MUMBAI: Following the Prime Minister's intervention in Parliament and the developments on the economic front, the Confederation of Indian Industry said that the reiteration of Government's commitment to economic revival was timely and pertinent. "CII had put forward industry's ten-point agenda for economic revival to Government last month," stated Kris Gopalakrishnan, President, CII. "It is heartening that Government is taking action to counter the economic downswing."
"Responding to the fast deteriorating economic parameters, CII had presented 'An Agenda for Economic Revival' to the Government in July. While the Government has outlined targets for CAD and fiscal deficit, CII said that specific steps are urgently required to stimulate growth and to improve investor sentiments," said Gopalakrishnan.
In its ten-point agenda, CII has recommended a comprehensive set of actionables, said the CII release issued here today.
First, is the need to contain Current Account Deficit (CAD). At this point in time, when Indiais losing out to other manufacturing nations, it is imperative to restore global competitiveness of its exports. Strong marketing action in new markets and slashing of transaction costs must be immediately carried out, the CII release said. On the import side as well, manufacturing competitiveness is fundamental to building domestic capacity in capital goods, electronics, coal and iron ore, and we need quick action on investment zones. For financing the CAD, government must announce urgent sovereign bond issue to attract capital.
Second is the issue of fiscal consolidation. The Food Security Bill has added tremendously to expected Government expenditure. Government must urgently draw up action plans to cut subsidy expenditure on fertilisers and oil products, said CII. Government must also offload share in public sector enterprises and banks to raise immediate funds to the tune of Rs 50,000 crore, utilizing this for capital spending in infrastructure.
Third is the need to increase availability and reduce cost of capital. Persistent inflationary pressures over the last four years and RBI steps to keep interest rates high to curtail demand have had the effect of shutting off demand for manufactured goods, while making investments unviable. Growth of gross fixed capital formation, or investment, has come down from 4.4% in 2011-12 to just 1.7% in 2012-13. CII has called for reducing interest rates by 100 basis points during the current fiscal year to encourage resumption of investment cycle.
Fourth, is the importance of promoting investments and stimulating demand. Given the uncertain regulatory and policy environment, new project announcements have dropped 80% and the value of stalled projects has gone up by two-thirds in the last five years. Power, infrastructure and manufacturing projects are shelved due to inadequate linkages, retrospective policy implementation, and high interest rates. CII has called for reviving the mining sector by reviewing bans, investing public sector savings, and other steps.
Fifth and very important is the implementation of the Goods and Services Tax (GST). India suffers from an uncompetitive taxation regime in comparison to other emerging economies. GST has many benefits for manufacturing, services and exports and could add 1.5 percentage points to GDP growth rate. This is the best stimulus that the economy can have, said CII in the release.
Sixth is the immediate issue of managing volatility in the rupee. According to CII, the government needs to consider issuing a sovereign guaranteed long term bond to the tune of $80-100 billion in order to finance the Current Account Deficit and curb volatility in the currency.
Seventh, is the suggestion to mobilize financial savings. Declining household financial savings can be addressed by expanding Rajiv Gandhi Equity Savings Scheme floors, and removing TDS on interest income. Inflation-linked instruments should be available to protect savings, said CII.
The eighth suggestion of CII is to strengthen the power sector. The Government should allocate coal blocks in a transparent manner and resolve hurdles to mining to revive the power sector. Regulatory autonomy to state electricity boards and effective unbundling of generation, transmission and distribution is essential, CII has said.
Ninth in the list is the recommendation to incentivize Micro, Small and Medium Enterprises (MSME). A range of interventions including finance, technology and export promotion support are required to make MSME the engine of growth for the economy, the CII "ten point agenda" said.
And finally, CII has suggested that there should be focus on implementation. Averring that India's weakest link is its implementation process, CII has recommended consistent, transparent and stable tax policy regime and implementation of recommendations of various committees set up for the purpose. The recommendations of the Administrative Reforms Commission should also be acted upon. Projects such as DMIC, NIMZ, etc should be speedily implemented within a fixed time-line, said CII.