At the 73rd Annual Session of FICCI in the year 2000, late Prime Minister Shri Atal Bihari Vajpayee ji had laid special emphasis on the need to strengthen the partnership between the government and the industry. He said: “It is the most important pre-condition to accelerate our growth rate to meet the 9 per cent yearly target that has been set. Only this will allow India to double its per capita income in ten years and make India a global economic power”.
India has witnessed good economic growth since then, and especially in the last few years, it has been the fastest growing economy in the world. We, however, are facing a challenge in terms of growth now, with the first and second quarter of 2019-20 registering poor 5% and 4.5% growth respectively.
This reminded me of what Vajpayee jee had so well outlined in 2000, and also the call of Prime Minister Shri Narendra Modi ji at FICCI AGM in 2017 — “political parties and chambers of industry should keep in mind the country’s requirements and the feelings of the people, and work accordingly”.
Again, it is only the venerable partnership between the industry and government, that can bring the growth back to 7-8 per cent and even higher in the coming quarters and years to achieve the target set by the Prime Minister, of making India a $5 trillion economy soon.
There is a complete unanimity across the board that the Centre and the States, along with industry and public on the whole, have to work together to get to this goal.
This is why we decided to dwell at length during this year’s annual session on the agenda — India: Roadmap to $5 trillion Economy.
Becoming a $5 trillion economy is a given. The question only is how soon. The government led by PM Modi has already turned the downturn in the economy into an opportunity to deepen the reforms by getting into the critical areas like labour laws, besides the added focus on fiscal and monetary policy measures.
If IBC, GST and RERA are the reforms implemented by the government in its first-term, that have laid a solid roadmap for improving the business environment in the country, the reduction in corporate tax rate from 30% to 22%, in its current term, is a move that makes India competitive now in terms of tax incidence with regard to its competitors.
It is time to look at the positives. The GDP growth appears to have bottomed out, IBC followed by banking sector consolidation is expected to improve the health and confidence in the banking system, sustained reform mode is set to support the upward move, and if the government and industry works together in capitalising on this, there is no reason why we can’t return to the higher growth trajectory quickly.
The government, on its part, has been extremely responsive in dealing with the industry issues.
In the upcoming budget on February 1, too, it is certain that a clear roadmap will be announced to reach $5 trillion by 2024-25.
The global growth situation, which was appearing quite gloomy a few month back, thanks to the rise in protectionism and escalating US-China trade tensions, is witnessing an optimistic outlook with the two countries inclined to settle their disputes now.
On the domestic front, reforms have started showing their impact on the ground. India has moved up 79 places in the Ease of Doing Business rankings, from 142nd in 2014 to 63rd in 2020, and is well poised to break into the top 25 in the next few years.
I also commend the Government of India opting out of the RCEP negotiations. It has sent a strong signal that we are not going to budge and ensure that the country’s interests are protected in any bi-lateral or multilateral trade pacts.
Though Monetary Policy is in the RBI domain, and the guiding force here is inflation management, it is extremely encouraging to note that the Central Bank has also outlined supporting growth as its focus area. The industry expects the repo rate cuts to continue and a further reduction of 75-100 basis points in the existing rate of 5.15%, with a better transmission of earlier rate cuts. This is also crucial for the growth to go beyond 7% in a speedy manner.
I would also like to list some of the specific areas for the consideration of the government:
1. For a typical manufacturing unit, the number of compliances can be anywhere between 2000 to 3000, if one includes both the central and state laws. Further, if we include the rules, the total number of compliances can go upto 6000. For a small or medium sized company, such compliances take up a lot management time. Instead of focussing on business, entrepreneurs have to focus on compliances. Government must review these requirements and limit the same to ones that are absolutely essential.
2. There is also a need to have an independent system of regulatory impact analysis for reviewing the existing and the new regulatory requirements related to the manufacturing sector.
3. Maintaining the sanctity of contracts is a critical issue and problems on this account are largely faced by companies at the state level. We have seen that a change in the government can cause disruption for the existing contracts wherein the incoming government revisits the contract and introduces new norms for an existing legally binding agreement. At times, the contracts are even discarded leading to private player who have already invested in the project, incur delays and huge losses. This creates uncertainty and negative business sentiments. FICCI would like to suggest that the agreement once signed legally between a government agency and private sector should be honoured in totality irrespective of the government in place, until and unless there is a proven case of corruption or malafide intentions during the course of earlier execution of the contract.
4. While appointment of judges and filling up of the vacancies in the judiciary is of utmost importance, there are several other areas where we need to see an improvement in the country’s judicial system. Government is the biggest litigant in the country. Decreasing the amount of protracted Government litigation in the Courts would make a significant impact on the pendency of cases before the Indian Courts.
5. FICCI is of the view that our engagement in FTAs and PTAs should be on our own terms and only if it provides greater market access to Indian companies. Further, our strengths in services sectors should be leveraged and access for Indian service sector players should be built into any FTA / PTA negotiations.
(This is the inaugural session address by Mr Sandip Somany welcoming Commerce & Industry and Railways Minister Mr Piyush Goyal at FICCI’s 92nd Annual Convention as the outgoing FICCI President.)