Prime Minister Narendra Modi today asked the industry to take risks and step up investments especially in job-creating sectors as his government looks to perk the economy by boosting spending and attracting global capital with improving ease of doing business.A meeting of the industry and business leaders, bankers and economists called by the Prime Minister to discuss how to convert the global turmoil into an opportunity felt that its impact on India would be far less while India Inc favoured an interest rate cut to bringing down cost of funds.
In a nutshell, the participants at the three-hour long meeting analysed the recent global events, their impact on India and the opportunities in-built in the situation for India, Finance Minister Arun Jaitley told reporters after the interaction.
He said the participants, 27 of whom spoke, felt the global situation, especially the volatility in the capital and currency markets, is a transient phase and that steps should be taken to strengthen the real economy.
Prime Minister laid thrust on low cost manufacturing and felt the strength of economy lies in its huge human resource, size of domestic market and that it is not entire export dependent.
He also laid emphasis on small and medium enterprises sector and using MNERGA funds as a possible tool for skill development and using Mundra Bank for supporting unorganised sector, Jaitley said. Transparency in governance will lead to early decisions.
Reliance Industries Chairman Mukesh Ambani, Tata Group head Cyrus P Mistry, Aditya Birla Group head Kumar Mangalam Birla, Sunil Bharti Mittal of Bharti Airtel and ITC chief Y C Deveshwar were among the industry leaders who attended the meeting.
RBI Governor Raghuram Rajan, ICICI Bank CEO Chanda Kochhar and SBI Chairman Arundhati Bhattacharya and economists like Subir Gokaran and Chief Economic Advisor Arvind Subramanian as well as Niti Aayog vice chairman Arvind Panagriya were also present. On the industry’s demand for an interest rate cut, the Finance Minister said it was the domain of the Reserve Bank to set monetary policy.
The meeting felt that the impact of global events on the Indian economy will be far less because the fundamentals are reasonably strong, Jaitley said adding that therefore they wanted steps in the direction of further strengthening the Indian economy.
“What we are looking at is different steps to strengthen the Indian economy,” he said.
The steps, he said, will range from investment in infrastructure, irrigation, easing doing business, attracting more global investment, generating private sector investment in India.
“These are the various steps which we are taking. So in this situation the best option for India is to strengthen our basic parameters… We are concentrating on strengthening the economy as a whole and how to convert it into an opportunity,” he said.
Boosting infrastructure spending as well as concentrating on agriculture sector was key to strengthening the domestic economy in the current scenario, he said adding an improvement in the agriculture sector would enhance the purchasing power of a large number of people. Sectors like food processing, textile and tourism were emphasised in this regard.
“Now with regard to various they have suggested are concentrate on the agriculture sector which will have a spillover effect on other sectors because a good agriculture will improve the purchasing power of a large number of people,” he said.
Increased expenditure on irrigation, emphasis on food processing, expediting the investment procedure for infrastructure creation were the other suggestions made at the meeting, he said.’
Finance Minister said there were several suggestions with regard to de-stressing stressed sectors particularly steel, textile, power distribution companies and tourism.
The suggestions also included ones on cost of labour, cost of capital, further emphasis on stalled projects and defensive measures in case where there are clear evidence of dumping.
While the participants felt large number of taxes mattes have been resolved, balance of reforms including passing of GST must be carried out, he said. “They expressed hope that GST which was held up because of parliament obstruction would move forward.”
Participants also emphasised on two more legislative steps — one relating to bankruptcy code and the other relating to definition of corruption under Prevention of Corruption Act, a step which the government has already taken, he said.
Bankruptcy code, he said, was in the final stages of drafting.
Modi endorsed the suggestions of some participants that MNREGA scheme can be used as a possible tool for skill development and development promotion along with Mudra bank initiatives in supporting the unorganised sector. In his presentation before the Prime Minister, Chief Economic Advisor Arvind Subramanian spoke about the key events that were contributing to global turmoil and what India could do to tap the opportunities and meet the emerging challenges.
Speaking at the press conference, he said, “India stands out. Whatever projections you are seeing, (India) is the highest growing country among all the major economies and would remain a relatively attractive investment destination.”
The Prime Minister, Subramanian said, “has clarified that this is not a matter of one country taking advantage of another country’s (China) performance which is deteriorating. It’s a matter of seeing challenges as opportunities that arise.”
Most of the participants, Jaitley said, “felt that we are going through a phase of extreme volatality… some of them suggested that volatility is the norm at the moment and therefore it is going to result in some turmoil in the market and on the currency front and this situation will continue… it will keep evolving.”
Once the global turmoil gets over, issues would come up but at the moment India is one of the lesser impacted economies in the world as the nation’s fundamentals are strong, he added.
Declining prices of oil and commodities in the global market is an opportunity for the country as it is a net importer, Jaitley said, adding that in this backdrop several participants suggested that steps should be taken to further strengthen Indian economy and improve ease of doing business.
“By and large, major thrust of entire discussion was that since in terms of its economy India is relatively untouched or little touched by these events except the transient impact on market, it’s an opportunity that India must avail of in terms of further strengthening its own domestic economy so that larger benefits of this global situation… can come India’s way,” he said. While responding to various suggestions made by industry, Jaitley said, “Prime Minister stressed that since you (industry leaders) regard this as a great opportunity for India, it is for India’s private sector to increase their investments…
“… and conventionally, compared to others, the private sector has greater risk taking ability because their entrepreneurship emanates out of risk taking.”
The Prime Minister, Jaitley said, was of the opinion that investments are necessary to promote job creation, while the participants too underlined the need for greater thrust on education and skill development.
Asked about RBI Governor Raghuram Rajan’s views on the industry’s demand for a rate cut, Jaitley said, “There was no discussion on timeframe or any such thing, neither did the Governor say this nor it was the opportunity (for such discussion).
According to Jaitley, towards the end, just as Subramanian had initiated discussion, economists present there — Bibek Debroy, Panagariya and Rajan — spoke on economic situation and how they look at the situation. “They gave their own opinions,” the Finance Minister said.
Talking to reporters after the meeting, industry leaders underlined the urgency to cut interest rates by the Reserve Bank, an issue which they raised during the discussions.
“Prime Minister said this is an opportunity for us to take advantage and invest… cost of capital is too high. I don’t know how many people can go ahead to take risk and invest… many of us raised the issue of interest rate,” Ficci president Jyotsna Suri said.
CII president Sumit Mazumder said “Prime Minister has said that industry must take risk and increase investments… we must go out and invest. Industry has a role to play.”