Fiscal Deficit Should not Bother US, says ASSOCHAM President Vineet Agarwal, 

Vineet Agarwal, the 40^th President of the Indian Associated Chambers of Commerce and Industry (ASSOCHAM), is one of the young businessmen who has given a new direction to the country’s industrial transportation sector. A graduate from USA’s leading Carnegie Mellon University, Vineet completed the 'Owner President Management program' (OPM) from Harvard Business School. He is also the founding National President of the Young Leaders Council (YLC) at the All India Management Association (AIMA).

Besides heading the Transport Corporation of India, he had also been associated with various International Institutes and Industry forums including the Director of the Young President Organization (YPO). As Managing Director of the TCI, he transformed the organization towards value-added services in the area of supply chain management and multimodal logistics. He Spoke to Vijay Thakur, Special Representative, The Statesman on Industry’s expectation from the government in wake of Covid-19 Pandemic and what short and long term measures the government should take to bring the Indian Economy back on the track.

Excerpts

 

Question:

The entire world is passing through a very tough phase in the wake of Covid-19 pandemic. India too has been hit badly because of the pandemic. The government is going to present its first Union Budget after the pandemic. What are the Industry's expectations from the Modi Government?

Answer

 Union Finance Minister Nirmala Sitharaman is going to present the the21-22 Budget under extraordinary circumstances. The entire world is passing through once in a hundred year kind of crisis. Even the most developed economies are grappling with the human and economic costs of the global health emergency.

We have proved many experts from the Western world wrong, who were projecting that India would take a long time to recover from the pandemic. But in fact, we recovered very fast and are now stressing about the future.

And a part of the credit goes to the immediate steps taken by the government including fiscal incentive to the industry and by giving support to common people by giving foodgrains. Coming to budget, the entire industry expects that the Modi government would take a bold step to put the economic recovery in the next gear.

I am of the view that Union Government should remain at the forefront of the Expense Budget with increased investment in infrastructure mainly road building, rural infrastructure, and a special focus on the healthcare sector in public as well as the private sector. The healthcare sector across the entire value chain, both in the public and private sectors. Any money spent on infrastructure will show three times its effect on ground zero.

It is obvious that the fiscal deficit is going to shoot up. But this is no time to think about the fiscal deficit. Under the given circumstances, the fiscal deficit of 7-8 percent of the GDP or even higher should not bother us as long as we spend on the productive sectors. The fiscal deficit numbers should not be compared with the past, at least for the next couple of years.

Question:

But Do not you think The government has already taken a series of steps to boost the country’s economy? 

Answer

To a great extent, the government has already taken several measures to boost manufacturing within the country, under the ambitious Atmanirbhar Bharat program. Schemes like the Production Linked Incentives for over a dozen sectors is already attracting international investors. The industry is expecting that such initiatives will get more leeway in the Budget.

There is no reason why India cannot become a global manufacturing hub for electronics, telecom equipment, something on the line of pharma sectors where we have emerged as a global leader.  

ASSOCHAM has submitted a detailed presentation to the Finance Ministry on tax and non-tax measures, the broad expectation is that the consumption-driven demand would get a boost which would automatically lead to the re-emergence of the private sector investment.

In the meantime, the government has to do the heavy lifting with help from the Reserve Bank of India. Sectors like real estate, agriculture, agrochemicals are expected to get a fillip. Besides, Industry hopes the government would give top priority to the sectors that have been worst affected by the Covid-19 pandemic mainly sectors like hospitality, transport, and aviation industry.

Question

Covid-19 has severely affected the small and medium sector (MSME). What do sops you suggest to bring MSME sector back on the track 

 

Answer:

While government has already taken measures to lift the MSME sector, the government should give them a further lift in terms of regulatory and fiscal support. The schemes like credit guarantee and mortgage-free loans should be broad-based.

While a lot has been done to ensure that their bills are paid expeditiously by the PSUs, government departments, the MSME sector need further cushioning and a liberal banking regime.

There are indications that India is moving towards a V-shaped recovery. However, to continue the industrial growth, we need consumption-led demand to balance supply-side measures and investment-led demand coming in from the government to create a multiplier effect.

Question

You said the government should increase investment in the infrastructure sector. Will you please elaborate it.

Answer

Industry is hoping that the Finance Minister would significantly raise the budget allocations for the ministries dealing with infrastructure sector like roads, highways, and rural development. A big leg-up is also expected in the healthcare sectors across the entire value chain. 

The Rs 110 lakh crore National Infrastructure Project Pipeline, with projects right across energy, healthcare, railways, ports, airports, roads and highways, and rural infrastructure should take India towards a modern and a state of the art economy.

Increased infrastructure investments are also coveted as it can help address the urgent need of job creation, create a multiplier effect in the economy and also enhance the country’s competitiveness to attract investments. 

We expect the industry and the Government to work in close coordination for sustainable economic growth. These efforts would need the support of the RBI which has played a pragmatic role in managing interest rates.

ASSOCHAM is happy that its long-standing recommendation to create an Infrastructure Bank, to fund port, road, and power projects, has now gained significance. Such a Bank will help the country enhance spending on productive assets.

Question

Other than budget what else you expect from the government to boost growth and demand in the Indian industrial sector.

Answer

One issue that the industry expects from the Modi government is to rationalize things like GST. There are some sectors, which are asking for the higher slab as they want higher input credit, at the same time there are some sectors that want to lower the GST slab since they do not want input credits. Now the government should rationalize the GST as per industry demand to give benefits to all. The rationalization of GST would ultimately immediately help many sectors. Consumption linked demand would also boost up due to the rationalization of GST. We are very hopeful about these short-term measures.

Ends.