Uncertainty is not good for growing businesses

Harsh Mariwala, chairman of Marico Ltd, on the financial and administrative reforms needed in 2013

 

Harsh Mariwala, chairman of Marico. 

The five things the government should do to kick-start growth in 2013 are:

Kick-start investments: There should be sustained focus on instilling faith and belief in India’s potential to grow and perform. The government needs to send stronger signals to the international community that policy paralysis is over and that the performance of the economy is better. A positive business sentiment will give international investment an impetus, which in turn will infuse funds in the economy, supplementing market performance.

A cabinet committee on investments (CCI) was set up in early December to accord single-window approval to mega projects of over Rs.1,000 crore. It is critical that the CCI gets into discernible action through specific approvals that highlight the government’s intent to remove investment bottlenecks and promote growth.

Interest rates: The government should look at a progressive reduction in interest rates by about 2 percentage points at least in the short run. This can be expected to trigger an increase in consumer demand. This increase can lead to a domino effect of investors looking at scaling up investments in the domestic market and businesses increasing supply to meet the new demand.

Implement infrastructural initiatives: Infrastructure is the backbone of any economy. For any economy to grow and develop, infrastructure should ideally help businesses to expand. In the coming years, the government should focus on developing roadways, railways and ports. With greater connectivity, India will be able to manage the demand-supply mechanisms in the market, help movement of products and services and provide impetus to international investment.

Better infrastructure also enables a higher standard of living, which helps increase consumption demand. Greater domestic demand will ensure sustained market performance in the longer run.

Reduce fiscal deficit, cut subsidies: The government needs to focus on restricting government subsidies to ease the pressure on the fiscal budget. This should be combined with balancing the increase in excise and customs duty in such a manner that it does not inflate production costs. A progressive reduction in subsidies will ease the government’s fiscal burden and encourage market forces to regulate demand in the economy.

Administrative and judicial reforms: To boost India’s image as a potential market to the international community and to encourage businesses in India, the government urgently needs to undertake administrative and judicial reforms. A definite decision on policies such as GAAR (general anti-avoidance rules) and retrospective taxation should be taken at the earliest to define the framework for businesses. Uncertainty is not good for growing businesses. Clarity on basics will increase the ease of doing business in India.

 

 

Priya 

PGDM 2sem