Harshavardhan Neotia, the president of Ficci, is the chairman of Ambuja Neotia Group which covers the entire spectrum of the real estate industry, including housing and hospitality as well as health care and education.
A Commerce graduate from St Xavier’s College, Kolkata, Mr Neotia has also done the Owner President Management Program (OPM) from Harvard Business School, USA. He was conferred the Padma Shri in 1999 for his outstanding initiative in social housing. He is a member of the Chief Minister’s Core Committee on Industry, Government of West Bengal. He is also the Honorary Consul of Israel in West Bengal. Mr Neotia spoke to RC RAJAMANI ahead of the Union Budget 2016-17 on different aspects of the economy.
There seems to be some confusion about GDP growth numbers. What is the real state of the economy in your view?
There has been an improvement in the growth performance of the economy over the last year and the signs of recovery are visible. However, the growth in the economy has been dispersed, with only a handful of sectors showing reasonable performance. For many segments of industry, weak demand and capacity under-utilisation continue to be key concerns. Our exports have been in a phase of ‘de-growth’ for nearly a year now and domestic demand is poor, particularly in the rural areas.
In the current financial year – 2015-16 – we expect the economy to register a growth of around 7.5 per cent. Given the various reform measures that have been taken up by the government since it came to power, clearance of various projects as well as expectations of a normal monsoon, we are hopeful that GDP growth will reach the level of around 8 per cent in the next fiscal.
How do you see the performance of the Modi government on the economic front so far?
The government has been sincerely working towards bringing economic reforms and has taken several measures to accelerate the pace of growth. Mega initiatives like Make in India, Smart Cities and Digital India have generated investor interest, which are gradually culminating in actual investments. Huge thrust has been laid on infrastructure development, both in terms of public expenditure as well as policy push. We have seen some improvement in ease of doing business and appreciate that the government is continuing efforts in this direction. The issues and challenges faced today are complex and cannot be resolved in one go. What is needed is continuous, rigorous effort towards creating an enabling environment for businesses to operate and become competitive, upgrading the agriculture sector for greater production and productivity and improving the state of education, skills and health in our country.
A lot of reforms-related legislation like GST is stuck in Parliament. How do you think the Opposition can be brought on board to back these Bills?
The government has displayed strong commitment in carrying forward the economic reforms agenda. One can see this in its efforts to bring in changes even in some of the most difficult areas such as labour, land and bankruptcy procedures. GST has been a priority for the government and we can see the government strengthening the administrative machinery and IT infrastructure to make the GST rollout possible.
The issue of the GST Bill being stuck in Parliament due to strong opposition does make the investor community anxious; however, we know that given the nature and scale of this reform measure, there is bound to be intense debate on every aspect. Forward movement is possible through discussions and we are hopeful that the government will be able to bring on board all stakeholders on the legislative architecture for the proposed GST, without unduly compromising on the new taxation regime’s essential character.
What has been the performance of RBI under Dr Raghuram Rajan? Do you see a policy conflict between government and RBI?
Dr Raghuram Rajan took over as RBI governor at a challenging time when we faced high current account deficit and a difficult external situation. He deftly managed the situation, bringing in much required stability. He has spearheaded several new banking initiatives, notably the issuance of new banking licenses and introduction of small and payment banks, which will play an important role in bringing greater competition and efficiency in the banking sector as well as further the cause of financial inclusion.
The policy objectives pursued by the Government and RBI are equally critical. Sound macro-economic development requires balancing of monetary and fiscal policies and both RBI and the government are working in cooperation to achieve this.
The industry has a plethora of demands over how the budget should be. Could you sum them up over half a dozen key areas?
In order to put GDP on a sustainable high growth path, the forthcoming Union Budget should focus on driving demand and investments in the economy. Some specific measures that can be taken up in the Budget are:
First, we would like the government to outline the roadmap for phasing out of exemptions, lowering of corporate tax rates and rationalisation of subsidies. The government is already committed to all of these measures and we would like to see an action plan.
Second, there is a need to move forward with the disinvestment process with greater vigour. Strategic sales may be considered wherever feasible and the money raised could be tied to various development programmes of the government.
Third, government should consider reducing its equity holding in public sector banks up to 26 per cent even as it retains control by way of a golden share. This will provide banks with the much needed capital and prepare them to stand ready to fund the growth cycle as it gathers pace.
Fourth, continue with the thrust on public investments in infrastructure to crowd in private investments.
Fifth, there is a need to widen the tax base. Mandatory filing of returns for all incomes (irrespective of source) above a certain threshold should be considered.
Do you have any plans to see Ficci emerge as a major economic think tank apart from being a major business lobby?
Ficci represents the voice of India’s business and industry and has been deeply involved in policy advisory and advocacy since its inception. Our committees have been at the forefront in bringing about policy change at the sectoral, regional as well as national level. We are continuously engaged with industry as well as the government through policy debates, discussions as well as research and publications. Recently, we have made a submission to the government on the key executive actions that can be taken up for enhancing the ease of doing business across sectors.
Real estate seems to be sluggish right now. What is the remedy and what is your opinion on the revival chances of the real estate sector?
As far as the real estate sector is concerned, yes, the last few years have seen muted growth. To revive the sluggish demand in the real estate sector, the cost of finance needs to be lowered. To trigger demand for housing, the government can consider providing additional incentives for affordable housing, especially for the lower and middle income segment.
What is your vision for Ficci under your leadership? What are the areas you wish to address specially?
While we would continue our policy engagements with government on all economic issues, we would also focus on helping our members improve competitiveness – nationally and internationally. We will work towards sensitising our members about the emerging requirements for corporate governance as well as for promotion of sustainable growth.