FICCI on Economic Survey 2019-20: 2020 the Decade of New India

New Deli: Commenting on the Economic Survey 2019-20 tabled today in the Parliament, Dr Sangita Reddy, President, FICCI said, “The prognosis undertaken in the Economic Survey released today highlights the ground reality and gives insights into what the economy has achieved over the last one year. The growth is estimated to pick up to 6.0-6.5% in the fiscal year (2020-21) on back of expeditious implementation of reforms. We are encouraged to see the action recourse suggested for moving towards a healthier growth path – both economically and socially and are hopeful of seeing concrete measures on these lines in the Budget 2020-21 tomorrow.”

“Notwithstanding the current problems, we are hopeful that 2020 will mark the beginning of decade of New India. We already see the government undertaking the next set of reforms for achieving this – which is commendable,” added Dr Reddy.

“We appreciate the stress laid on the importance of bringing greater openness in the market for wealth creation supported by the hand of ‘Trust’. This is in line with the Hon’ble Prime Minister’s positive words from the ramparts of the Red Fort on the 73rd Independence Day when he said wealth creation is a great national service and one should never see wealth creators with suspicion. We laud the suggestion in the Survey towards rationalisation of government intervention to boost wealth creation,” said Dr Reddy.

“FICCI hails the suggestion on the need to relax the fiscal gap for 2019-20 and pressing the need to announce countercyclical measures to lend support to growth. FICCI has been suggesting this for some time. Our recommendation to the government is to infuse Rs 1.5-2.0 lakh crore at the very minimum into the economy – which must be used to boost rural demand and infrastructure investments. At the same time, aggressive disinvestments may be targeted to limit the impact of such a spending boost on fiscal deficit and can be backed by a time-bound disinvestment plan of about Rs 3 lakh crore,” said Dr Reddy.

“The survey rightly recognizes the important role industry will play to achieve the USD 5 trillion target. However, it is high time we focus on the next set of reforms for enhancing the competitiveness of the industry by laying emphasis on reducing cost of doing business. This is also important if India wants to position itself as the next export hub – an ambition highlighted in the Survey,’ said Dr Reddy.

“The logistics cost in India remains quite high. Addressing this is very important if we need to see ourselves as a part of global value chains. At present, concerns regarding basic factors of production – land, labour, capital has been pulling the Indian industry down and these need immediate attention,” added Dr Reddy.

“Also, cost of capital in India is much higher vis-a-vis what our competitors pay in their home countries. The cost of intermediation is at above five per cent and there is a need for revisiting the structure of interest rates to ensure that the spreads are minimised. Despite government recapitalising public sector banks not much improvement in the functioning of the public sector banks has been noted. Government may therefore consider divesting its stake in the public-sector banks to enable banks to raise capital from the market. Government can look at having 26 per cent share as a floor and bring in the concept of a golden share to exercise control over critical decisions. This will help save government money and which can instead be used to set up a Development Finance Institution, which can provide long-term capital to the industry at competitive rates,” said Dr Reddy.

“FICCI is appreciative of the efforts made by the government to improve the ease of doing business in the country, however there is still much that can be done to improve the regulatory environment, especially the business environment for a going concern. FICCI’s feedback from its members indicates that for a typical manufacturing unit the number of compliances can be anywhere between 2000 and 3000, if one includes both the central and state laws. Further, if we include the rules, the total number of compliances can go up to 6000. We are happy to be acknowledged in the Survey on this and urge the government to review these requirements on priority,” added Dr Reddy.

“On the agriculture front, we are happy to note the focus of the government on mechanisation of agriculture and allied sectors. This was the need of the hour and would help transform not only the agriculture sector but the entire rural economy. The suggestion in the Survey to remove the Essential Commodities Act will be particularly useful for agriculture trade,” said Dr Reddy.

“With inclusive and rounded development being government’s motto, we appreciate the constant focus on education and health sectors. The Survey highlights the increase in spend on education and health as percent of GDP to 4.7% in FY20 from 4.0% in FY15. However, India continues to invest far less than its peers in these critical sectors. These sectors are the basic foundation for economic growth and social development and FICCI urges the government to double this expenditure,” added Dr Reddy.

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