Taking over as the president of Ficci, Harshavardhan Neotia, chairman of Ambuja Neotia Group called for more reforms including making tax administration friendly and adversarial. In an interview to Aanchal Magazine and Sandeep Singh, Neotia said that reforms undertaken by the government over the last 18 months will start to yield results now. Excerpts:
How do you see things now after almost 18 months of the Modi government?
I sense that we are on the cusp of a positive upward movement. In the given global context, while 7.2 per cent or thereabouts is not a bad number, there were expectations of a higher figure. My sense is that we would be moving in that direction from now on and the building blocks of some of the reforms that Modi government has introduced over the last 18 months will start yielding some results.One of the major stimulus that the government had put in was a large dose of public expenditure and it takes time for the whole process to unfold in the form of actual money going into the ground. There are some indications of improvement like the beginning of a positive trend in demand for bitumin and cement as well. I understand that while road construction stood at 7-8 kilometres a day about three years ago, it has gone up to around 15 kilometres and is likely to reach 30 kilometres in the next two years.
What are the issues that you think still need to be addressed?
We need to make tax administration more friendly, less adversarial. We will work with the government on ease of doing business. We would like to see widening the tax net as we feel that 2.8 to 2.9 per cent of people paying taxes is a very small number and this should be around 5 per cent. Widening tax base is important to have a moderate tax regime. We will press for disinvestment and also like to see recapitalisation of banks, particularly those that have a large overhang of NPAs. It is important because once the growth cycle comes back, the banks should be in a position to lend.
Do you see GST impasse stalling growth?
It has not been there and so GST cannot be stalling growth. Yes, it is an important legislation, will be a radical move towards unifying our markets and will bring lot of non-compliant people within the tax net and broaden tax base. Studies suggest that it will be helpful in propelling our GDP by 1-1.5 per cent by bringing in calculation, things that were out of it. I have no reason to feel that it won’t come and I think that should have come by now. However, as the FM said that it is better to have a delayed GST than to have a poor GST, I agree with the same.
Are benefits of rate cut coming and what is your expectation on more cuts?
Interest rates haven’t come down as far as consumers are concerned. RBI has cut the rates but since the savings rate continue to be high, banks have not passed the full benefits. We feel that at least 1.5-2 per cent moderation is needed from a year ago. While some of it has come, another 1 per cent or more needs to come through and it will bring both the EMIs for consumers and interest rate for business groups down. It will increase the risk taking ability of the investors.
While higher public expenditure was expected to crowd in private investment, when do you see that happening?
Private investment will crowd in, there is no doubt about it. There is a lag because it’s not as though all public investment actually has gone on to the ground as there is a process of clearance and so it takes time.
Also, most of the firms had built capacities in expectation of 8 per cent growth but that has not happened over the last 3-4 years and hence everyone was saddled with excess capacity. Also, as the economy was sluggish there are underutilised assets and subdued prices. There has been a pick-up in growth in the last 18-24 months to some extent and going forward we may possibly reach optimal capacity utilisation. So the investment cycle can now come in but some sectors like steel may continue to be on a low for some time.