Some Hits and a Few Misses

The Modi government has delivered but there is still an unfinished reforms agenda: BT- BMR survey

Corporate India believes that the Modi government has broadly delivered in its first three years, but there is still an unfinished agenda of reforms, reveals a BusinessToday- BMR Advisors poll of CEOs and CFOs

NARENDRA MODI swept to power in 2014 amid great expectations from the world of business. He was expected to set the house in order, usher in next phase of economic reforms and put India’s growth story back on track. Three years on its time for a reality check. Has Modi risen to the occasion and delivered the goods? Business Today joined hands with BMR Advisors for a survey to gauge the sentiment of corporate India. A poll of select CEOs and CFOs from diverse industries was conducted between April 11 to April 25. It captures the mood of the industry and its assessment of the progress of the government’s key programmes and flagship schemes.

Impressed, But Not Thrilled

The Modi government has taken several measures to lift growth. Indeed, nearly two- thirds of the respondents believe that the government has been successful in ensuring development, growth and reforms; a fifth believe that Modi and his team fell short on these parameters.

The Indian economy has witnessed suboptimal growth over the past few years. Much of this is attributed to sluggish power and infrastructure sectors. Almost onethird of the respondents believed “development finance” is imperative for power and infrastructure reforms. Reforms related to access to land was ranked second in terms of priority for these sectors (23 percent of the respondents). It was followed by providing efficient mechanism to reduce commercial disputes in PPP framework, faster environmental clearance and single window clearance, in the order of criticality.

In its three years, the government has taken a number of steps to curb the menace of black money. Approximately, 39 per cent participants found these steps to be effective and 21 per cent believed that they have been highly effective. Around 40 per cent of the respondents expressed dissatisfaction with the steps taken so far.

Win Some, Lose Some

In past three years, many flagship programmes were launched by the government to boost Indian economy. These included Make in India, Start-up India, Digital India, Jan Dhan Yojana, among others.

The Digital India initiative was seen to be highly effective by 24 per cent; 46 per cent rated it effective, while the rest were not impressed. The government’s performance on the roll-out of Goods and Services Tax (GST), liberalisa-

tion of FDI policy and promotion of Start-up India, Jan Dhan Yojana and Digital India programmes has been applauded by the respondents. However, the respondents were not impressed by Make in India. Similarly, a majority of the respondents believed inadequate labour law reforms and slow progress on disposal of litigations and new measures for dispute resolution were a cause for concern.

In the survey, the respondents were asked to rank the government’s performance on certain parameters on a scale of 1 to 5. Creation of transparent and efficient procedure for auction of natural resources earned an average top score of 4.09. Maintaining a balance between fiscal discipline and stimulating growth, attracting foreign investment, tackling corruption and related issues and providing non-adversarial tax environment received average scores of 3.84, 3.66, 3.47 and 3.11, respectively.

When asked whether foreign investment would be impacted on account of changes in the US monetary and economic policies, around 29 per cent of the respondents echoed that it will have a bearing, while 37 per cent believed that there won’t be any impact.

Long Way to Go

When asked about the measures that should be taken to boost “Make in India” campaign, the participants ranked banking reforms, including interest rate rationalisation as the most important factor. This was followed by reforms in labour laws, tax policy and administrative reforms and improving physical infrastructure, logistics and supply chain in the order of importance.

On the “Start-up India” initiative, the participants were of the

opinion that involvement of private PEs/VCs/ angel networks is the most critical factor in making it a success. The participants also gave importance to assistance through domestic funding and incentives for R&D.

Recently, the government announced merger of select public sector banks. Almost 66 per cent participants were of the view that it would have no effect and will worsen PSU bank finances. The rest believed that it meant focused recovery of NPAs, legroom to raise more capital, efficient use of capital and cost rationalisation through reduction in branches in order of importance.

The principle of “one nation, one tax” has been the backbone of GST. The roll-out of GST has been a big step for the Indian economy. The participants ranked tax neutrality in supply chain decisions as the most important outcome of GST, followed by reduction in tax costs and indirect tax litigation.

On being asked whether introduction of anti-profiteering provisions in GST can be a challenge for businesses, approximately 42 per cent participants agreed. Also, 24 per cent participants were not sure, and around 34 per cent participants did not see these provisions as a challenge. The participants ranked lack of preparedness at vendors’ and customers’ end for timely transition as the most worrying hurdle in GST transition. The others believed that lack of clarity on procedural aspects and ambiguity on key tax related aspects would also pose hurdles.

The participants represented diverse sectors from automotive, IT, FMCG, real estate, among others. Despite the varied background of the respondents, there was a broad consistency in how CEOs and CFOs viewed the performance of Modi Government over the last three years. ~