What is your message to boost investor confidence?
In today is world, any discussion or debate across various forums on development, economic growth or political stability, attention of the world is automatically attracted towards India. Expectations from India are not only from within the country, but even in the context of global growth and development a lot is expected from our country. At the same time, unprecedented mandate given to our government during the recently concluded election in the largest democracy has further raised the hopes and expectations.
Performance of our government during the last five years has shown the scale, speed and direction in which we work. This has given a new benchmark for the country to judge the performance of the government. I consider it a very positive development that there are a lot of expectations from us even though we have not yet completed even first 100 days of the new government.
Strong and sound economic fundamentals coupled with stable government with increased majority ae” I see these as the reasons for this kind of high expectations.
I would request experts to see this government as a government in continuity from last five years, and not in isolation. Similarly, with respect to economic policy, I would request people to analyse the impact of two budgets together — one presented in February and another one in July 2019.
It has been a common practice established over the years in our country to judge a budget based on what it has given or provided for specific sets of people and sector, based on what individual groups get, experts from those groups would analyse the budget. But now, time has come to look at the
macro picture of how the budget will propel our country forward and what it will contribute towards world growth, rather than the micro picture of just who got what. I understand that this would mean a paradigm shift from the conventional thinking; but I am sure that in the coming months and years this aspect would find its place in intellectual debate.
Economic pundits may analyse the performance of last five years which would give an indication of Our commitment and delivery. Our government has proved that we are fiscally responsible, we have kept the inflation under tight control. It has good relations with all major economic powers. Interest rates have fallen. Reforms like Goods and Services Tax (GST) and Insolvency and Bankruptcy Code (1BC) have been acknowledged to have benefited the economy. Logistics have become much more efficient. Stressed and stalled assets are getting resolved. Infrastructure is being built at an
unprecedented pace.
I consider entrepreneurs as Indias Growth Ambassadors. I want to tell them that our government will leave no stone unturned to make India a better place to do business in all aspects. We want entrepreneurs to get better productivity and better profits, we want our industries to grow in speed and scale, we want our businesses to get access to bigger markets, both at home and abroad. We want our investors to earn more, invest more and create more jobs.
Viewed in a global context, investors can be assured that India is the best destination in the world.
In the last term you implemented broad structural reforms such as the GST and the bankruptcy code and ease of doing business. However, attaining the $5 trillion goal will require bolder steps. What are the other measures that the government has in mind?
Let us, for a moment, step back and evaluate how big a reform GST was in a complex country, plagued by reform inertia for decades. It set in place a process of formalisation, which is irreversible and self-sustaining. Through 1BC, we sent a message that entrepreneurial failure is neither fatal nor
final. We put in motion an exit mechanism which is a win-win for the creditors, the workers and the market.
Setting higher goals and objectives and achieving them had been the hallmark of our government during the last five years. Let me take you back to November 2018, when the then President of the World Bank, Mr. Jim Yong Kim, commended India s historic rise in the ease of doing business
rankings. He said that it was remarkable that a nation of over 1.25 billion people has achieved a rise of 65 ranks in a short period of 4 years. This kind of performance gives us further confidence in setting still higher goals. Five years ago, who would have thought that:
India can implement GST;
India can achieve status of an open defecation free nation;
India can provide electricity connection to all households;
India can provide access to clean cooking to more than 8 crore families;
India can provide health insurance cover of 5 lakh to more than 10 crore needy families.
We have laid a solid foundation for high, sustainable growth over the long run. India has broken the perception that developing countries cannot grow at a higher rate for a reasonable period without getting into the problem of overheating, that is, higher inflation. During the past 5 years, India
witnessed the highest average growth rate with lowest average inflation. All the macro-economic parameters such as current account deficit, fiscal deficit, inflation, etc. were brought down to acceptable levels. This helped in restoring confidence in the economy and witnessed unprecedented FDI inflows.
Indian economy was used to growing in a particular manner for almost 45 years after Independence. From 1991, the country tried to change gear and ventured into a different philosophy of growth and development. There was a beginning, but unfortunately due to political instability it never gathered pace which was required to uplift crores of poor people from their state of destitution and deprivation. Thanks to the highest rate of average growth during the last 5 years, we were able to bring crores of poor families out of this situation.
When we talk about economic growth, it means wealth creation for the nation. It does not mean more money into state exchequer, it means more money in the pockets of people. It is wealth creation which will lead to prosperity for all.
Experiences of last five years give me the confidence that this country and people of India have everything in them to achieve higher goals and higher objectives. I am confident that 1.3 billion people comprising millions of farmers, lakhs of industrialists, hundreds and thousands of young
entrepreneurs and start-ups, women, through their collective endeavour, will take us there. Through you, I want to motivate our industrialists to believe in the India story and in the long-term potential of Indian market. They should carry on their business and complete their investment plan
without any confusion. I reassure all honest and law-abiding businesses of all possible support from our end.
The vision for the next five years is to have investment-led growth. We are targeting 100 lakh crore Worth of investment in the coming five years. To achieve this vision, the government is working on policies to promote inflows from domestic as well as foreign sources. This would entail further
liberalising our FDI policy, simplification of labour laws, further enhancing ease of doing business, power sector reforms, asset monetisation and asset recycling in public sector, and reforms in banking, insurance and pension sectors. While investment has to be driven by private sector, the
government will do its bit to crowd-in. In undertaking all these reforms, the government will work with an open mind in consultation with all Stakeholders.
Most MNCs are tweaking supply chains in view of the trade conflict between the United States and China. Experts feel that this represents an opportunity for India to attract FDI. Does the government have a strategy in place to attract such investments?
India today offers skilled human resources, rapidly improving infrastructure along with one of the worlds biggest markets. For anyone looking to shift base, India is an ideal location. There is no doubt that the ongoing events are creating opportunities for some economies. But our policies are
not designed to get some short-term benefit out of transient disruptions being seen around the world. We are focused on improving our competitiveness through long-term reform measures. It encompasses steps towards improving our ranking in ease of doing business, tax reforms with
lowering of tax rates and simplifying procedures, labour sector reforms to encourage formalisation and FD-related reforms to further liberalize the investment climate.
The key story is about how the Fortune 500 companies see their production shifting. We would like them to diversify more, to do more production in India. We are constantly talking with these firms and understanding the difficulties that they face. We are very focused on creating the financial, regulatory, capital controls, taxation, labour and infrastructure environment to make it convenient for global firms to bring goods in a friction-less manner into India, run factories or service centres here, and re-export the resulting products. As an example, the GST will soon rise to the full model GST treatment of GST-on-imports coupled with zero-rating of exports, which is the most export-friendly indirect tax structure.
The Indian private sector does not seem keen to invest right now. What what can be done to change this?
I do not think this is a one-dimensional problem. Indiscriminate lending of the past created excess capacity as well as NPA problems. While we have brought the NPA issue under control, there is a requirement of optimum capacity utilization for the private sector to make fresh investment. This
depends on the domestic and international demand. We are facing some headwinds on this. One of the major reasons for domestic demand being curtailed is the credit constraints. So, it is a vicious cycle, which is at its last stage.
In order to boost credit flow, the plan to recapitalise banks has been set in motion. Further, they are being encouraged to lend to Non-Banking Financial Companies. It is bound to improve availability of credit for the private sector and boost the economy while securing trust of the markets.
Also, the government is fully behind the idea of minimum government, maximum governance. Strategic disinvestment of select Central Public Sector Enterprises (CPSES) remains a priority area for the government. This would open up many new sectors for private investments to chip in.
We have ensured clean lending and sustainable growth and I think that it is just a matter of a short time before we see the private sector booming again.
With capacity utilisation crossing 75%, we would see growth in investment from private sector in the coming months. At the same time, the government will continue to aggressively push public sector investment and accelerate the execution for these projects to crowd-in.
We have seen many domestic and international companies across sectors who are seeing growth in the coming quarters and are investing. Various ministries are in continuous dialogue with different industries to enable the private sector to grow at their full potential. We are willing to go as far as
needed to ensure that animal spirits are revived and our entire private sector is bullish.
The years between 2014 and 2019 saw a sustained upsurge in FDI. Is the government contemplating further measures to boost FDI?
Even when global value of FDI inflow is declining, we have maintained steady level of about Us $65 billion of FDI inflows. The years between 2014 and 2019 saw a sustained upsurge in FDI. India received Us $286 billion worth FDI between 2014-15 and 2018-19, which is a 50% increase over the
previous five years. The budget has envisaged a rise in FDI limits in certain sectors such as insurance. The bulk of FDI decision-making by global companies is no longer influenced by FDI capital controls that India has, as our capital controls against FDI are gone in most sectors. Now the
questions are about India as an operating environment. This involves financial regulation, tax policy, tax administration, the behaviour of regulators, predictability of policy, quality of infrastructure. We are constantly talking to MNCs and understanding what difficulties they face while operating in
India. We have addressed many of these issues in the ease of doing business effort and the balance of this agenda is the area that we will now focus on.
We have also announced in the budget a scheme to invite global companies to set up mega- manufacturing plants in sunrise and advanced technology areas such as semi-conductor fabrication, solar photo voltaic cells, lithium storage batteries, solar/electric charging infrastructure, computer servers, laptops, etc. and provide them investment-linked income-tax exemptions and indirect tax benefits.
India and US appear to be talking past each other on trade issues. What do you think is the way forward?
India and US are mature democracies with various forums of engagement on trade. Our countries are at different stages of development with different strengths and varied domestic market requirements. We have had pretty constructive dialogues in the last few months on various facets of trade and commerce and we are positive it will result in a win-win situation for both countries.
What is the government doing to boost exports?
Exports form an integral part of our growth model. This is where Make In India is making an impact. Today, for example, some of the coaches of metro trains running in Australia were made in India. It is earning a good name for our country there!
Part of our vision to double farmer income by 2022 is driven by a focus on increasing exports. We are not looking at farmers as just producers but as potential exporters. In this, value addition by way of food processing will play a big role. To strengthen this, we have already set up many mega food parks, and many cold chain projects are being set up.
We are not looking to boost exports by incentives only, we also want to improve the competitiveness of our exporters. Various measures taken to improve the ease of doing business have resulted in an easier regulatory environment, and we are striving every day to make it better. Lower interest rates, improvement in logistics sector and simplification of GST are some examples. The new automated refund system for GST will help exporters.
The economy is experiencing a slowdown right now. The budget has taken some steps, can we expect more measures?
The budget is neither the beginning nor the end of our work in economic policy. My team and I are thinking about these issues all the time and acting on them.
