Arun Jaitley should pause on fiscal consolidation, believes India Inc, and instead focus on spending towards infrastructure, the rural economy and health care
Nearly two years after the Narendra Modi-led government assumed power, business sentiment has shifted from euphoria to cautious optimism, with a growing feeling that rhetoric must translate into action. The upcoming Union Budget is an opportunity to set the ball rolling.
Despite a marginal rise in India’s position in the World Bank’s Ease of Doing Business 2016 ranking, and easing fiscal deficit and inflationary pressures, there are still some areas of concern: Credit growth from banks is muted, rural demand has slackened due to two drought-like seasons and exports continue to slide amid weakening global demand for goods.
As part of the second season of the Forbes India CEO Dialogues: The Leadership Agenda, Adi Godrej, chairman of the Godrej Group, Ajay Piramal, chairman of the Piramal Group, Ronnie Screwvala, founder, Unilazer Ventures, Zarin Daruwala, CEO-designate, Standard Chartered Bank, Ridham Desai, managing director at Morgan Stanley India, Haigreve Khaitan, senior partner at Khaitan and Co, and Rashesh Shah, chairman and CEO of Edelweiss Group, spoke about their expectations from Finance Minister Arun Jaitley and the government in Budget 2016.
Majumdar: What are the key challenges that Mr Jaitley faces at this time?
Godrej: The FM is in a good position; he will not allow fiscal deficit to go out of hand, but there will be spending. The government could do more on crop insurance and the FM should look at a reduction in the rates of direct (and personal) taxes. It could lead to better revenues in the same fiscal year; it can be positive. He may not play around with indirect taxes, with GST expected to come in soon.
Majumdar: Mr Piramal, given the scenario of manufacturing and exports going down, what do you expect?
Majumdar: What can the capital markets expect to translate household savings into investments. What remains to be done?
Desai: I think what had to be done is done. The government has delivered on the fiscal deficit; when it came to office, it was around 5.8 percent, [we feel] it is now down to around 3.4 percent. The RBI has already engineered a shift in household savings, which were moving towards buying physical assets like gold and property because inflation expectations were high. Now, as inflation expectations are coming down, you can see a tick up in financial assets—real equity investing is at an all-time high.
(This story appears in the 04 March, 2016 issue of Forbes India. To visit our Archives, click here.)