Should the world de-grow to delay hitting the limits of growth? There is a growing outcry that the relentless push for GDP growth is causing social inequity and irredeemable planetary damage.
Co-founder and managing director of the diversified Hiranandani Group, Niranjan Hiranandani last month took over as the new president of the Associated Chambers of Commerce and Industry of India (Assocham).
A business leader with the desire to rewrite India’s real estate story, Hiranandani is credited with changing Mumbai’s skyline. In an e-mail interview with ASHA RAMACHANDRAN, the industry chamber’s new president set out his vision as well as expectations from the forthcoming Budget.
Q: At Assocham’s centenary celebrations you unfolded the chamber’s vision of “Looking beyond 100”.Can you please elaborate on this vision?
A: Growth must be equitable, which means there should be equal and more opportunities for everyone. For any country or economy to prosper, growth and inequality cannot be treated separately. The universal provision of basic infrastructure for all is fundamental to increasing the productivity of the people and businesses alike.
In the next five years, Assocham as a leading industry body will strive to bring about an equitable growth model to resolving poverty, skilling, economic disparity, etc. The five core priorities for addressing equity at the economic level are a) creating adequate employment opportunities b) providing ease of doing business environment c) ensuring food and water security d) bringing women power in GDP and finally e) doing business with responsibility.
Q: What sectors, in your opinion, should Assocham focus on in India’s stride towards a 5 trillion dollar economy?
A: The ambitious target laid down by the Government is desirable and very much achievable. There is a dearth of undertaking a series of bold fiscal measures and not just sops in the sectors which are labour-intensive and capable of generating higher per capita income.
As a result, the cascading effect will be rise in GDP growth, inclusive of new employment generation. For the Indian economy to grow at double digits instead of at 5 per cent currently, a major kick start with policy and economic reforms needs to be granted on priority to sectors like housing and urban infrastructure, which will gain momentum for 269 allied industries.
Additionally, sectors like MSME, tourism, education and textiles can be key growth catalysts. The set of path-breaking proactive reforms by the Central government will be useful in steering the economy in accelerated growth direction.
Q: While India has done much in the infrastructure sector, a lot more needs to be done. How do we achieve this?
A: Infrastructure development not only creates employment but also holds the potential to increase consumption, attract investments and thus give a boost to the economy. India needs to focus on its burgeoning need to attract investment into infrastructure development sector to achieve its ambitious target of becoming a 5 trillion-dollar economy by 2024.
Infrastructure financing in India faces several challenges, right from high cost of capital to shortage of long-term financing due to asset-liability mismatch. Infrastructure, considered to be the backbone of the economy, is finding it difficult to fund new projects due to limited availability of capital and liquidity with the banks/NBFCs and banks’ sectoral limits.
Therefore, alternative funding avenues need to be worked out. Firstly, it needs to encourage privatisation by constructing a financial bond market, which runs for five years and moves assets into a 20-30 year bond/InvIT to ensure constant capital flows or create a sovereign bond market.
There are two more ways that the Central government can think of financing the infrastructure projects. The first step would be mobilising funds through disinvesting in profitmaking state-run companies, while the second step would be reviving private participation to fill the financing gap.
Q: What ails India’s economic growth, which has seen a steady downward slide, particularly in the current fiscal?
A: Micro, small and medium enterprises (MSME) are the backbone of the Indian economy, generating nearly 70 million jobs through a network of 30 million units and manufacturing more than 6,000 different products. MSME is a liquidity-driven sector.
The liquidity crisis arising out of structural policy reforms in India has led to choking of liquidity supply in the MSME, which brings the sector’s growth to a grinding halt. There are delayed payments not just from private organisations but also several government organisations, which is alarming and needs immediate curative measures to ensure its revival.
One of the major concerns for the MSME sector is the availability of capital at a lower interest rate. Though the government has approved the continuation of credit-linked capital subsidy component under Credit-Linked Capital Subsidy-Technology Upgradation Scheme (CLCS-TUS) in February 2019, so far only Rs 338 crore has been released. However, under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), 5,46,127 credit facilities have been approved, amounting to a guarantee of Rs 33,381 crore.
Government e-Marketplace (GeM) organisations like Common Service Centres (CSC), Entrepreneurship Development Institute of India (EDII) are responsible for bringing MSMEs on digital platform and for providing them digital identity. Though the Central government has been taking a lot of initiatives, there is an urgent need to design a comprehensive integrated policy to promote skill development and credit availability for expedited growth.
Q: What are your Budget expectations? What suggestions has Assocham given to the Finance Minister for her Budget presentation next month?
A: Tax spectrum: A widespread expectation of a significant relief to the middle class, which is a very powerful consumption catalyst. The exemption for income tax-payers may be considered at Rs 5 lakh per annum without strings attached, along with other saving and stimulus measures like liberal deductions on the interest rates on housing loans.
The highest slab for income tax return should be 20 per cent and the lower slabs could be 5 and 10 per cent. While we appreciate the fiscal constraints of the government, leaving more money in the hands of the middle and upper middle class could prove to be a game-changer in reviving consumer demand.
Along with the impact of corporate tax reduction, which would be seen after a lag, the combined effect would be stellar. Eventually, a pick-up in consumer demand would play out in the form of higher sales realisation, resulting in increased revenue for the government. As regards manufacturing, it is a smart move on the part of the government to woo global giants in electronics and other areas in the backdrop of US-China trade war.
The focus on electronics, manufacturing and exports, is in the right direction. Reduction in corporate tax, bringing India at par with competitors would be a great pull factor for global investment into Indian manufacturing. Besides, laudable policy efforts on Ease of Doing Business should continue and issues like enforcement of contracts, getting state and local permissions be dealt with in coordination with the states.
A big and continuous push to infrastructure, encompassing roads, highways, ports, airports, railways, telecom and energy must be the way forward. The latest report of the highlevel government task force identifying potential investment of Rs 102 lakh crore in the next five years is an ambitious measure. Some of the ensuing initiatives are quite ambitious and would be test cases.
The NITI Aayog plan for introducing 150 private trains should be given the top priority. The Rs 50 lakh crore investment only in the Railways would have a huge multiplier impact on a range of sectors like tourism, exports and manufacturing.