Reduction in interest rates, moderate taxes, introduction of a goods & services tax, and reforms hold the key to India's growth, says Confederation of Indian Industry Chairman Adi Godrej, in an interview with Vrishti Beniwal. Edited excerpts:
Your expectations from the Budget?
It should be pro-growth, create positive perception and sentiment. The perception today of India is better than what it was six months ago.
After the industrial output numbers were out, the finance minister said green shoots were visible. Your take.
Some green shoots are visible and the IIP (Index of Industrial Production) numbers are one of these, though the base effect has to be taken into account. The other is the perception. For many quarters, there were no reforms. Some reforms which don't need parliamentary approval are already in place. It appears other reforms will also be implemented soon. Formation of a Cabinet Committee on Investment is very positive news. Most important, if the GST (goods and services tax) is introduced, growth will be good in 2013-14.
Do you expect the Cabinet Committee on Investment to deliver?
In principle, it should help a lot. It is a question of how it is implemented. The committee has been formed under the chairmanship of the Prime Minister and I presume fast-tracking of large projects will be possible.
Industry had said India's image took a beating because of the Budget announcements with regard to General Anti-Avoidance Rules (GAAR) and retrospective taxation. Has the perception changed?
India was doing very well till February and then the Budget created an extremely negative sentiment. GAAR and retrospective taxation created a very bad perception, even outside India. Now, the Shome panel has given excellent recommendations and I hope they are implemented soon. If the economy grows well, revenues will rise considerably. The new team in the finance ministry is fully aware of that and I hope sensible policies will be taken forward.
The finance minister has cautioned we will have to take a bitter pill to restore the economy's health. What steps do you envisage?
One bitter pill might be that you can't keep subsidising a lot of products like petroleum and fertiliser for a long period. I don't think, in these circumstances, it would be good if rates of taxes are raised. It might have a negative impact on GDP growth and on collections. We have also strongly suggested to the Reserve Bank that interest rates need to be reduced.
Industry is not happy with the Land Acquisition Bill in the form it has been approved by the Cabinet. What are your concerns?
The provision that unless 80 per cent of the owners of land to be acquired agree the acquirer won't go ahead is too high a number. We suggested if 60 per cent agree, then others' land should also be acquired at the same price. Some provisions they have corrected. If there are some issues, we will take it up for amendment when the Bill is discussed in Parliament.
What steps are needed to bring back the economy to a growth path, while containing the fiscal deficit?
It should be reforms plus some administrative steps. Projects should be cleared fast and that will help new investment. Interest rates should be moderate. The most important is GST; it will add to GDP growth.
The government has often sought industry's help in convincing the (main opposition) Bharatiya Janata Party and state governments to support GST.
We have done it. CII has gone and met many of the chief ministers. I have met Narendra Modi. Fortunately, he has changed his mind. We met the Bihar CM and opposition leaders. I think there is a better understanding now between the government and the opposition on GST.
What are your views on the Direct Taxes Code (DTC), which has undergone many changes and might be reworked again?
It is a good reform and should be passed. The original Bill had a few flaws but some very good points, too. Now, while the flaws have been removed, mainly the Minimum Alternate Tax on assets, some other provisions have also been diluted. It's better to have this DTC than nothing but that's not the idea.