#ModiNext3Years: Here's a check list of big-ticket reforms India Inc wants
Modi and his government have largely been perceived as pro-business.
The two-years of PM Modi at the helm of the country has drawn diverse reactions from people across genres, be it politicians, academicians, media and the business. Modi, the man, has received accolades for his enthusiasm, energy and for relentlessly putting India on the map across the globe. There have been several who have said it was not time for celebrations as there is a lot that Modi and his government has promised and have not fulfilled as yet. For instance, jobs for all.
Modi and his government have largely been perceived as pro-business. During his campaign that was the highlight of Modi’s election speeches. So what is the evaluation of Modi and his government by the business community in the country?
Harsh Goenka, Chairman, RPG Enterprises, says that Modi inherited an economy that set him off at a disadvantage. “I am personally excited to see the efforts that he and his team are putting in to make the economy stronger both from the development standpoint as well as geo-political relations. This is a marathon, not a 100 metre sprint.” Goenka wants the government to address the following issues on an urgent basis:
GST: The Goods and Services Tax would go a long way in simplifying the complicated and varied state taxes with a common pan-India system of tax . Consensus needs to be built around it across the political spectrum. Perhaps the Rajya Sabha elections coming up this year will change the fate of this long-awaited reform. It has the potential to add one percent to the GDP.
Investment Policy: A lot has happened on this front, with the government actively rallying for foreign investment, prompting a sharp uptick in FDI, which rose 29 percent to $40 billion in the latest fiscal year. The manufacturing sector needs a push and this can come through the efforts being made to improve infrastructure as well as ease of doing business. A major challenge for Make in India has been the massive influence of state governments, often composed of opposing parties. With the arithmetic having changed lately, we can expect more alignment from states.
Land Bill : The ball is now in the court of the states, with the Centre having placed this in their purview, given each state has different rules in acquiring land. Again, the political composition of state governments posed a challenge here but that is changing. Easing of land acquisition norms, in a win-win manner with the farmer, is key to inviting investment.
Labour Reforms: The government’s desire to simplify labor laws in a phased manner is a step in the right direction. Industry is keen to uphold the welfare of labour, but must have freedom to hire and retrench underperforming workers. This is key to promoting investment and boosting growth.
Taxation: A major setback for foreign investment in India is our complex taxation structure and protracted litigation. There is an immediate need to streamline the ambiguities and double taxation. The matter of inverted duty structure wherein raw materials attract more import duty than the final products needs to be streamlined, so that locally made products are not at a disadvantage vis-à-vis imports.
The Modi government's reforms have been lauded in the past by Venugopal Dhoot, Chairman, Videocon Industries, who echoes the thought of many in India Inc with a demand for GST on the top of his big ticket reforms that he wants the government to undertake. His list includes:
GST: It is needed as early as possible for faster economy growth.
Land reforms: To pave way for faster clearance of highway and other industrial projects, which will thereby help in developing infra and industrial projects, generating employment at large.
Subsidy reform through financial empowerment: This will eliminate leakages and corruption.
Public Sector Banks (PSBs) reforms: It will make PSBs stronger, bigger and more competitive globally.
Railways: A dedicated freight corridor should be prioritized and implement as soon as possible.
An expert in early stage investment and who has mentored over 50 early stage investments, Apoorv Ranjan Sharma, Co-Founder and President, Venture Catalysts, seed investment and innovation platform, says India's early stage investment landscape is currently ill-equipped and disorganised to take on the global leaders, the US and China, and support the country’s booming start-up ecosystem. He wants the Modi government to address the following issues:
Exemption of capital gains tax on certain small busines stock
Identify and remove unnecessary regulatory barriers to high-growth start-ups; and expand collaborations between large companies and start-up
Implement economic policies to shrink extreme income inequality
Supporting 'All things Internet': Enabling internet for India's least disrupted industries such as farming and manufacturing because it will increase productivity which will lead to higher output and exports
Educational reform to support digital age. Society has advanced from industrial age to digital age and we have not seen education reforms that helps enhance skills required in digital economy.
Acknowledging that the government is handicapped by political compulsions which does not allow for an easy passage of some of its reforms, Ankur Bisen, Senior Vice-President, Technopak Advisors, a management consultant firm, says some of them should be given more focus:
GST: A unified tax reform is on top of my list. Taxation reforms are a symbol of the pace of reforms and it has not happened at the pace with which it should have. There are multiple stakeholders involved and is not a simplistic issue.
Urbanisation: We have branded cities smartly and the smart cities concept has caught on, but there is no talk on how the government will manage urbanization. By 2030, two-third of India will live in cities. How is the government going to make the cities livable? How is it going to address issue of sanitation, public transport? In any global surveys, India’s cities are at the bottom half of the list. Urbanisation is a reform that requires a long gestation period. If the government is looking at a three year window, it needs to say how it is going to achieve what it takes to address these issues.
Implementation of Budget announcements: With regard to rural income, would like to know how is the government going to increase it? We have to see if farming income doubles in the next three years. Rural distress has ripple effects on other sectors.
If the NDA wants to compete on a global platform and implement several of its initiatives that have been launched to help boost business and create a friendly business environment, then there are three crucial areas they need to focus on says Ravichandran Purushothaman, President, Danfoss India and Vice-Chairman, CII Tamil Nadu:
GST: This is a game changer for all industries and with India being a consumption driven economy, it will fuel growth due to lower costs to consumers . The emphasis has to be given for early implementation of the Bill. In particular, it will benefit the food and cold chain industry as it will ease movement in the food value chain, increase inter-state transaction, reduce inflation and enable investments in the cold chain sector. It will be big boost by adding almost 2 percent to the GDP and help the economy grow at a faster pace.
Land and Labour reforms: This is the need of the hour as it plays an important role in boosting the manufacturing scenario in the country. Some of our laws are old and need to be modified to suit new generation of industries. Improving and streamlining the process for land purchases and having a single window clearance for projects will accelerate growth and trigger interest from potential investors. Land reforms will accelerate speed of implementation of many infrastructure projects as well by saving time, reducing burden of legal costs and providing relief to investors .
Ease of doing business: By creating a globally compatible platform with ease of doing business, we will be able to attract investors and investment for the manufacturing sector which can further propel the Make In India initiative to greater heights and help India shine as a good location for business. Make in India initiative will not succeed unless the ease of doing business has a steep change. Job creation is very crucial as India needs to create one million jobs per month for the next 10 years.
Clearly, GST seems to be the big reform that the industry wants from the government now and unfortunately for the ruling NDA, that one Bill is stuck in a political quagmire. PM Modi's will to roll out reforms hinges on how he tackles this diplomatically.
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