'Early rollout of GST will make a visible difference'

Harshvardhan Neotia, who recently took over as the new President of Ficci, believes that the finance minister’s urge to tax the super rich distorts equity, and discourages entrepreneurship.

In an interview with Deccan Herald’s Annapurna Singh, he suggests that though the move may be a shortcut to collect revenues, it is detrimental for the growth of the economy from a long-term perspective. Excerpts of the interview:

Although India is now growing at a faster pace, the industry here has not fared well this year. Also, exports have remained a laggard for the last 12 months. What are your thoughts on this?

Growth has been dispersed, with only a handful of sectors showing a reasonable performance. For many segments of industry, weak demand is a key concern, and this is weighing heavily on their existing capacities. Our growth is currently being driven by public investments.

However, ‘Make in India’, ‘Digital India’, and ‘Skill India’ have garnered a positive response. Global investors from across countries have expressed intentions to invest across a wide array of sectors. An early implementation of GST will make a visible difference on the ground. With regard to exports, the government had reintroduced the interest equalisation scheme in November, and had also increased duty drawbacks of certain products. This is expected to give some relief to exporters going ahead. We need to keep the focus on enhancing the competitiveness of our manufacturing sector as this would help give a push to exports as well.

According to you, what will be the five most important things the finance minister should focus on in this Budget to give a desired push to the economy?

We, at Ficci, would like the government to outline the roadmap for phasing out of exemptions, lowering of corporate tax rates and minimisation of subsidies, in the Union Budget. Second, there is a need to move forward with the disinvestment process with greater vigour. Strategic sales may be considered wherever feasible.

Third, the government should consider reducing its equity holding in public sector banks up to 26 per cent, even as it retains control by way of a golden share. This will provide banks with the much needed capital and prepare them to stand ready to fund the growth cycle as it gathers pace. Fourth, it must continue with the thrust on public investments in infrastructure, particularly in rural areas to crowd-in private investments.

Fifth, there’s a need to maintain a healthy fiscal balance. One must take steps to garner higher revenues and efficient expenditure management.  

On the reforms side, the Centre has not made much headway on GST, land bill, real estate bill and others?

The issue of the GST bill being stuck in Parliament does make the investor community anxious, but we know that given the nature and scale of this reform measure, there is bound to be intense debate on every aspect. We hope to see this being achieved in the forthcoming budget session. The onus of amendments to the Land Acquisition Act has shifted to the states. We look forward to the states enacting their own land laws aligned to their development requirements.

The Opposition is blaming the government for creation of jobless growth. Do you agree?

The government has taken steps to promote entrepreneurship, which is very encouraging. There is, of course, a need to give a stronger boost to promote an ecosystem of entrepreneurs, MSMEs and startups. To promote startups in India, we need to address the key challenges currently facing startups. The incorporation procedures are complicated and time-consuming. There is also a need to have institutional support for incubation and mechanism for continuous mentoring. Financing is also a key concern, both with respect to raising capital as well as for maintaining cash flows. Likewise, startups also need encouragement and support for hiring and retaining talented human resources. We do hope to see redressal to some of these issues in the upcoming startup policy.

The agriculture sector is in huge distress. Rural demand is mute, as can be seen from the consumer durables production numbers? What are your suggestions to kick-start them?

The agriculture sector has been witnessing slow growth due to a variety of factors, including low crop yields, high dependence on monsoons, weak post-harvest infrastructure and variations in levels of farm mechanisation, across regions and crops. Rural demand, of course, needs to be given a strong boost by supporting livelihood opportunities in rural areas. This may include taking steps towards improving agricultural production, as well as enhancing public investment in rural infrastructure. Serious attention needs to be given to the sector — including rain proofing it, helping increase productivity and profitability.

Any suggestion to rationalise India’s tax structure?

On direct taxes, Finance Minister Arun Jaitley has already announced a road map for reducing the tax rate from 30 per cent, to 25 per cent. We hope that the government follows the timeline for this gradual reduction. There is also a need to reconsider the levy of MAT with all the incentives being proposed to be phased out. At the same time, the government should make all efforts to widen the tax base by capturing all the assessees in the tax net who have a taxable income, but are evading tax. The tax rates for individuals are quite high, and there is a need to review the slab structure for the taxation of income for individuals.

The highest rate of 30 per cent should trigger for income above the threshold of Rs 20 lakh. This would increase the personal disposable income in the hands of individuals and will generate more demand, and consequently, lead to new investments. As regards indirect taxes, GST will be the biggest tax reform ever attempted in this country.