JK Organisation expects greater push to reforms in Budget

With Narendra Modi government set to present its first full Budget later this month, India Inc is looking for more sops from Finance Minister Arun Jaitley which would give further push to the economic reforms launched last year, says Harsh Pati Singhania, Director, JK Organisation, and vice-chairman & MD, JK Paper Ltd., while talking to Girja Shankar Kaura.

Q: This would be the first full year Budget of Modi Government. What kind of major policy initiatives do you expect from the government?

A: The government, since it came to power, has already undertaken several initiatives over the past 8-9 months that has helped to improve the overall business climate. But the economic recovery is yet to gain ground. Given that this will be the first full-fledged Budget for Modi-led government, it is expected to provide a blueprint of its reform programme that should push the Indian economy close to 8% growth on sustainable basis. For this there must be a concerted effort to improve upon our ease of doing business and competitiveness for which infrastructure deficiency needs to be addressed, particularly by triggering investments in big infrastructure projects such as Dedicated Freight Corridors, or other projects in power and road/highway sectors. While investment is the key for new projects to come on stream, demand revival is of equal importance.

Improvement in physical infrastructure is vital, but with rising literacy and higher aspirations of people it is also crucial that education levels, in terms of quality and capacity, should be more in sync with employability. The government has set a target of 500 million skilled workers in India by 2022, for which there is a need to provide more impetus on skill development programmes so that a large pool of young populace gets gainful employment.

To do away with the stringent and multiple tax laws, the government is pushing through the GST, but the revenue neutral rate of about 27% is too high that could undermine the whole process as compliance will remain poor. We expect some clear picture on this in the Budget and some reduction in the corporate tax rate of 30% as business is much strained by the high incidence of surcharge, enhanced DDT and lowered depreciation rates besides the current high rate of MAT.

Q: The government has launched Make in India campaign to promote manufacturing. Do you expect the government to come out with a policy blueprint in the Budget?

A: The Prime Minister’s ‘Make in India’ initiative is seen as an apt vehicle to prop up the manufacturing sector and transform India’s economic future, not only for GDP but for job creation besides providing a fillip to exports. There is an urgent need to improve our overall competitiveness and remove the regulatory bottlenecks that undermine business. The government has already made some effort in this regard, like moving towards digitisation, reduced paper work, more online, single-window clearances etc., but some stumbling blocks still remain, like the inverted duty structure, uncertainty over taxation regime, inadequate skilled manpower, to name a few. Once these are adequately addressed, investments, whether domestic or overseas, will flow in.

Q: This year the government seems to be comfortably meeting fiscal deficit targets largely due to fall in crude prices. What steps you suggest to further bring it down?

A: Any shortfall to meet the fiscal deficit target should be ideally met through a more concerted effort towards disinvestment and rationalisation of the subsidy bill that should be limited only to the bottom of the pyramid.

Q: What do you think about disinvestment plan of the government?

A: While disinvestment seems to the most suitable way to offset the shortfall in revenue and to maintain the fiscal deficit within the targeted level, it is not always an easy task as we have seen in the past few years when actual proceeds fell way short of the targeted levels. Sometimes, trade unions arrive as a stumbling block (as in Coal India) or the situation does not seem ideal (ONGC, Oil India, as crude oil prices are in a freefall). With disinvestments of these two major PSUs almost not possible in the next two months, we expect another shortfall for the current year too.

Q: On indirect tax front, what are your expectations from the government?

A: To promote domestic manufacturing, it is crucial that import of finished products attract duties at least as much, if not more, than what is levied on raw materials. But often this is not the case and certain key industries continue to face the malaise of inverted duty structure. While the interim Budget addressed this issue and certain sectors benefitted, the big ones remain out of the ambit. We expect the Budget to raise import tariffs on finished products such as tyres, paper etc., to be on a par with their respective key raw material.