In an interview with The Hindu, FICCI President Naina Lal Kidwai talks about the significance of the Goods and Services Tax (GST) and the need to build quickly a consensus on it. She also shares her insight on crucial economic issues. Edited excerpts:
What steps should the government take to bring the economy back on growth path?
The frustration for people like me is that we have been there (8 per cent growth), and the ability to get back there is clearly staring us in the face. A single measure that can take us there is the GST . Evidence suggests that it could contribute 1.5 to 2 per cent to the GDP. I can’t think any country of our scale and size that can boast a single measure that add substantially to the GDP. The fact that we can have it and yet do not have it is quite tragic.
The key is to iron out the contentious issues and make sure that we find solution and then move ahead. Moving ahead requires parliamentary approval. The closer we are moving toward elections, this looks harder.
The Cabinet Committee on Investment has been clearing projects, especially those pertaining to infrastructure, on a large scale. Despite this, many of them are still struggling to take-off. What steps have been identified by industry to get these projects moving?
The good thing about the CCI is that the ministries sitting around the table are able to resolve issues and accord approvals. We have had situations where companies have received the approvals, but at the State-level they have lapsed. We need to hold these projects by the hand, and make sure that approvals move on a basis that those that require renewals are done quickly.
What is the comfortable level for the rupee? What are the steps required to strengthen it?
The Ministry of Finance has said 58-60 is the realistic level. I am happy to go with that. It is important that we take steps to ensure that the rupee stays stable especially in the wake of volatility we’ve seen in the last couple of months, driven largely by an external announcement on potential QE (quantitative easing) tapering. This suggests that our economic indicators in themselves are fragile. Otherwise, there would not be this kind of a volatile answer to an external event. That’s where we need to develop confidence.
The good news is that in the last few weeks our foreign exchange reserves have started going up. The government has made some important policy announcements around NRI deposits. That should bring in $12-15 billion into the country.
The recent repo rate hike has left industry disappointed. What should the RBI do to bring back liquidity into the system and promote investment?
The RBI governor took important steps on liquidity by rolling back the rate on MSF (marginal standing facility). Industry was disappointed that the repo rate was hiked. Industry has been demanding lowering interest rates. Whatever happens with repo rates is not as critical as the rate which industry is charged by banks. Even while repo rates were going down over the past 18 months, it’s not as if industry benefited from it.
Do you expect the electoral battle in the five States, due in November, and general elections due in 2014 to be a dampener in unleashing further reforms, especially in the financial sector?
The good news is India does not need big bang changes. The Insurance Bill signals that government is still in action. This in itself signals that we are liberalising.
We need consensus at the earliest on GST. However, it should get approval irrespective of the coming elections because it is important for the country.