Stage Set for a 9% plus Growth: CII President
CII Unveils Agenda Going Forward
(THE REPORT CONTAINS REFORMS / ANNOUNCEMENTS / KEY FEATURES / STATUS OF ANNOUNCEMENTS / LIKELY IMPACT)
Congratulating the Government on completion of the first year in office, the President of CII, Mr Summit Mazumder said that “Under the exemplary leadership of the Hon’ble Prime Minister, Shri Narendra Modi, the country has witnessed a year of unparalleled achievements. Never before has a government done so much in its first year in office. As Indians we are proud of what India stands for in the eyes of the world. We have personally seen how in the last one year, India once again commands respect and admiration in the same measure. This is owed to the Prime Minister’s unstinted efforts to change India’s image globally.”
Mr Mazumder went on to say that “the economic fundamentals are strong and the government has created strong foundation for building a developed India. As CII, we believe that building India is a shared responsibility and industry must play its part. We are committed to ensure that industry’s commitment is well made.”
In a press release issued here today, along with a report marking one year of the government, CII has said that it welcomes the many path-breaking economic reform measures announced by the Government during the past year and called for continuing the strong momentum across ten critical areas. Commenting on the agenda for the coming years, Mr Sumit Mazumder stated, “The Government has exceeded the expectations of industry in the area of economic reforms. We are hopeful that that the Government would continue to maintain strong momentum of reforms going forward.”
The CII release said that the government’s achievements during the year can broadly be categorized into four areas, namely corruption-free governance, economic diplomacy, empowerment of states and putting in place key policies to revive investment in the economy. With transformational changes being envisioned not only on the economic front but on the social, technology and foreign policy fronts as well, the first anniversary of the Modi government has been marked by fresh thinking on all major areas of governance, the release said.
Outlining the area of reforms requiring further policy attention, CII has urged the Government to consider policy strategies in ten critical areas that would bring huge economic benefits for growth, investment and employment creation.
First, is in the area of macro-economy – CII has said that the government has done a remarkable job of fiscal discipline and hopes that it would stay the course. “Setting a ceiling on subsidy expenditure would be an important step in that direction,” stressed the CII President. All subsidy disbursal may be converted into direct benefit transfer (DBT) by linking Jan Dhan Yojana, Aadhar and mobile technology or the JAM trinity, including for foodgrains, LPG and kerosene, within two years, said the CII press release. PSU disinvestment must be rolled out through the year while restructuring and privatization of loss-making PSUs should be actioned, it added.
Welcoming the government’s initiative to introduce GST, CII said that this would add 1.5 percentage points to the GDP growth rate.
Second, is the issue of land acquisition – On this CII has supported the government’s efforts to get the legislation through Parliament and has additionally suggested that it should review the compensation package to reduce rehabilitation and resettlement costs as sellers receive multiples of market value on acquisition. The consent clause from Gram Sabhas should be dropped as it is already required from land owners for Schedule V areas, suggests CII. “There is huge need for ex ante zoning of land for identification of land use over a 100 year time horizon and establishment of State Land Bank Corporations for scientific acquisition and disbursal of land parcels for industrialization and urbanization,” pointed out Mr Mazumder.
Third, is the area of Infrastructure – According to CII, the infrastructure sectors require multiple interventions across cross-cutting areas such as renegotiation of PPPs, securing Government approvals before award of projects, long-term financing options, systematic exit policies and dispute resolution, among others. It is important to distinguish treatment of non-performing assets in the infrastructure sectors from those in other sectors, CII said in the press release.
Fourth, is the area of Energy – CII has requested the Government to address financial health of distribution companies to facilitate expansion of power and coal sectors. The Electricity (Amendment) Bill draft separating carriage and content is in accordance with CII recommendations and should be passed speedily. In the hydrocarbons sector, there is need for a roadmap for transition to a market-based gas pricing. To maintain continuity, CII suggests that the New Domestic Natural Gas Pricing Guideline 2014 may include discoveries prior to November 2014. “There is need to attract global investments in the energy exploration space and to that end, we recommend that Production Sharing Contract should be in line with global best practices,” noted Mr Mazumder.
In the midstream section, building a gas grid through public private partnership can be encouraged through appropriate policy stance, said the CII press release.
Fifth, is the area of manufacturing – Mr Mazumder recommended comprehensive actions for boosting the manufacturing sector. He added, “In particular, an early announcement is needed on a National Policy on Capital Goods including competitiveness, exports, capacity building, R&D and appropriate standards”. National Policies for strategic sectors under the Make in India campaign, such as Textiles, Chemicals, and Electronics must be devised as well, with comprehensive agendas for making India a manufacturing hub for global markets.
In the mining sector, exploration by private sector can be facilitated through an Exploration Fund for scarce minerals. CII also called specifically for a National Steel Policy with focus on availability of ores and coal, a reasonable tariff regime, long-term financing, and skill development.
Sixth, is on labour reforms – To encourage mass manufacturing operations, CII urged the Government to modernize the Industrial Disputes Act 1947 to apply to establishments with over 500 workers instead of 100 workers. This may be supplemented with increased provision for compensation in case of retrenchment, recommended CII. Mr Mazumder observed, “CII has suggested that labour laws be converged and simplified to avoid contradictions and ensure easy compliance. This will promote creation of jobs in factories.” CII recommended permitting contract labour and distinguishing contract workers working with large contractors as primary employers. Several amendments are also required in the Factories Act and Trade Unions Act 1926, while pending legislation relating to labour issues should be passed without delay, the CII release said.
Seventh, is the area of skill development – Private sector participation in skill development needs to be encouraged, said CII. “Skill development should be eligible for mandatory expenditure under CSR activity under the new Companies Act,” suggested Mr Mazumder. He added that there is need for capacity building in over 11,000 Industrial Training Institutes and private institutes through participation of industry, use of advanced technology and training of trainers, among others. A single body is required for funding of training programs. The National Occupational Standards should be rolled out as national standards by the National Skill Qualification Committee, said the release.
Eighth, is on Companies Act – The Companies (Amendment) Bill 2014 seeks to make certain amendments to the 2013 Act. “Many CII recommendations have been settled in the Bill. However, certain other amendments relating to onerous requirements for private companies, related party transactions, CSR, criminalization of offences, and other areas may also be considered by the Government,” said the CII President.
Ninth, is on Taxation – CII has welcomed the stress on a fair, transparent and hassle-free tax regime being promulgated by the Government. “We are happy that the Finance Minister has pledged to bring down corporate tax to global rates in the next four years and we hope this would be front-loaded, given subdued global environment,” said Mr Mazumder. Processes for Alternate Dispute resolution mechanism, arbitration and conciliation should be introduced. Tax administration must minimize uncertainty and maximize convenience, emphasized the CII press statement.
Tenth, and the final area of intervention is the financial sector – “The Indian financial sector needs to move from a bank-dominated system to a diversified regime with multiple financing options,” stressed the CII President. “A National Assent Management Company may be urgently considered to take non-performing assets off the balance sheets of banks and attract fresh capital, besides other functions.” There is need for an integrated bond, currency and derivatives market at par with the equity market, the CII release said.
“With a multi-pronged strategic economic reforms package, we believe that the Indian economy could hit a growth rate of 9-10 per cent in the medium term horizon,” concluded Mr Mazumder.
New Delhi
27th May 2015
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