply-side loopholes need to be addressed. There is no permanent answer to India’s food inflation, as we have the new food security law, which is only going to add to the issue. To provide real food security, we need higher production and a proper delivery system. Ficci has been of the stand that this administered pricing mechanism has to be demolished, as it creates artificial distortions in the market. Along with this, infrastructure facilities should be in place.
Where do you see economic growth in the coming days? Will India grow over five per cent or below in this financial year?
Our research shows growth is going to be 4.8-5 per cent this year. In the coming year, it could be 5-5.5 per cent. Industrial growth has been very low, at two per cent this year. We are not looking at something more than 2-2.5 per cent in the coming year, as of now. If projects cleared by the CCI (Cabinet Committee on Investment) are not implemented on the ground, it would further dampen these figures. Agricultural growth because of a good monsoon is on the way up. Certainly, we should be on our way up in the coming financial year. Also, (work on the new) industrial corridors are going to boost the economy.
CCI is a backward-looking thing; we are trying to solve problems which we could have done long before. If we could resolve those things by executive decisions, today things would be positive. Personally, I don’t think the country needs a CCI in the longer run; it was specific for stuck projects only. Learnings from the CCI should be applied to the system through executive action and correction.
Ficci has been batting for a GST (national goods & services tax) for a long time. But the states have rejected the Centre’s proposal due to lack of a consensus. What is your take on this?
Two years ago, we were close to implementation and about to start even the IT (information technology) infrastructure (for implementation). It should be brought to the front of the agenda. We are very disappointed that it seems to have taken a back seat. Now, with elections coming and all, I think it would lag by at least a year more, as it needs further consensus. We appear to be already two years behind on GST implementation.
Ficci, through its task force, has been engaging national political parties in this regard. We have been engaging with the Left, the BJP and the Congress, and having positive feedback from everywhere. At the end of the day, it would add 1.5-2 per cent to GDP in our estimates.
A lot of concerns are being raised on the ease of doing business in India. Can we overcome these?
First, a vision is needed. We can cry that out of 190 countries, we are 134 and all. If we try to set a vision, we should say if this ranking is important, can we be in the top 50? What is required for this?
The country that ranks 50th in the ease of doing business is Kazakhstan. That indicates where we are in the global picture. However, let’s compare some parameters. On two of the counts, we are already better than Kazakhstan, in getting credit (28) and protecting investors (34). If we look at the other parameters and attack these, one at a time, we can come up. For starting a business, we are at number 179; we are number 92 in registering properties; number 158 in paying taxes. We have to simplify taxation the electronic way.
My point is, if on registration of properties and paying of taxes, we go up, we can better ourselves on the overall ease of doing business. We will be in the top 50 in maybe three years if we address one issue at a time.
A new Direct Taxes Code has been deferred by the cabinet on the basis of issues like a super-rich tax. What would be your advice to the government on this?
It wasn’t only because of the super-rich tax; that was probably the media’s reflection. When DTC was conceptualised for the first time, there were some very negative elements, and very adventurous elements, not feasible for an economy with aspirations to grow. It was then replaced with another version during Pranab Mukherjee’s time as the finance minister. Then there was an attempt to tinker with the DTC and introduce it in the (just-concluded) winter session (of Parliament). We have not had a look at that version. But from what we could see from the media, there were still some negative elements. In principle, the DTC can rationalise taxes and exemptions, and can make tax life more predictable for people and entities.
