Sumit Mazumder
President, CII
Talks to Sanjeev Sharma
CII president and CMD, TIL Limited, Sumit Mazumder, says the Modi government has initiated several reform measures which have brought about a positive shift in the fundamentals of economy. While stoutly dispelling criticism that things are not moving on the ground, he says policies are being translated into action and mentions areas like inflation, FDI, investments and auction of coal and spectrum.
Q: How does CII view the economic climate with the Modi government about to complete a year in office?
A: Indian industry is optimistic and enthusiastic about the current economic climate. There is a huge shift in the underlying macroeconomic fundamentals as compared to a year ago. The fiscal deficit is contained at prudent levels, the current account deficit has come down, and inflation control is a big plus.
The cut in interest rates has been a good beginning, and there is pick-up in consumer demand which would gain momentum going forward.
Overall, investor sentiments have improved greatly as is evident in the most recent CII Business Climate survey and we in CII expect GDP growth to register 7.8-8.2% for 2015-16.
Q: While several reform measures have been announced there is a view that things on the ground are not moving?
A: It is not correct to say that things are not moving on the ground. The results of the multiple reforms undertaken in the last year are evident in a number of positive indicators, notably the investment scenario where FDI and planned domestic investments are both displaying an upturn. The strong action on foodgrains and fuel prices and Direct Benefits Transfer of certain items is a concrete outcome of the reforms process, and has helped subdue inflation. This in turn has created the environment for RBI to lower interest rates.
The e-Biz platform has already placed 11 services on an integrated online platform, labour returns for MSME have been simplified, and ministries and states would be taking up further administrative facilitation. Moreover, under the Prime Minister’s leadership, important projects are getting off the ground. The example of huge revenues arising from the coal and spectrum allocations demonstrates that policies are being translated into action.
The various government campaigns are already in implementation stage.
Progress on Swachh Bharat, Smart Cities, and Clean Energy would take their due time to deliver results. Industry, too, is working with the government on these areas. For example, CII will be engaging on building 10,000 toilets in schools and has taken up activities under the Smart City and Digital India initiatives. CII is also closely involved with the Make in India campaign.
Q: When will investments start to happen? Why is industry hesitating? How do you view the progress on Make in India?
A: I do not think that industry is hesitating. The latest data shows a strong uptick in capital goods production and this is a sign that sentiments are vastly improved. As per CMIE figures, there has been a big surge in investment announcements over the past quarter. With more reforms, the planned investments will start showing on the ground.
The progress in Make in India is remarkable particularly the huge interest generated among overseas investors. We were recently at the Hannover Messe where CII had taken a 40-member delegation and hosted an investment summit with German CEOs and I must say the excitement among investors was visible. This has been the case in other road shows and interactions we have had with international investors as well, and I am confident that the investment pipeline will strengthen in the days to come.
Q: While there has been improvement in business climate, what are the main challenges faced by industry?
A: The soft global economic environment is of concern to Indian industry. Slowdown in China has dampened global economic growth prospects, and though other major economies have improved, there remains underlying fragility in the global system. This is reflected in the Indian export performance which has stagnated over the year.
The agricultural sector is troubled due to unseasonal rainfall and we hope the Government would continue to support distressed farmers through specific steps. A key source of concern is the financial sector where banks are struggling with non-performing assets and inadequate capitalisation. The Government must undertake disinvestment of public sector banks and carry out restructuring of the sector. In addition, land acquisition and GST introduction present huge opportunities for industry and economic growth.
However, CII recognises that the Government is actively working on these issues and the situation would improve on these fronts shortly.