In a slowing world economy, India has to rely on domestic triggers to keep up the growth momentum including fast-pacing the structural reforms, says Shaktikanta Das, Secretary, Economic Affairs. “With so much of global headwinds, India must strengthen its own economy and maintain its growth momentum,” he said. The government needs to continue with structural reforms, he reiterated pointing out that as the Finance Minister had mentioned in his current talks at IMF and the World Bank, the global environment is not supportive of reviving global growth.
In an exclusive interview to Firstpost, India’s secretary of Economic Affairs, Shaktikanta Das spoke of India’s place in the world economy at a time when global growth is at 3 percent compared with India's impressive 7 percent plus.
The current mood about India is very positive in the world, says Das. He is in Washington with Finance Minister Arun Jaitley on an official tour to Washington D.C. to attend the Annual Meetings of the International Monetary Fund and the World Bank and other associated meetings. Jaitley is accompanied by Urijit Patel, Governor, RBI, Dr. Arvind Subramanian, Chief Economic Advisor and other officials.
On the side-lines of the Fund Bank meetings, Das also participated in a panel discussion organized by Morgan Stanley, to deliberate upon the ‘Cyclical and Structural Progress in the Emerging Market Economies’, wherein he spoke about the fiscal consolidation and economic reform path being undertaken in India.
Das said that be it in goverment circles, where the Indian delegation headed by FM Jaitley had bilateral meetings with finance ministers of US, UK, China Iran, or even in neighbouring countries like Sri Lanka, Bangladesh and a few others too, or with investors of various funds or or multi lateral institutions like International Monetary Fund, World Bank, there is a lot of with a lot of expectation with regard to India. He said, this was also extended to China and a few other countries who are global drivers of growth. “Let us not forget that 3/4th of the world’s growth comes from emerging and developing economies and India is in the forefront recording highest growth rate,” Das said.
Investors too are optimistic about India and want to invest in India, thanks to the FDI policy reforms, ease of doing business and other structural reforms undertaken by the government such as the bankruptcy code, the move towards GST, etc. Das said when there are negative interest rates prevailing in most of the developed economies, India still offers a very good return and so there is a lot of interest in investing in India, both in FDI and in foreign portfolio investments. The overall feel about India is positive, said Das, adding that, positive, expectations are that India will maintain and improve its growth.
The reason why investors are positive about India, explained Das was because India has also established its robustness as a market. Besides, the country’s regulatory framework is very robust and trustworthy for are a foreign portfolio investor and FDI investor, too. “The mood about India has changed. There is recognition that India is a good place to do business,” said Das.
Regarding the much-discussed Goods and Services Tax (GST) Bill, Das said that it simplifies the indirect taxation regime in India. “Currently, there is central excise which is levied and collected by the central govt, VAT by states, then a plethora of taxes like entry tax, purchase tax, luxury tax, octroi, cess, surcharge... [With GST], the multiplicity of taxes will go, and there will a common tax imposed by both centre and states. Today there is tax on tax – if you have paid VAT on a particular good or service, that particular tax gets embedded in the cost of that particular product and when it moves on to another state, there is again VAT. So there is a cascading effect on prices of commodities and various goods which will go. [With GST], there will not be tax on tax. India becomes one market, one tax and goods will move freely and faster from one end of the market to another,” said Das.
The secretary of Economic Affairs said that experts have estimated that the average time for trucks at a checkpost is as high as 48 hours which adds to the cost of logistics, cost of manpower. With the passage of the GST bill, lLogistics will become cheaper and economy will become efficient, he said. “It is a very fair and equitable tax between states and centre. Service tax is levied only by centre and under GST the state can also do it. It creates a parity between states and centre,” he said.
The government faces major challenges. Das pointed out that the biggest challenge for the government is to skill the large number of India’s young population. About 60 percent of the population is below 35 years of age and what they need is good education, besides good and productive skills, he said. If the government does not meet this challenge soon, this demographic advantage could become a liability, cautioned Das. However, the government was cognizant of the problem and a number of skilling programmes have been undertaken under the government’s Skill India Mission programme, he said.
The other challenge to the government, according to Das, was to fix the issue of stressed assets in banks. “This is a work in progress. Because of legacy factors, the banks have built up lot of stressed assets over the years. It has created a risk aversion in banks,” he said, adding that measures have been taken by the government in each of these areas.