The next big reform to improve ease of doing business in India should be the simplification of the presently complex Finance Bill, the new president of the Confederation of Indian Industry Rakesh Bharti Mittal has said. He added that the recovery in private sector investment will quicken by the end of this year propelling the economy to 8% growth next year. Excerpts:
What is the real progress you are seeing in fixing the twin balance sheet problem, especially on the company balance sheet side?
There is good progress, especially on the company side where many stressed assets have been referred to the NCLT (National Company Law Tribunal). However, in some cases, the resolution is taking some time due to the judicial process that has to be followed. These things cannot be concluded in a hurry as all [the] parties need to be satisfied. Quick resolutions will ensure that more stressed assets are able to take advantage of the IBC process.
How would you rate the Insolvency and Bankruptcy Code [IBC] in its current form? What are the changes you would like to see incorporated?
It [IBC] is a major reform that has been brought in and something that the country was lacking. Companies that become bankrupt due to various reasons did not have a way to shut down their business. Any major reform, when first introduced, will need some modifications depending on [the] issues that come up. I believe changes have been suggested, for example, to allow promoters to buy back their own assets. Another issue is that of home buyers who need to be compensated for any loss even if the builder has filed for bankruptcy.
There are some green shoots in private investment but by when do you see it recovering enough to properly drive economic growth in the country?
There are definitely signs of a pick-up in investment activity as the capital goods sector is doing well.
I believe that the investment cycle should begin to move up by the end of this year. Economic growth will then move to the 8%-plus rate.
Has bank credit to the private sector started picking up?
Bank credit has started to move up. I do not think it is an issue of demand, as the money raised from equity and bond markets has been rising. One could say that there is preference for accessing the market directly for funds. Non-banks are also becoming more active as providers of credit, especially to the small and medium sector. The bulk of bank lending is to the retail sector.
What would you consider the next big policy decision that would ease doing business in the country?
I believe the next big reform should be in the area of direct taxes where the complex Finance Bill needs to be replaced with a simpler one which reduces the tax rate and removes exemptions. This would be a bold move and therefore may take some time to implement. Meanwhile, [the] CII is looking at rationalisation of the GST (Goods and Services Tax) in terms of fewer rates and inclusion of more products.
What are the reforms you would like to see in the agricultural sector?
Agriculture has great potential and the involvement of the private sector is required for the realisation of the Prime Minister’s vision of doubling farmers’ income. A host of reforms are required at the State level such as allowing long tenure land leases, giving freedom to farmers to sell their perishable produce and others.
I would suggest that the NITI Aayog initiates a ranking of State governments on the ease of doing agricultural business. This should cover areas such as power, micro-irrigation, high value crops and agri-infrastructure. This will induce competition across States to improve their agri-environment.
