Good Mon­soon Will Spur De­mand: Forbes

The Economic Times - - Economy -

Huge in­vest­ments an­nounced by the gov­ern­ment in ru­ral sec­tor, roads and rail­ways will kick-start the in­vest­ment cy­cle that will lead to in­creased de­mand, said the Con­fed­er­a­tion of In­dian In­dus­try’s (CII) new pres­i­dent Naushad Forbes. In an in­ter­view with ET’s Ra­jat Arora, Forbes said he ex­pects a GDP growth in the range of 8% in 2016-17. Edited ex­cerpts:

Are you happy with the pace of re­forms un­der the NDA gov­ern­ment? Goods and Ser­vices Tax (GST) — yes, it was orig­i­nally in­tro­duced by the Congress, but they never ac­tu­ally in­tro­duced the bill in Par­lia­ment. The cur­rent NDA gov­ern­ment in­tro­duced it and got it passed in the Lok Sabha. Now, it has been pend­ing in Ra­jya Sabha be­cause of po­lit­i­cal rea­sons.

The ob­jec­tions to GST are only po­lit­i­cal. If the po­lit­i­cal will is there, I’m sure it will be sorted out. This gov­ern­ment has over­hauled the Ap­pren­tice­ship Act. The law changed a year and a half ago but the no­ti­fi­ca­tions are still pend­ing from some states. If states im­ple­ment them faster, then com­pa­nies can take ad­van­tage of the sit­u­a­tion.

Then, there’s the bank­ruptcy re­form that is with the Par­lia­ment, which is ex­pected to be cleared soon — it will im­prove In­dia’s rank­ing on the ease of do­ing in­dex. Changes have been made to the Ar­bi­tra­tion Act and to the Com­pa­nies Act. We also see real ea­ger­ness on the part of dif­fer­ent min­istries to fo­cus and de­liver on the ground.

In the road sec­tor, projects are be­ing rolled out re­ally fast. We have a con­struc­tion equip­ment com­mit­tee with CII. The com­mit­tee says that there has been a huge in­crease in de­mand of road con­struc­tion equip­ment. That means there has been an in­crease in rolling out of road projects. Rail­way con­tracts are be­ing awarded and so are port ex­pan­sion projects. So, core in­fra­struc­ture sec­tor is show­ing strong signs. Along with this, the Make in In­dia and Start Up In­dia ini­tia­tives are also pick­ing up.

Even af­ter all these re­forms, cor­po­rate in­vest­ment is sub­dued... There are is­sues of sen­ti­ment that in­flu­ence in­vest­ment. What drives sen­ti­ment is de­mand. Com­pa­nies have been strug­gling with sub­dued de­mand for long. We have im­proved our ef­fi­ciency in terms of pro­duc­tion, but there’s no de­mand to meet that pro­duc­tion. So, there’s a huge ca­pac­ity that’s ly­ing unutilised. Only when this ca­pac­ity is used, we’ll be able to see fresh in­vest­ments from cor­po­rates. Ru­ral de­mand has been af­fected

badly due to a poor mon­soon.

What ways you would sug­gest to boost de­mand? I think the mea­sures an­nounced in the bud­get, in­clud­ing in­creased in­vest­ment in road build­ing pro­gramme, and in the ru­ral sec­tor in­clud­ing ir­ri­ga­tion would drive de­mand. In­crease in FDI will also show good re­sults soon. I think if we have a good mon­soon this year, we’ll see a spur in de­mand. That will feed into agri­cul­tural growth that would lead to higher ru­ral in­come. In many com­modi­ties, half the de­mand comes from ru­ral ar­eas. So, it will show in in­dus­trial out­put.

Do you think the gov­ern­ment needs to do more to bring in in­vest­ment? Non-leg­isla­tive re­forms should be ac­cel­er­ated. Some of these in­clude ex­pan­sion of the JAM trin­ity of Jan Dhan Yo­jana, Aad­haar, grand­fa­ther­ing and sun­set clauses for new gov­ern­ment schemes, and con­tin­ued ac­tion on in­fra­struc­ture in­vest­ments. There is also a need to set up a Na­tional Asset Man­age­ment com­pany. They also need to clar­ify the roadmap to bring down the cor­po­rate tax and eas­ing out some of the in­cen­tives. Also, the cases of wil­ful de­fault­ers need to be looked at legally.

This gov­ern­ment has al­ready taken sev­eral bold steps. Let’s take labour re­forms — this gov­ern­ment had the courage to pick up the topic in 20 years. Ra­jasthan has moved on labour re­forms, and so have Andhra Pradesh, Gu­jarat, Mad­hya Pradesh and even West Ben­gal. What I look for­ward to in the cur­rent year is more states join­ing the band­wagon on labour re­forms.

The bank­ruptcy re­form should hap­pen as the Op­po­si­tion is also sup­port­ive. It’s re­plac­ing an an­cient legislation. The bud­get had a very in­ter­est­ing an­nounce­ment to run a pi­lot pro­gramme for Di­rect Ben­e­fit Trans­fer of fer­tiliser sub­sidy. We would like to see it rolling out soon be­cause fer­tiliser sub­sidy is huge and any re­form in this area would be very pro­duc­tive. It will stop leak­ages.

The quick pas­sage of the con­sti­tu­tional amend­ment to in­tro­duce GST would make In­dia a sin­gle mar­ket and re­duce trans­ac­tion costs. It could lead to a GDP growth of 1.5%.

CII’s es­ti­mate is higher than the RBI’s forecast of 7.6% growth in the cur­rent fis­cal. We are fore­cast­ing GDP growth in the range of 8% in 2016-17. Strong macroe­co­nomic fun­da­men­tals, in­creased in­fra­struc­ture in­vest­ment by the gov­ern­ment, a good mon­soon and down­ward trend in in­ter­est rates can lead to that growth. We are very op­ti­mistic and are also see­ing signs of a re­cov­ery in the ru­ral econ­omy.

AMRENDRA JHA

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