Sunday, January 17, 2021
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“Govt must push ahead with reforms”

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The state of the Indian economy has always exercised everyone as the future depends on it. The president of FICCI, HARSHAVARDHAN NEOTIA, who recently taken over the industry body, feels optimistic that the economy in India will move ahead despite a dire forecast and government initiatives in this regard will soon start to show results. In a freewheeling interview with Managing Editor RAMESH MENON, he speaks about a variety of matters concerning the Indian economy and the business scenario.

“FICCI’s view is that banks should deal sternly with companies where excessive bad loans were taken primarily on account of poor management or mismanagement.”

The latest GDP figures indicate that India will grow at 7.6 percent. Do you see that happening?

I do see it happening and the economy should be moving upwards in the months to come. Many initiatives taken by the present government are now bearing fruit. This includes public investment programs like roads and railways. Generally, there is a push in the infrastructure sector. Digital India, Make in India and Skill India will take some time to fructify. I feel optimistic about our growth.

However, many pundits forecast a situation worse than 2008. How is Indian industry going to face that challenge?

It is a fact that we have global headwinds against us. Some factors will be difficult to judge as they are international in nature. But as we are working towards development, the Indian economy will hold out.

Overall figures for the last fiscal have shown a slump in manufacturing, though there has been some good news in certain quarters. How well has industry performed in the last two years?

The industry has had a difficult time in general. It had built up capacities on the expectations of 7 to 8 percent growth. That did not happen in the last four to five years. As a result, there’s been excess capacity. So naturally, the profitability of companies was under stress. Additionally, some companies had leveraged significantly causing a huge debt burden.  However, as the economy picks up, these difficulties should get addressed and companies should soon commence their capital investment cycle.

The Reserve Bank of India has flagged bad loans of nationalized and private banks as one area of concern. Many of the big defaulters are corporate houses. Should banks crack down on them? Will that impact industry?

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FICCI’s view is that banks should deal sternly with companies where excessive bad loans were taken primarily on account of poor management or mismanagement. However, some companies have a debt-stress due to reasons completely beyond their control such as global economic factors or lack of permissions and clearances causing inordinate delays. In such cases, we feel that due consideration must be given. It might help companies tide over an extraordinary crisis if some loans are restructured and they can get some short-term relief.

How does FICCI view the new trend of startups?

It is a welcome move. The organized industry cannot provide enough job opportunities for all job seekers. Therefore, entrepreneurial activities will need to be encouraged to provide income opportunities to our teeming millions. Creating an eco-system for startups is, therefore, a very laudable step and should be promoted vigorously.

Many new ventures are out to disrupt established businesses. Will old business practices be forced to change? Uber, for example, has a valuation higher than those who manufacture the cars they use on their network.

Disruptive technologies have always brought new economic models. Such technologies usually supplement brick-and-mortar ventures and can often improve their business prospects. However, all companies need to be mindful of changes in consumer behavior and adapt quickly to those requirements and expectations.

The agrarian crisis has depressed rural demand. Has this affected industry, particularly fast moving consumer goods?

It certainly has. It is, therefore, very important for us to delink our agricultural production from dependency on monsoons by improving irrigation and other facilities.

Both Start Up India and Make in India are attractive ideas. But how will they work?

These are initiatives in the right direction. They need sustained and long-term perseverance to enable us to reap the benefits. The continuing effort of the government is encouraging and I am optimistic of its success.

There is no shortage of equity in India. So why is the government setting up a Startup India Fund and should the government be in the business of startups?

As I have understood, the government is trying to catalyze the process by focusing the attention of the nation towards startups. The initial fund is only meant to give it a kick-start. Once it gets going, a majority of the funding will come from private sources.

How can the concept of Make in India work when the country is strapped with weak infrastructure, poor power situation and lack of skills? Numerous places face huge power cuts every day.

It is true that Make in India’s success ultimately lies in the convergence of all the issues that you have mentioned. However, a beginning needs to be made. You cannot generate power without having a need for it. Nor can you create skills without adequate job opportunities. It is very difficult to figure out which to tackle first. The government is attempting to tackle all these areas with an expectation that they will ultimately complement and supplement each other.

Many power projects have wound up because of lack of industrial demand. Does this indicate a slowdown?

There are vast parts of India without power and a few pockets that have surplus power. Generally, we are still deficient in power. The big question is whether the power available is affordable by all consumers. Also, many discoms remain unviable. Therefore, there are many issues that need to be sorted out simultaneously.

What do you think the government should do to boost economic growth?

FICCI has suggested that it should continue with its robust public investment program as it is a major requirement in the present circumstances when private capital is still not adequately available. Also, the government needs to carry on with its disinvestment program to enable it to free resources to help build our infrastructure.

Finally, it must keep pushing ahead with reforms for ease of doing business.

The industry has often felt bogged down with regressive laws or regulations of SEBI. Is the Income Tax Act outdated? What changes are required for distribution of wealth and tax rates?

Be it the Income Tax Act, SEBI rules or the Companies Act, there are always many issues that the industry believes need clarification or modification. This is primarily to help in the ease of doing business as well as to bring in parity among the acts where on some provisions different acts have different procedures prescribed. The industry is in continuous dialogue with the government on the need to change laws and rules and we have seen many positive amendments and changes that have been already notified. On many others, discussions and consultations are under way.

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