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Monday, March 01, 2021

Unleash ‘animal spirits’ for growth, FM Sitharaman tells India Inc

The government, the finance minister said, has already initiated steps, including a sharp cut in the corporate tax rate, and companies can take advantage of these.

By: ENS Economic Bureau | New Delhi |
Updated: February 21, 2021 1:07:22 am
Finance Minister Nirmala Sitharaman delivers an address at the All India Management Association. (Source: Twitter/@FinMinIndia)

Finance minister Nirmala Sitharaman on Saturday called on Corporate India to awaken its ‘animal spirits’ and step up investments now that businesses are in a reset mode after a period of Covid-induced disruptions.

The government, she said, has already initiated steps, including a sharp cut in the corporate tax rate, and companies can take advantage of these.

“We need capacities to be ramped up, we need expansion, we need more production of very many such products, which are so required for the economy,” Sitharaman said at an event of All India Management Association. “(After the tax cut) I have been waiting to see expansion happening, I’ve been waiting to see greater investments from private sector in India,” she said.

The government in September 2019 drastically cut the corporate tax rate to just 15 per cent for setting up new manufacturing units in a bid to spur elusive private investments. But the outbreak of the Covid-19 pandemic dashed its plans. Investments remain critical to the country’s resurgence story, as private consumption has been badly bruised by income losses in the aftermath of the pandemic.

Although a contraction in gross fixed capital formation substantially narrowed from 47.1 per cent year-on-year in the first quarter of this fiscal to 7.3 per cent in the three months through September, it still remained far below trend. Private consumption, meanwhile, shrank at a faster pace of 11.3 per cent in the September quarter.

With businesses going through the reset phase after the substantial lifting of the lockdown curbs, the government hopes to make a sustained push now to draw investors.

“I would now like to see private investors and private industry…coming forward with the so-called ‘animal spirits’ to show that it is possible to pull India up and keep it high as one of the fastest growing economies. It is now on your shoulder entirely,” she said.

The minister highlighted the latest, aggressive efforts towards disinvestment. The push for disinvestment in trickles has not really been so successful in spreading the ownership pattern, she said. “So, I want to have an efficient, more meaningful way in which our taxpayers’ money should be spent…The disinvestment of units or privatisation of units is not because we want them to be closed down,” she said.

She urged the industry to make the best of the disinvestment policy announced in the Budget. The government has set a disinvestment target of Rs 1.75 lakh crore for FY22. For the current fiscal, it had budgeted disinvestment revenue of Rs 2.1 lakh crore but the pandemic disrupted its plans. Earlier this month, the minister presented a Rs 34.8 lakh-crore-Budget for 2021-22. FE

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