Ahead of Finance Minister Arun Jaitley’s pre-Budget consultations with India Inc. on Wednesday, Confederation of Indian Industry (CII) President Sumit Mazumder spoke to The Hindu’sVikas Dhoot on the state of the economy what the government must do to prop up growth.

Ahead of Finance Minister Arun Jaitley’s pre-Budget consultations with India Inc. on Wednesday, Confederation of Indian Industry (CII) President Sumit Mazumder spoke to The Hindu’s Vikas Dhoot on the state of the economy what the government must do to prop up growth.

What is the broad theme that industry wants addressed in the Budget?

The theme is creation of demand. Private sector is not investing because there is a lack of demand. They are sitting on excess capacities due to past investments and thirdly, the lack of positive sentiments due to the failure to get GST going. This is reflected in reports that manufacturing is at a two-year low now. If these are addressed, we will definitely see a big pick-up in the economy.

Is industry seeing ground-level results from the NDA government’s efforts so far?

Things are better, but could always be even better. If you expect the results right away, that’s utopian. There is a time lag between when you implement something and the results. Industry is happy generally, but extremely disappointed with the stalling of the Goods and Services Tax (GST) regime, which has become the overarching reform for all. The government has got other reforms through in areas like foreign direct investment in the past 18 months.

Mr Jaitley has said that private sector plays a role when times are good and public investments lead the way when the going is tough. Your comments.

One of the reasons is infrastructure in the doldrums due to the nature of the previous contracts that were signed. People who build the infrastructure are in trouble. So, the government has initiated many reforms in that area such as allowing exits and helping stalled projects. But the key is how we get these companies back on their feet so they can invest again.
In the recent contracts that have been awarded for highways, 90 per cent of the land is acquired which was a big deterrent earlier. Getting land or environmental clearance to build roads and highways is a sovereign responsibility, not the contractor’s. This government gets this, while the previous government didn’t.
So, I do believe we will see a revival, but the lag of all the problems continues. That is why you don’t see continuous growth in industrial output.

How do you assess Make In India’s impact?

Has it taken off in a way one would like to see? No. But I like to believe it would make an impact. A lot of our technology partners are keen to look at sourcing from us for global markets as our quality and costs are competitive.

Are you seeing any pick up in demand in your own business (Tractors India Ltd.) from the public investments in infrastructure?

Yes, there is and we will see an even more substantial pick-up from the roads, highways and mining sectors. The government needs to invest in rural India, it is not seeing any traction and that is a major part of our economy. Agriculture, cold chains, irrigation — we would like to see major investments that can prop up growth. Infrastructure building also needs to grow much faster.

Niti Aayog Vice-Chairman Arvind Panagariya has said that India Inc should think bigger instead of asking tax sops and duty changes each time they meet the government. Would you agree?

Sometimes, we need to get out of this support-seeking mindset. I think the industry is mature and as long as there’s an enabling environment, it knows how to manage itself. In the short term, you may need support, but in the long run, we can’t live on subsidies. The counter argument is we are so disadvantaged due to high land prices, interest costs. There are two sides to every coin. I would like to eventually go away from sops and subsidies, but we must have a level-playing field.

What are industry’s concerns about phasing out exemptions on corporate tax?

CII’s view is that once the tax rate is reduced, the phasing out of all exemptions is acceptable. But this should be done in tandem, not one step ahead of the other. We will support it if that happens.
As a country, we are way behind in research and development and have worked with the idea of buying the wheel technology rather than reinventing the wheel. Given the low research base, it would need some support. It’s not a crime for a businessman to expect returns and R&D needs long-term investments. As we mature, competition would be such that we would be forced to do R&D.
So overall, I’m not in favour of subsidies, competition is the best way forward. Look at how Indian manufacturing survived the liberalisation of 1991.