CII PREZ: VACCINE, STIMULUS WILL MAKE 9-9.5% GROWTH POSSIBLE
“TODAY, THE WAY GOODS TRADE IS DONE HAS CHANGED AND THERE ARE E-COMMERCE FIRMS, SO SUPPLY CHAINS ARE FAR MORE COMPLEX” “WE WANT THE GOVERNMENT TO WORK ON VACCINATION LEVEL WHICH IS 3 MILLION A DAY AND NEEDS TO GO UP TO THE 7-MILLION LEVEL”
The Confederation of Indian Industry (CII) has sought the appointment of a 'vaccine minister' and called for increased availability of vaccines in the country. In an interview with Jyoti
Mukul, new CII president TV NARENDRAN shares his views on the 15 per cent minimum corporate tax rate suggested by the Group of Seven (G-7) countries and whether vaccination should be made compulsory for employees. Edited excerpts:
What is the nature of the ~3-trillion stimulus that the CII has suggested to the government? Should direct cash transfer be part of it?
The Reserve Bank of India (RBI) last year had a headroom on the monetary side. Currently, it does not have much headroom because inflation is creeping up and interest rates are quite low. So, from that point of view, we think the solution has to be more fiscal. The starting point for us is that the revenue growth has been better than what people thought a few months back. GST collections are better than what we thought. Even last month, the GST was more than ~1 trillion which to me is a number that looked very far away during this time last year. We feel the fiscal deficit will be around 6.8 per cent even after factoring in vaccination expenses and everything else. That is why the ~3trillion stimulus, which is 1.8 per cent of GDP, will help. On the consumer side, people incurred a lot of medical expenses. Many have lost jobs and faced salary cuts. They are postponing expenditure. Just as there is infrastructure-led growth, for consumption-led growth, we are saying can we look at GST, for instance, to be brought down by 2-3 per cent for five-six months in order to bring back consumer confidence. More money could also be set aside for the MNREGA scheme, which had a budget of ~1.11 trillion last year, and ~73,000 crore has been allocated this year. That money can be used for creating productive assets and people can also benefit from it. Vaccination and stimulus together will make sure that we are back to 9-9.5 per cent growth, which is required to catch up with the activity last year or the year before.
Shouldn’t spending on health infrastructure increase rather than tax cuts, considering the government's revenue situation?
There is already a bigger plan for health infrastructure than what has been there traditionally. We are looking at a fiscal deficit after factoring in spending in the budget. We are saying make sure the money committed in the budget is spent whether it is health infrastructure or other infrastructure.
Will increased capital expenditure by the government or companies help, considering that demand was low even before the pandemic?
It is correct that there has been a slowing down of demand side growth for the last few years even before the pandemic. That is the reason why CII has been asking that government spending on infrastructure should go up because that is a great multiplier; helps to kick-start the economy and brings down the cost of operating in India. The government has announced a lot of infrastructure expenditure. Infrastructure building creates jobs equitably across the country, not just in urban centres.
What is your take on the view that spending on some large projects should
not be done at this point of time when the health infrastructure needs more money and the government is resorting to increased borrowings?
The government should spend at least 3 per cent of GDP on health infrastructure and we are getting close to that. It should not necessarily be government health spending but also from the private sector. There is far more consciousness about the need to invest in health. So, different states are also doing a lot of work. Large projects take many years. If you get them started now, over a period of time it leads to economic activity. The government should spend 2.5 per cent on health, and then increase it to 3 per cent from the current 1.3 per cent.
How far has vaccination helped in return of economic activity and do you think fully vaccinated people should be asked to come to office and not work from home?
We want the government to work on vaccination level which is 3 million a day and needs to go up to the 7 million level. Whether fully vaccinated people should return to office is a call a company should take. There is a need to balance the social needs of coming to office and getting flexibility that many people have started to enjoy.
Should vaccination be compulsory for employees or should it be persuasion?
The ideal way is convincing but at some point of time, it is also a public responsibility. We have not yet discussed this with our members. Let us wait for a month and let vaccines be available. Today, there is no point in insisting. But once vaccines are available, you can say that you cannot come unless you get vaccinated. You need to have exceptions for people who have Covid or other medical conditions and cannot get jabbed.
What is your view on the recent G-7 meet that called for a minimum 15 per cent corporate tax while the average rate for India is about 29 per cent?
Companies, which have a footprint in multiple geographies, are residing in countries which have much lower tax rates. To ensure that large multinationals pay tax, you ensure that a minimum tax is levied in those countries. The other issue is how to tax commerce. Tax laws are based on the way commerce was done earlier. Today, the way goods trade is done has changed and there are e-commerce firms, so supply chains are far more complex. This risk is always there but it has become a bit less because if somebody is motivated to go out of India because of a lower rate, he would have done it already. Countries need to balance it because if it is too low, then they will not get revenue. If it is high, they will not get investment. What we have seen is if you reduce the tax rate then the compliance also improves. At this time, there are things to be balanced between the Centre and the states on GST. It is a complex journey. Effective tax rate is quite high in India.